UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
_________________________
FORM 10-Q
_________________________
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2017
OR
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from              to             
Commission file number 1-4881
_________________________
AVON PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
_________________________
New York
 
13-0544597
(State or other jurisdiction of
Incorporation or organization)
 
(I.R.S. Employer
Identification No.)
Building 6, Chiswick Park, London W4 5HR
United Kingdom
(Address of principal executive offices)
+44-1604-232425
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x    No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
  
Accelerated filer
¨
Non-accelerated filer
¨   (do not check if a smaller reporting company)
  
Smaller reporting company
¨
 
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x
The number of shares of Common Stock (par value $0.25 ) outstanding at September 30, 2017 was 439,997,691 .
 



TABLE OF CONTENTS
 
 
 
Page
Numbers
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
5  - 6
 
 
 
 
 
 
 
 
 
 
 
 
9  - 25
 
 
 
Item 2.
26  - 44
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
Item 1.
 
 
 
Item 2.
 
 
 
Item 6.
 
 
 
 

2


PART I. FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS

AVON PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
Three Months Ended
(In millions, except per share data)
September 30, 2017
 
September 30, 2016
Net sales
$
1,378.2

 
$
1,367.5

Other revenue
39.6

 
41.3

Total revenue
1,417.8

 
1,408.8

Costs, expenses and other:
 
 
 
Cost of sales
550.0

 
550.9

Selling, general and administrative expenses
784.8

 
745.9

Operating profit
83.0

 
112.0

Interest expense
34.8

 
34.4

Gain on extinguishment of debt
—

 
(3.9
)
Interest income
(3.4
)
 
(3.5
)
Other expense, net
3.6

 
10.4

Total other expenses
35.0

 
37.4

Income before taxes
48.0

 
74.6

Income taxes
(36.1
)
 
(38.3
)
Income from continuing operations, net of tax
11.9

 
36.3

Loss from discontinued operations, net of tax
—

 
(0.7
)
Net income
11.9

 
35.6

Net loss attributable to noncontrolling interests
0.6

 
0.4

Net income attributable to Avon
$
12.5

 
$
36.0

Earnings per share:
 
 
 
Basic from continuing operations
$
0.01

 
$
0.07

Basic from discontinued operations
—

 
—

Basic attributable to Avon
0.01

 
0.07

Diluted from continuing operations
$
0.01

 
$
0.07

Diluted from discontinued operations
—

 
—

Diluted attributable to Avon
0.01

 
0.07

The accompanying notes are an integral part of these statements.


3


AVON PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Nine Months Ended
(In millions, except per share data)
September 30, 2017
 
September 30, 2016
Net sales
$
4,029.8

 
$
4,047.0

Other revenue
117.0

 
102.6

Total revenue
4,146.8

 
4,149.6

Costs, expenses and other:
 
 
 
Cost of sales
1,592.1

 
1,634.7

Selling, general and administrative expenses
2,411.4

 
2,300.0

Operating profit
143.3

 
214.9

Interest expense
106.0

 
100.3

Gain on extinguishment of debt
—

 
(3.9
)
Interest income
(11.2
)
 
(12.8
)
Other expense, net
19.4

 
142.9

Total other expenses
114.2

 
226.5

Income (loss) before taxes
29.1

 
(11.6
)
Income taxes
(99.5
)
 
(72.1
)
Loss from continuing operations, net of tax
(70.4
)
 
(83.7
)
Loss from discontinued operations, net of tax
—

 
(12.9
)
Net loss
(70.4
)
 
(96.6
)
Net loss (income) attributable to noncontrolling interests
0.9

 
(0.3
)
Net loss attributable to Avon
$
(69.5
)
 
$
(96.9
)
Loss per share:
 
 
 
Basic from continuing operations
$
(0.20
)
 
$
(0.22
)
Basic from discontinued operations
—

 
(0.03
)
Basic attributable to Avon
(0.20
)
 
(0.25
)
Diluted from continuing operations
$
(0.20
)
 
$
(0.22
)
Diluted from discontinued operations
—

 
(0.03
)
Diluted attributable to Avon
(0.20
)
 
(0.25
)
The accompanying notes are an integral part of these statements.

4


AVON PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
Three Months Ended
(In millions)
September 30, 2017
 
September 30, 2016
Net income
$
11.9

 
$
35.6

Other comprehensive income:
 
 
 
Foreign currency translation adjustments
13.6

 
15.2

Change in derivative losses on cash flow hedges, net of taxes of $0.0 and $0.0
—

 
1.8

Adjustments of and amortization of net actuarial loss and prior service cost, net of taxes of $0.0 and $0.2
6.5

 
3.6

Total other comprehensive income, net of taxes
20.1

 
20.6

Comprehensive income
32.0

 
56.2

Less: comprehensive loss attributable to noncontrolling interests
(0.6
)
 
(0.6
)
Comprehensive income attributable to Avon
$
32.6

 
$
56.8

The accompanying notes are an integral part of these statements.

5



AVON PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
Nine Months Ended
(In millions)
September 30, 2017
 
September 30, 2016
Net loss
$
(70.4
)
 
$
(96.6
)
Other comprehensive income:
 
 
 
Foreign currency translation adjustments
85.1

 
103.0

Change in derivative losses on cash flow hedges, net of taxes of $0.0 and $0.0
—

 
2.7

Adjustments of and amortization of net actuarial loss and prior service cost, net of taxes of $0.0 and $10.6
12.7

 
271.8

Other comprehensive income related to New Avon investment, net of taxes of $0.0
1.2

 
—

Total other comprehensive income, net of taxes
99.0

 
377.5

Comprehensive income
28.6

 
280.9

Less: comprehensive loss attributable to noncontrolling interests
(0.7
)
 
(0.4
)
Comprehensive income attributable to Avon
$
29.3

 
$
281.3

The accompanying notes are an integral part of these statements.



6


AVON PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
September 30,
2017
 
December 31,
2016
Assets
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
663.8

 
$
654.4

Accounts receivable, net
473.5

 
458.9

Inventories
662.5

 
586.4

Prepaid expenses and other
292.2

 
291.3

Current assets of discontinued operations
0.5

 
1.3

Total current assets
2,092.5

 
1,992.3

Property, plant and equipment, at cost
1,488.3

 
1,424.1

Less accumulated depreciation
(781.8
)
 
(712.8
)
Property, plant and equipment, net
706.5

 
711.3

Goodwill
96.8

 
93.6

Other assets
620.8

 
621.7

Total assets
$
3,516.6

 
$
3,418.9

Liabilities, Series C Convertible Preferred Stock and Shareholders’ Deficit
 
 
 
Current Liabilities
 
 
 
Debt maturing within one year
$
16.1

 
$
18.1

Accounts payable
796.7

 
768.1

Accrued compensation
149.0

 
129.2

Other accrued liabilities
360.6

 
401.9

Sales taxes and taxes other than income
137.5

 
147.0

Income taxes
9.1

 
10.7

Current liabilities of discontinued operations
2.5

 
10.7

Total current liabilities
1,471.5

 
1,485.7

Long-term debt
1,873.0

 
1,875.8

Employee benefit plans
160.9

 
164.5

Long-term income taxes
82.9

 
78.6

Long-term sales taxes and taxes other than income
185.2

 
124.5

Other liabilities
90.6

 
81.3

Total liabilities
3,864.1

 
3,810.4

 
 
 
 
Commitments and contingencies (Note 8)


 


Series C convertible preferred stock
461.9

 
444.7

 
 
 
 
Shareholders’ Deficit
 
 
 
Common stock
189.7

 
188.8

Additional paid-in capital
2,290.7

 
2,273.9

Retained earnings
2,235.4

 
2,322.2

Accumulated other comprehensive loss
(934.6
)
 
(1,033.2
)
Treasury stock, at cost
(4,601.7
)
 
(4,599.7
)
Total Avon shareholders’ deficit
(820.5
)
 
(848.0
)
Noncontrolling interests
11.1

 
11.8

Total shareholders’ deficit
(809.4
)
 
(836.2
)
Total liabilities, series C convertible preferred stock and shareholders’ deficit
$
3,516.6

 
$
3,418.9

The accompanying notes are an integral part of these statements.

7


AVON PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended
(In millions)
September 30, 2017
 
September 30, 2016
Cash Flows from Operating Activities
 
 
 
Net loss
$
(70.4
)
 
$
(96.6
)
Loss from discontinued operations, net of tax
—

 
12.9

Loss from continuing operations, net of tax
$
(70.4
)
 
$
(83.7
)
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
 
 
 
Depreciation
63.4

 
62.5

Amortization
22.2

 
22.4

Provision for doubtful accounts
168.5

 
114.6

Provision for obsolescence
27.7

 
26.6

Share-based compensation
22.0

 
23.1

Foreign exchange losses (gains)
12.0

 
(0.3
)
Deferred income taxes
15.4

 
(16.3
)
Loss on deconsolidation of Venezuela
—

 
120.5

Other
37.0

 
3.0

Changes in assets and liabilities:
 
 
 
Accounts receivable
(170.1
)
 
(167.1
)
Inventories
(71.6
)
 
(109.5
)
Prepaid expenses and other
18.0

 
(16.8
)
Accounts payable and accrued liabilities
(51.1
)
 
(41.7
)
Income and other taxes
(15.3
)
 
(15.3
)
Noncurrent assets and liabilities
27.3

 
(26.3
)
Net cash provided (used) by operating activities of continuing operations
35.0

 
(104.3
)
Cash Flows from Investing Activities
 
 
 
Capital expenditures
(66.7
)
 
(68.2
)
Disposal of assets
3.3

 
3.3

Distribution from New Avon LLC
22.0

 
—

Reduction of cash due to Venezuela deconsolidation
—

 
(4.5
)
Other investing activities
(0.1
)
 
1.6

Net cash used by investing activities of continuing operations
(41.5
)
 
(67.8
)
Cash Flows from Financing Activities
 
 
 
Debt, net (maturities of three months or less)
(0.7
)
 
(31.4
)
Proceeds from debt
—

 
508.7

Repayment of debt
(2.3
)
 
(311.9
)
Repurchase of common stock
(6.6
)
 
(5.3
)
Net proceeds from the sale of series C convertible preferred stock
—

 
426.3

Other financing activities
(0.2
)
 
(17.2
)
Net cash (used) provided by financing activities of continuing operations
(9.8
)
 
569.2

Cash Flows from Discontinued Operations
 
 
 
Net cash used by operating activities of discontinued operations
(7.5
)
 
(67.6
)
Net cash used by investing activities of discontinued operations
—

 
(94.6
)
Net cash used by discontinued operations
(7.5
)
 
(162.2
)
Effect of exchange rate changes on cash and cash equivalents
33.2

 
(17.9
)
Net increase in cash and cash equivalents
9.4

 
217.0

Cash and cash equivalents at beginning of year (1)
654.4

 
684.7

Cash and cash equivalents at end of period
$
663.8

 
$
901.7

 
The accompanying notes are an integral part of these statements.
(1) Includes cash and cash equivalents of discontinued operations of $(2.2) at the beginning of the year in 2016.


8


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in millions, except per share data)

1. ACCOUNTING POLICIES
Basis of Presentation
We prepare our unaudited interim Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States ("GAAP"). We consistently applied the accounting policies described in our 2016 Annual Report on Form 10-K (" 2016 Form 10-K") in preparing these unaudited interim Consolidated Financial Statements. In our opinion, the unaudited interim Consolidated Financial Statements reflect all adjustments of a normal recurring nature that are necessary for a fair statement of the results for the interim periods presented. Results for interim periods are not necessarily indicative of results for a full year. You should read these unaudited interim Consolidated Financial Statements in conjunction with our Consolidated Financial Statements contained in our 2016 Form 10-K. When used in this report, the terms "Avon," "Company," "we" or "us" mean Avon Products, Inc.
For interim Consolidated Financial Statements purposes, we generally provide for accruals under our various employee benefit plans for each quarter based on one quarter of the estimated annual expense, and adjust these accruals as estimates are refined. In addition, our income tax provision is determined using an estimate of our consolidated annual effective tax rate, adjusted in the current period for discrete income tax items including:
•
the effects of significant, unusual or extraordinary pretax and income tax items, if any;
•
withholding taxes recognized associated with cash repatriations; and
•
the impact of loss-making subsidiaries for which we cannot recognize an income tax benefit and subsidiaries that reduce the reliability of the estimated annual consolidated effective tax rate.
Venezuela
As of March 31, 2016, we deconsolidated our Venezuelan operations, and since then, we account for this business using the cost method of accounting. The decision to deconsolidate our Venezuelan operations was due to the lack of exchangeability between the Venezuelan bolivar and the U.S. dollar. This was caused by Venezuela's restrictive foreign exchange control regulations and our Venezuelan operations' increasingly limited access to U.S. dollars, which restricted our Venezuelan operations' ability to pay dividends and settle intercompany obligations.
As a result of the change to the cost method of accounting, in the first quarter of 2016, we recorded a loss of $120.5 in other expense, net. The loss was comprised of $39.2 in net assets of the Venezuelan business and $81.3 in accumulated foreign currency translation adjustments within accumulated other comprehensive loss ("AOCI") (shareholders' deficit) associated with foreign currency changes before Venezuela was accounted for as a highly inflationary economy. The net assets of the Venezuelan business were comprised of inventories of $23.7 , property, plant and equipment, net of $15.0 , other assets of $11.4 , accounts receivable of $4.6 , cash of $4.5 , and accounts payable and accrued liabilities of $20.0 . Our Consolidated Balance Sheets no longer include the assets and liabilities of our Venezuelan operations. We no longer include the results of our Venezuelan operations in our Consolidated Financial Statements, and will include income relating to our Venezuelan operations only to the extent that we receive cash for dividends or royalties remitted by Avon Venezuela.
Revisions
In our 2016 Form 10-K, our Consolidated Statements of Cash Flows presented supplemental information of the cash paid for interest of $87.1 for the year ended December 31, 2016; however, this amount should have been disclosed as $142.8 . We determined that the effect of this revision was not material to our 2016 Form 10-K.
New Accounting Standards Implemented
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation , which is intended to simplify the accounting for share-based payment transactions. This new guidance changes several aspects of the accounting for share-based payment transactions, including accounting for income taxes, forfeitures and employer-tax withholding requirements. ASU 2016-09 also clarifies the Statements of Cash Flows presentation for certain components of share-based payment awards. We adopted this new accounting guidance in the first quarter of 2017, which did not have a material impact on our Consolidated Financial Statements.

9


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in millions, except per share data)


Accounting Standards to be Implemented
ASU 2014-09, Revenue from Contracts with Customers
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , as a new Topic, Accounting Standards Codification Topic ("ASC") 606. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This new accounting guidance may be adopted either retrospectively or as a cumulative-effect adjustment as of the date of adoption. We intend to adopt this new accounting guidance as a cumulative-effect adjustment as of January 1, 2018. Based on the evaluation completed to-date, we believe that we will need to:
•
consider some of our sales incentive programs as a separate deliverable and allocate a portion of the sales transaction price to this deliverable, and thus defer a portion of the sales transaction price until the incentive prize is redeemed;
•
consider some of our prospective discounts achieved based on sales targets as a separate deliverable and allocate a portion of the sales transaction prices to this deliverable, thus deferring a portion of the sales transaction price until future discounts are realized;
•
adjust the manner in which we present our allowance for sales returns in our Consolidated Balance Sheets, to reflect a refund liability and a returns asset;
•
reflect fees paid by the Representative to the Company for items such as brochures, sales aids and late payments as revenue, rather than as a reduction to selling, general and administrative expenses ("SG&A"), as these represent separate performance obligations;
•
reflect certain of the costs associated with the fees paid by the Representative in cost of sales, rather than SG&A; and
•
recharacterize certain costs related to sales incentives, brochures and sales aids in our Consolidated Balance Sheets from prepaid expenses and other to inventories.
As a result of adopting this new accounting guidance, we estimate that had we adopted the new standard as of January 1, 2016, the impact on our full-year 2016 Consolidated Statement of Operations would have been:
• an increase in total revenue by approximately 5% ;
• a decrease in gross margin by approximately 350 to 500 basis points; and
• a decrease in operating margin by approximately 10 to 30 basis points.
These impacts are associated with reclassifications of items in the Consolidated Statements of Operations only, which will have no impact on operating profit. These impacts do not reflect the impact due to the change in timing of recognition of revenue and associated costs that would be deferred until sales incentive programs and prospective discounts are fulfilled, which we do not believe is material to the estimated impacts discussed above. In addition, upon adoption, we do not expect the change in timing of recognition of revenue and associated costs to have a significant impact on our full-year Consolidated Statements of Operations; however, the impact may vary depending on the types of incentive programs, the volume of incentives offered, and the timing of the programs. The cumulative-effect adjustment upon adoption of the new revenue recognition standard as of January 1, 2018 will depend on open sales incentive programs and prospective discounts existing at December 31, 2017, which cannot be reliably estimated at this time.
ASU 2017-07, Compensation - Retirement Benefits
In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits . This new guidance requires entities to (1) disaggregate the service cost component from the other components of net periodic benefit costs and present it with other current employee compensation costs in the Consolidated Statements of Operations and (2) present the other components of net periodic benefit costs below operating profit in other expense (income), net. We intend to adopt this new accounting guidance effective January 1, 2018. The new accounting guidance is applied retrospectively and will increase our operating profit for the three and nine months ended September 30, 2017 and the full year 2016 by $3.9 , $5.8 and $2.1 , respectively, but will have no impact on net income (loss).
ASU 2016-02, Leases
In February 2016, the FASB issued ASU 2016-02, Leases , which requires all assets and liabilities arising from leases to be recognized in the Consolidated Balance Sheets. We intend to adopt this new accounting guidance effective January 1, 2019. We are currently evaluating the effect that adopting this new accounting guidance will have on our Consolidated Financial Statements.

10


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in millions, except per share data)


2. EARNINGS (LOSS) PER SHARE AND SHARE REPURCHASES
We compute earnings (loss) per share ("EPS") using the two-class method, which is an earnings (loss) allocation formula that determines earnings (loss) per share for common stock, and earnings (loss) allocated to convertible preferred stock and participating securities, as appropriate. The earnings allocated to convertible preferred stock are the larger of 1) the preferred dividends accrued in the period or 2) the percentage of earnings from continuing operations allocable to the preferred stock as if they had been converted to common stock. Our participating securities are our grants of restricted stock and restricted stock units, which contain non-forfeitable rights to dividend equivalents to the extent any dividends are declared and paid on our common stock. We compute basic EPS by dividing net income (loss) allocated to common shareholders by the weighted-average number of shares outstanding during the period. Diluted EPS is calculated to give effect to all potentially dilutive common shares that were outstanding during the period.
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(Shares in millions)
 
2017
 
2016
 
2017
 
2016
Numerator from continuing operations:
 
 
 
 
 
 
 
 
Income (loss) from continuing operations, less amounts attributable to noncontrolling interests
 
$
12.5

 
$
36.7

 
$
(69.5
)
 
$
(84.0
)
Less: Earnings (loss) allocated to participating securities
 
.2

 
.5

 
(.9
)
 
(1.1
)
Less: Earnings allocated to convertible preferred stock
 
5.8

 
6.1

 
17.2

 
12.8

Income (loss) from continuing operations allocated to common shareholders
 
6.5

 
30.1

 
(85.8
)
 
(95.7
)
Numerator from discontinued operations:
 
 
 
 
 
 
 
 
Loss from discontinued operations
 
$
—

 
$
(.7
)
 
$
—

 
$
(12.9
)
Less: Loss allocated to participating securities
 
—

 
—

 
—

 
(.2
)
Loss allocated to common shareholders
 
—

 
(.7
)
 
—

 
(12.7
)
Numerator attributable to Avon:
 
 
 
 
 
 
 
 
Net income (loss) attributable to Avon
 
$
12.5

 
$
36.0

 
$
(69.5
)
 
$
(96.9
)
Less: Earnings (loss) allocated to participating securities
 
.2

 
.5

 
(.9
)
 
(1.3
)
Less: Earnings allocated to convertible preferred stock
 
5.8

 
6.1

 
17.2

 
12.8

Income (loss) allocated to common shareholders
 
6.5

 
29.4

 
(85.8
)
 
(108.4
)
Denominator:
 
 
 
 
 
 
 
 
Basic EPS weighted-average shares outstanding
 
440.0

 
437.4

 
439.5

 
436.7

Diluted effect of assumed conversion of stock options
 
—

 
—

 
—

 
—

Diluted effect of assumed conversion of preferred stock
 
—

 
—

 
—

 
—

Diluted EPS adjusted weighted-average shares outstanding
 
440.0

 
437.4

 
439.5

 
436.7

Earnings (Loss) per Common Share from continuing operations:
 
 
 
 
 
 
 
 
Basic
 
$
.01

 
$
.07

 
$
(.20
)
 
$
(.22
)
Diluted
 
.01

 
.07

 
(.20
)
 
(.22
)
Loss per Common Share from discontinued operations:
 
 
 
 
 
 
 
 
Basic
 
$
—

 
$
—

 
$
—

 
$
(.03
)
Diluted
 
—

 
—

 
—

 
(.03
)
Earnings (Loss) per Common Share attributable to Avon:
 
 
 
 
 
 
 
 
Basic
 
$
.01

 
$
.07

 
$
(.20
)
 
$
(.25
)
Diluted
 
.01

 
.07

 
(.20
)
 
(.25
)
Amounts in the table above may not necessarily sum due to rounding.
During the three months ended September 30, 2017 and 2016, we did not include stock options to purchase 18.4 million shares and 15.0 million shares, respectively, of Avon common stock in the calculation of diluted EPS because the exercise prices of those options were greater than the average market price, and therefore, their inclusion would be anti-dilutive. During the nine months ended September 30, 2017 and 2016, we did not include stock options to purchase 16.9 million shares and 14.2

11


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in millions, except per share data)


million  shares, respectively, of Avon common stock in the calculation of diluted EPS as we had a loss from continuing operations, net of tax. The inclusion of these shares would decrease the net loss per share, and therefore, their inclusion would be anti-dilutive.
During the three and nine months ended September 30, 2017 and 2016 , it is more dilutive to assume the series C convertible preferred stock is not converted into common stock; therefore, the weighted-average shares outstanding were not adjusted by the as-if converted series C convertible preferred stock because the effect would be anti-dilutive. The inclusion of the series C convertible preferred stock would increase the net earnings per share for the three months ended September 30, 2017 and 2016 and decrease the net loss per share for the nine months ended September 30, 2017 and 2016. If the as-if converted series C convertible preferred stock had been dilutive, approximately 87.1 million additional shares would have been included in the diluted weighted average number of shares outstanding for the three and nine months ended September 30, 2017 and 2016 . See Note 5, Related Party Transactions.
We purchased approximately 1.5 million  shares of Avon common stock for $6.6 during the first nine months of 2017 , as compared to approximately 1.3 million shares of Avon common stock for $5.3 during the first nine months of 2016 , through acquisition of stock from employees in connection with tax payments upon the vesting of restricted stock units and performance restricted stock units.
3. DISCONTINUED OPERATIONS
On December 17, 2015, the Company entered into definitive agreements with affiliates controlled by Cerberus Capital Management, L.P. ("Cerberus"). The agreements include an investment agreement providing for a $435.0 investment by Cleveland Apple Investor L.P. (“Cerberus Investor”) (an affiliate of Cerberus) in the Company through the purchase of perpetual convertible preferred stock (see Note 5, Related Party Transactions) and a separation and investment agreement providing for the separation of the Company's North America business, which represented the Company's operations in the United States, Canada and Puerto Rico, from the Company into New Avon LLC ("New Avon"), a privately-held company that is majority-owned and managed by Cerberus NA Investor LLC (“Cerberus NA”) (an affiliate of Cerberus). These transactions closed on March 1, 2016.
The major classes of financial statement components comprising the loss on discontinued operations, net of tax for North America are shown below:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2016
Total revenue
 
$
—

 
$
135.2

Cost of sales
 
—

 
53.2

Selling, general and administrative expenses
 
1.0

 
90.0

Operating loss
 
(1.0
)
 
(8.0
)
Other income items
 
—

 
.6

Loss from discontinued operations, before tax
 
(1.0
)
 
(7.4
)
Gain (loss) on sale of discontinued operations, before tax
 
.3

 
(16.0
)
Income taxes
 
—

 
10.5

Loss from discontinued operations, net of tax
 
$
(.7
)
 
$
(12.9
)
There were no amounts recorded in discontinued operations for the three or nine months ended September 30, 2017.
4. INVESTMENT IN NEW AVON
In connection with the separation of the Company's North America business (as discussed in Note 3, Discontinued Operations), which closed on March 1, 2016, the Company retained a 19.9% ownership interest in New Avon. The Company has accounted for its ownership interest in New Avon using the equity method of accounting, which resulted in the Company recognizing its proportionate share of New Avon's income or loss and other comprehensive income or loss. Our recorded investment balance in New Avon at September 30, 2017 was zero .
During the three and nine months ended September 30, 2017, the Company's proportionate share of the losses of New Avon was $ 6.2 and $ 16.0 respectively, of which $ 1.7 and $ 11.5 , respectively, of these amounts was recorded within other expense, net. In addition, during the third quarter of 2017, the Company received a cash distribution of $ 22.0 from New Avon, which reduced our recorded investment balance in New Avon. During the third quarter of 2017, we recorded only $1.7 of the

12


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in millions, except per share data)


Company's proportionate share of the losses in New Avon, as this reduced our recorded investment balance in New Avon to zero. If New Avon experiences future losses while our recorded investment balance is zero, we would not record our proportionate share of such loss. The Company's proportionate share of the losses of New Avon was $4.5 and $9.0 during the three and seven months ended September 30, 2016 , respectively, which was recorded within other expense, net. In addition, the Company's proportionate share of the post-separation other comprehensive income of New Avon was a benefit of an immaterial amount and $.1 during the three and nine months ended September 30, 2017, respectively, and was recorded within other comprehensive income (loss).
The Company also recorded an additional loss of $.5 within other expense, net and a benefit of $1.1 within other comprehensive income (loss), during the nine months ended September 30, 2017 , primarily associated with purchase accounting adjustments reported by New Avon.
Summarized financial information related to New Avon is shown below:
 
 
Nine Months Ended
September 30, 2017
 
Seven Months Ended September 30, 2016
Total revenue
 
$
527.7

 
$
523.0

Gross profit
 
$
322.9

 
$
317.4

Net loss
 
$
(80.5
)
 
$
(45.2
)
5. RELATED PARTY TRANSACTIONS
The following tables present the related party transactions with New Avon and affiliates of Cerberus. There are no other related party transactions. New Avon is majority owned and managed by Cerberus NA. See Note 3, Discontinued Operations and Note 4, Investment in New Avon for further details.
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Statement of Operations Data
 
 
 
 
 
 
 
 
Revenue from sale of product to New Avon (1)
 
$
8.3

 
$
6.9

 
$
25.9

 
$
20.4

Gross profit from sale of product to New Avon (1)
 
$
.2

 
$
.5

 
$
1.5

 
$
1.4

 
 
 
 
 
 
 
 
 
Cost of sales for purchases from New Avon (2)
 
$
.9

 
$
1.2

 
$
3.0

 
$
4.1

 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses:
 
 
 
 
 
 
 
 
Transition services, intellectual property, research and development and subleases (3)
 
$
(7.4
)
 
$
(10.2
)
 
$
(22.5
)
 
$
(25.1
)
Project management team (4)
 
$
.6

 
.8

 
$
2.2

 
1.8

Net reduction of selling, general and administrative expenses
 
$
(6.8
)
 
$
(9.4
)
 
$
(20.3
)
 
$
(23.3
)
 
 
September 30, 2017
 
December 31, 2016
Balance Sheet Data
 
 
 
 
Inventories (5)
 
$
.4

 
$
1.0

Receivables due from New Avon (6)
 
$
9.1

 
$
11.6

Payables due to New Avon (7)
 
$
.3

 
$
.7

Payables due to an affiliate of Cerberus (8)
 
$
.5

 
$
.6

(1) The Company supplies product to New Avon as part of a manufacturing and supply agreement. The Company recorded revenue of $8.3 and $6.9 , within other revenue, and gross profit of $.2 and $.5 associated with this agreement during the three months ended September 30, 2017 and 2016 , respectively. The Company recorded revenue of $25.9 and $20.4 , within other revenue, and gross profit of $1.5 and $1.4 associated with this agreement during the nine months ended September 30, 2017 and 2016 , respectively.
(2) New Avon supplies product to the Company as part of the same manufacturing and supply agreement noted above. The Company purchased $.8 and $1.0 from New Avon associated with this agreement during the three months ended September 30, 2017 and 2016 , respectively, and recorded $.9 and $1.2 associated with these purchases within cost of sales during the three

13


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in millions, except per share data)


months ended September 30, 2017 and 2016 , respectively. The Company purchased $2.7 and $4.6 from New Avon associated with this agreement during the nine months ended September 30, 2017 and 2016 , respectively and recorded $3.0 and $4.1 associated with these purchases within cost of sales during the nine months ended September 30, 2017 and 2016 , respectively.
(3) The Company also entered into a transition services agreement to provide certain services to New Avon, as well as an intellectual property ("IP") license agreement, an agreement for research and development and subleases for office space. In addition, New Avon is performing certain services for the Company under a similar transition services agreement. The Company recorded a net $7.4 and $10.2 reduction of selling, general and administrative expenses associated with these agreements during the three months ended September 30, 2017 and 2016 , respectively, and a net $22.5 and $25.1 reduction of selling, general and administrative expenses associated with these agreements during the nine months ended September 30, 2017 and 2016 , respectively. The net reduction of selling, general and administrative expenses associated with these agreements generally represents a recovery of the related costs.
(4) The Company also entered into agreements with an affiliate of Cerberus, which provide for the secondment of Cerberus affiliate personnel to the Company's project management team responsible for assisting with the execution of the transformation plan (the "Transformation Plan") announced in January 2016. The Company recorded $.6 and $.8 in selling, general and administrative expenses associated with these agreements during the three months ended September 30, 2017 and 2016 , respectively, and recorded $2.2 and $1.8 in selling, general and administrative expenses associated with these agreements during the nine months ended September 30, 2017 and 2016 , respectively. See Note 12, Restructuring Initiatives for additional information related to the Transformation Plan.
(5) Inventories relate to purchases from New Avon, associated with the manufacturing and supply agreement, which have not yet been sold, and were classified within inventories in the Consolidated Balance Sheets.
(6) The receivables due from New Avon relate to the agreements for transition services, the IP license, research and development and subleases for office space, as well as the manufacturing and supply agreement, and were classified within prepaid expenses and other in the Consolidated Balance Sheets.
(7) The payables due to New Avon relate to the manufacturing and supply agreement, and were classified within other accrued liabilities in the Consolidated Balance Sheets.
(8) The payables due to an affiliate of Cerberus relate to the agreement for the project management team, and were classified within other accrued liabilities in the Consolidated Balance Sheets.
In addition, the Company also issued standby letters of credit to the lessors of certain equipment, a lease for which was transferred to New Avon in connection with the separation of the Company's North America business. As of September 30, 2017 , the Company has a liability of $1.6 for the estimated value of such standby letters of credit. The recognition of the initial liability of $2.1 was included in the estimated loss on sale of the North America business in loss from discontinued operations, net of tax during the year ended December 31, 2016 .
Series C Preferred Stock
On March 1, 2016, the Company issued and sold to Cerberus Investor 435,000 shares of newly issued series C preferred stock for an aggregate purchase price of $435.0 . Cumulative preferred dividends accrue daily on the series C preferred stock at a rate of 1.25% per quarter. The series C preferred stock had accrued unpaid dividends of $35.6 as of September 30, 2017 . There were no dividends declared in the nine months ended September 30, 2017 and 2016 .
6. INVENTORIES
Components of Inventories
 
September 30, 2017
 
December 31, 2016
Raw materials
 
$
228.6

 
$
179.3

Finished goods
 
433.9

 
407.1

Total
 
$
662.5

 
$
586.4


14


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in millions, except per share data)


7. EMPLOYEE BENEFIT PLANS
 
 
Three Months Ended September 30,
 
 
Pension Benefits
 
 
 
 
Net Periodic Benefit Costs
 
U.S. Plans
 
Non-U.S. Plans
 
Postretirement Benefits
 
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
Service cost
 
$
.8

 
$
1.3

 
$
1.1

 
$
1.2

 
$
—

 
$
—

Interest cost
 
.7

 
.8

 
4.7

 
4.9

 
.1

 
.3

Expected return on plan assets
 
(.8
)
 
(1.0
)
 
(7.4
)
 
(7.5
)
 
—

 
—

Amortization of prior service credit
 
—

 
—

 
—

 
—

 
(.1
)
 
(.2
)
Amortization of net actuarial losses
 
1.3

 
1.5

 
2.1

 
1.5

 
—

 
.1

Settlements/curtailments
 
—

 
—

 
3.3

 
—

 
—

 
—

Net periodic benefit costs (1)
 
$
2.0

 
$
2.6

 
$
3.8

 
$
.1

 
$
—

 
$
.2

 
 
Nine Months Ended September 30,
 
 
Pension Benefits
 
 
 
 
Net Periodic Benefit Costs
 
U.S. Plans
 
Non-U.S. Plans
 
Postretirement Benefits
 
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
Service cost
 
$
3.5

 
$
4.9

 
$
3.5

 
$
3.8

 
$
—

 
$
.1

Interest cost
 
2.2

 
5.9

 
13.5

 
16.6

 
.8

 
1.2

Expected return on plan assets
 
(2.4
)
 
(7.2
)
 
(21.0
)
 
(25.0
)
 
—

 
—

Amortization of prior service credit
 
—

 
(.1
)
 
(.1
)
 
—

 
(.3
)
 
(1.1
)
Amortization of net actuarial losses
 
3.8

 
9.2

 
5.9

 
4.9

 
.1

 
.2

Settlements/curtailments
 
—

 
.1

 
3.3

 
—

 
—

 
—

Net periodic benefit costs (1)
 
$
7.1

 
$
12.8

 
$
5.1

 
$
.3

 
$
.6

 
$
.4

(1) Includes $4.4 of U.S. pension and immaterial amounts of the postretirement benefit plans (related to the U.S.) for the nine months ended September 30, 2016 , which are included in discontinued operations. Amounts associated with the pension and postretirement benefit plans in Canada and the postretirement benefit plan in Puerto Rico, which are included in discontinued operations, have been excluded from all amounts in the table above. See Note 3, Discontinued Operations for discussion of the separation of the Company's North America business.
During the nine months ended September 30, 2017 , we made approximately $12 and approximately $18 of contributions to the U.S. and non-U.S. defined benefit pension and postretirement benefit plans, respectively. During the remainder of 2017 , we anticipate contributing approximately $0 to $3 and approximately $2 to $7 to fund our U.S. and non-U.S. defined benefit pension and postretirement benefit plans, respectively.
In addition to the amounts in the table above, during the second quarter of 2017, we recorded an $18.2 charge for a loss contingency related to a non-U.S. pension plan, for which an amendment to the plan that occurred in a prior year may not have been appropriately implemented.
8. CONTINGENCIES
Settlements of FCPA Investigations
As previously reported, we engaged outside counsel to conduct an internal investigation and compliance reviews focused on compliance with the Foreign Corrupt Practices Act ("FCPA") and related U.S. and foreign laws in China and additional countries. The internal investigation, which was conducted under the oversight of our Audit Committee, began in June 2008 and along with the compliance reviews, was completed in 2014.
Following our voluntary reporting of the internal investigation to both the U.S. Department of Justice (the "DOJ") and the U.S. Securities and Exchange Commission (the "SEC") and our subsequent cooperation with those agencies, the United States District Court for the Southern District of New York (the "USDC") approved in December 2014 a deferred prosecution agreement (“DPA”) entered into between the Company and the DOJ related to charges of violations of the books and records and internal controls provisions of the FCPA. In addition, Avon Products (China) Co. Ltd., a subsidiary of the Company operating in China, pleaded guilty to conspiring to violate the books and records provision of the FCPA and was sentenced by the USDC to pay a $ 68 fine. The SEC also filed a complaint against the Company charging violations of the books and records

15


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in millions, except per share data)


and internal controls provisions of the FCPA and a consent to settlement (the "Consent") which was approved in a judgment entered by the USDC in January 2015, and included $ 67 in disgorgement and prejudgment interest. The DPA, the above-mentioned guilty plea and the Consent resolved the SEC’s and the DOJ’s investigations of the Company’s compliance with the FCPA and related U.S. laws in China and additional countries. The fine was paid in December 2014 and the payment to the SEC was made in January 2015.
Under the DPA, the DOJ will defer criminal prosecution of the Company for a term of three years. If the Company remains in compliance with the DPA during its term, the charges against the Company will be dismissed with prejudice. Under the DPA, the Company also represented that it has implemented and agreed that it will continue to implement a compliance and ethics program designed to prevent and detect violations of the FCPA and other applicable anti-corruption laws throughout its operations.
Under the DPA and the Consent, among other things, the Company agreed to have a compliance monitor (the "monitor"). During July 2015, the Company engaged a monitor, who had been approved by the DOJ and SEC. With the approval of the DOJ and the SEC, the monitor can be replaced by the Company, if the Company agrees to undertake self-reporting obligations for the remainder of the monitoring period. The monitoring period is scheduled to expire in July 2018. There can be no assurance as to whether or when the DOJ and the SEC will approve replacing the monitor with the Company’s self-reporting. If the DOJ determines that the Company has knowingly violated the DPA, the DOJ may commence prosecution or extend the term of the DPA, including the monitoring provisions described above, for up to one year.
The monitor has assessed and monitored the Company's compliance with the terms of the DPA and the Consent by evaluating, among other things, the Company's internal accounting controls, recordkeeping and financial reporting policies and procedures as they relate to the Company's current and ongoing compliance with the FCPA and other applicable anti-corruption laws. The monitor has recommended some changes to our policies and procedures that we have substantially adopted and are in the process of completing. The monitor may make additional recommendations that we must adopt unless they are unduly burdensome or otherwise inadvisable, in which case we may propose alternatives, which the DOJ and the SEC may or may not accept.
The third-party costs incurred in connection with ongoing compliance with the DPA and the Consent, including the monitorship, have not been material to date and we do not anticipate material costs going forward. We currently cannot estimate the costs that we are likely to incur in connection with self-reporting, if applicable, and any additional costs of implementing the changes, if any, to our policies and procedures required by the monitor.
Brazilian Tax Assessments
In 2002, our Brazilian subsidiary received an excise tax (IPI) assessment from the Brazilian tax authorities for alleged tax deficiencies during the years 1997-1998, which was officially closed in favor of Avon Brazil in July 2017. In December 2012, additional assessments were received for the year 2008 with respect to excise tax (IPI) and taxes charged on gross receipts (PIS and COFINS). In the second quarter of 2014, the PIS and COFINS assessments were officially closed in favor of Avon Brazil. As in the 2002 IPI case, the 2012 IPI assessment asserts that the establishment in 1995 of separate manufacturing and distribution companies in Brazil was done without a valid business purpose and that Avon Brazil did not observe minimum pricing rules to define the taxable basis of excise tax. The structure adopted in 1995 is comparable to that used by many other companies in Brazil. We believe that our Brazilian corporate structure is appropriate, both operationally and legally, and that the 2012 IPI assessment is unfounded.
These matters are being vigorously contested. In January 2013, we filed a protest seeking a first administrative level review with respect to the 2012 IPI assessment. In July 2013, the 2012 IPI assessment was upheld at the first administrative level and we appealed this decision to the second administrative level. The 2012 IPI assessment totals approximately $356 , including penalties and accrued interest.
On October 3, 2017, Avon Brazil received a new tax assessment notice regarding IPI for 2014, in the total amount of approximately $ 270 , including penalties and accrued interest. In line with the other assessments received in the past, the Brazilian tax authorities assert that the structure adopted in 2005 has no valid business purpose. Avon will vigorously contest this assessment, and presented the first defense on November 1, 2017.
In the event that the 2012 and the 2017 IPI assessments are upheld, it may be necessary for us to provide security to pursue further appeals, which, depending on the circumstances, may result in a charge to earnings and an adverse effect on the Company's Consolidated Statements of Cash Flows. It is not possible to reasonably estimate the likelihood or potential amount of assessments that may be issued for subsequent periods (tax years up through 2010 are closed by statute). However, other similar IPI assessments involving different periods (1998-2001) have been canceled and officially closed in our favor by the second administrative level and in July 2017 we received the official cancellation of the 2002 assessment pursuant to the

16


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in millions, except per share data)


favorable decision discussed above. We believe that the likelihood that the 2012 and the 2017 IPI assessments will be upheld is reasonably possible. As stated above, we believe that the 2012 and 2017 IPI assessments are unfounded. At September 30, 2017, we have not recognized a liability for the 2012 or 2017 IPI assessments.
Brazil IPI Tax on Cosmetics
In May 2015, an Executive Decree on certain cosmetics went into effect in Brazil which increased the amount of IPI taxes that are to be remitted by Avon Brazil to the taxing authority on the sales of cosmetic products subject to IPI. Avon Brazil filed an objection to this IPI tax increase on the basis that it is not constitutional. In December 2016, Avon Brazil received a favorable decision from the Federal District Court regarding this objection. This decision has been appealed by the tax authorities.
From May 2015 through April 2016, Avon Brazil remitted the taxes associated with this IPI tax increase into a judicial deposit which would be remitted to the taxing authorities in the event that we are not successful in our objection to the tax increase. In May 2016, Avon Brazil received a favorable preliminary decision on its objection to the tax and was granted a preliminary injunction. As a result, beginning in May 2016, Avon Brazil is no longer required to remit the taxes associated with IPI into a judicial deposit. As the IPI tax increase remains in effect, Avon Brazil is continuing to recognize the IPI taxes associated with the May 2015 Executive Decree as a liability. At September 30, 2017 , the liability to the taxing authorities for this IPI tax increase was approximately $ 185 and was classified within long-term sales taxes and taxes other than income
in our Consolidated Balance Sheets, and the judicial deposit was approximately $76 and was classified within other assets in our Consolidated Balance Sheets. The net liability that does not have a corresponding judicial deposit was approximately $109 at September 30, 2017 , and the interest associated with this net liability has been and will continue to be recognized in other expense, net. Our cash flow from operations has benefited as compared to our earnings as we have recognized the expense and associated interest related to this IPI tax in our Consolidated Statements of Operations; however, since May 2016, we have not made a corresponding cash payment into a judicial deposit.
An unfavorable ruling to our objection of this IPI tax increase would have an adverse effect on the Company's Consolidated Statements of Cash Flows as Avon Brazil would have to remit the liability owed to the taxing authorities. This amount would be partially offset by the amount of the judicial deposit held by Avon Brazil. We are not able to reliably predict the timing of the outcome of our objection to this tax increase.
Other Matters
Various other lawsuits and claims, arising in the ordinary course of business or related to businesses previously sold, are pending or threatened against Avon. In management's opinion, based on its review of the information available at this time, the total cost of resolving such other contingencies at September 30, 2017 , is not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.
9. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The tables below present the changes in AOCI by component and the reclassifications out of AOCI for the three and nine months ended September 30, 2017 and 2016 :
Three Months Ended September 30, 2017:
 
Foreign Currency Translation Adjustments
 
Net Investment Hedges
 
Pension and Postretirement Benefits
 
Investment in New Avon
 
Total
Balance at June 30, 2017
 
$
(839.7
)
 
$
(4.3
)
 
$
(114.0
)
 
$
3.4

 
$
(954.6
)
Other comprehensive income other than reclassifications
 
13.5

 
—

 
—

 
—

 
13.5

Reclassifications into earnings:
 
 
 
 
 
 
 
 
 
 
Amortization of net actuarial loss and prior service cost, net of tax of $0.0 (1)
 
—

 
—

 
6.5

 
—

 
6.5

Total reclassifications into earnings
 
—

 
—

 
6.5

 
—

 
6.5

Balance at September 30, 2017
 
$
(826.2
)
 
$
(4.3
)
 
$
(107.5
)
 
$
3.4

 
$
(934.6
)

17


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in millions, except per share data)


Three Months Ended September 30, 2016:
 
Foreign Currency Translation Adjustments
 
Cash Flow Hedges
 
Net Investment Hedges
 
Pension and Postretirement Benefits
 
Total
Balance at June 30, 2016
 
$
(862.7
)
 
$
(.4
)
 
$
(4.3
)
 
$
(142.4
)
 
$
(1,009.8
)
Other comprehensive income other than reclassifications
 
15.4

 
—

 
—

 
.7

 
16.1

Reclassifications into earnings:
 
 
 
 
 
 
 
 
 
 
Derivative losses on cash flow hedges, net of tax of $0.0 (2)
 
—

 
1.8

 
—

 
—

 
1.8

Amortization of net actuarial loss and prior service cost, net of tax of $.2 (1)
 
—

 
—

 
—

 
2.9

 
2.9

Total reclassifications into earnings
 
—

 
1.8

 
—

 
2.9

 
4.7

Balance at September 30, 2016
 
$
(847.3
)
 
$
1.4

 
$
(4.3
)
 
$
(138.8
)
 
$
(989.0
)
Nine Months Ended September 30, 2017:
 
Foreign Currency Translation Adjustments
 
Net Investment Hedges
 
Pension and Postretirement Benefits
 
Investment in New Avon
 
Total
Balance at December 31, 2016
 
$
(910.9
)
 
$
(4.3
)
 
$
(120.2
)
 
$
2.2

 
$
(1,033.2
)
Other comprehensive income other than reclassifications
 
84.7

 
—

 
—

 
1.2

 
85.9

Reclassifications into earnings:
 
 
 
 
 
 
 
 
 
 
Amortization of net actuarial loss and prior service cost, net of tax of $0.0 (1)
 
—

 
—

 
12.7

 
—

 
12.7

Total reclassifications into earnings
 
—

 
—

 
12.7

 
—

 
12.7

Balance at September 30, 2017
 
$
(826.2
)
 
$
(4.3
)
 
$
(107.5
)
 
$
3.4

 
$
(934.6
)
Nine Months Ended September 30, 2016:
 
Foreign Currency Translation Adjustments
 
Cash Flow Hedges
 
Net Investment Hedges
 
Pension and Postretirement Benefits
 
Total
Balance at December 31, 2015
 
$
(950.0
)
 
$
(1.3
)
 
$
(4.3
)
 
$
(410.6
)
 
$
(1,366.2
)
Other comprehensive income (loss) other than reclassifications
 
31.4

 
—

 
—

 
(10.6
)
 
20.8

Reclassifications into earnings:
 
 
 
 
 
 
 
 
 
 
Derivative losses on cash flow hedges, net of tax of $0.0 (2)
 
—

 
2.7

 
—

 
—

 
2.7

Amortization of net actuarial loss and prior service cost, net of tax of $.6 (1)
 
—

 
—

 
—

 
12.4

 
12.4

Deconsolidation of Venezuela, net of tax of $0.0
 
81.3

 
—

 
—

 
.8

 
82.1

Separation of North America, net of tax of $10.2
 
(10.0
)
 
—

 
—

 
269.2

 
259.2

Total reclassifications into earnings
 
71.3

 
2.7

 
—

 
282.4

 
356.4

Balance at September 30, 2016
 
$
(847.3
)
 
$
1.4

 
$
(4.3
)
 
$
(138.8
)
 
$
(989.0
)
(1) Gross amount reclassified to pension and postretirement expense, within selling, general & administrative expenses, and related taxes reclassified to income taxes.
(2) Gross amount reclassified to interest expense, and related taxes reclassified to income taxes.
A foreign exchange net gain of $ 5.0 and net loss of $ 1.9 for the three months ended September 30, 2017 and 2016 , respectively, and a foreign exchange net gain of $14.8 and net loss of $12.8 for the nine months ended September 30, 2017 and 2016 , respectively, resulting from the translation of actuarial losses and prior service cost recorded in AOCI, are included in foreign currency translation adjustments in our Consolidated Statements of Comprehensive Income (Loss).

18


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in millions, except per share data)


10. SEGMENT INFORMATION
We determine segment profit by deducting the related costs and expenses from segment revenue. In order to ensure comparability between periods, segment profit includes an allocation of global marketing expenses based on actual revenues. Segment profit excludes global expenses other than the allocation of marketing, costs to implement ("CTI") restructuring initiatives (see Note 12, Restructuring Initiatives), a loss contingency related to a non-U.S. pension plan (see Note 7, Employee Benefit Plans), certain significant asset impairment charges, and other items, which are not allocated to a particular segment, if applicable. This is consistent with the manner in which we assess our performance and allocate resources.
Summarized financial information concerning our reportable segments was as follows:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 Total Revenue
 
2017
 
2016
 
2017
 
2016
Europe, Middle East & Africa
 
$
482.8

 
$
476.4

 
$
1,484.9

 
$
1,517.7

South Latin America
 
589.7

 
594.8

 
1,647.0

 
1,556.9

North Latin America
 
206.0

 
196.8

 
607.0

 
625.9

Asia Pacific
 
130.1

 
131.4

 
379.0

 
406.4

Total revenue from reportable segments
 
1,408.6

 
1,399.4

 
4,117.9

 
4,106.9

Other operating segments and business activities
 
9.2

 
9.4

 
28.9

 
42.7

Total revenue
 
$
1,417.8

 
$
1,408.8

 
$
4,146.8

 
$
4,149.6

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Operating Profit
 
2017
 
2016
 
2017
 
2016
Segment Profit
 
 
 
 
 
 
 
 
Europe, Middle East & Africa
 
$
65.9

 
$
66.2

 
$
222.5

 
$
218.3

South Latin America
 
66.3

 
73.8

 
124.8

 
157.9

North Latin America
 
17.2

 
24.4

 
56.0

 
85.0

Asia Pacific
 
13.0

 
12.9

 
34.1

 
43.1

Total profit from reportable segments
 
$
162.4

 
$
177.3

 
$
437.4

 
$
504.3

Other operating segments and business activities
 
1.1

 
(1.0
)
 
3.9

 
3.2

Unallocated global expenses
 
(74.3
)
 
(77.5
)
 
(243.3
)
 
(249.6
)
CTI restructuring initiatives
 
(6.2
)
 
(14.0
)
 
(36.5
)
 
(70.2
)
Loss contingency
 
—

 
—

 
(18.2
)
 
—

Legal settlement
 
—

 
27.2

 
—

 
27.2

Operating profit
 
$
83.0

 
$
112.0

 
$
143.3

 
$
214.9

Other operating segments and business activities include the first quarter of 2016 results of Venezuela, as it was deconsolidated effective March 31, 2016, as well as markets that have been exited. Effective in the first quarter of 2017, given that we exited Thailand during 2016, the results of Thailand are now reported in Other operating segments and business activities for all periods presented, while previously the results had been reported in Asia Pacific. Other operating segments and business activities also include revenue from the sale of products to New Avon since the separation of the Company's North America business into New Avon on March 1, 2016 and ongoing royalties from the licensing of our name and products.

19


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in millions, except per share data)


11. SUPPLEMENTAL BALANCE SHEET INFORMATION
At September 30, 2017 and December 31, 2016 , prepaid expenses and other included the following:
Components of Prepaid Expenses and Other
 
September 30, 2017
 
December 31, 2016
Prepaid taxes and tax refunds receivable
 
$
107.4

 
$
99.3

Prepaid brochure costs, paper and other literature
 
72.6

 
73.2

Receivables other than trade
 
55.8

 
68.3

Other
 
56.4

 
50.5

Prepaid expenses and other
 
$
292.2

 
$
291.3

At September 30, 2017 and December 31, 2016 , other assets included the following:
Components of Other Assets
 
September 30, 2017
 
December 31, 2016
Deferred tax assets
 
$
162.9

 
$
162.1

Judicial deposits other than Brazil IPI tax (see below)
 
84.3

 
78.0

Capitalized software
 
81.4

 
83.9

Long-term receivables
 
81.4

 
78.9

Judicial deposit for Brazil IPI tax on cosmetics (Note 8)
 
75.6

 
69.0

Net overfunded pension plans
 
73.0

 
54.8

Trust assets associated with supplemental benefit plans
 
36.7

 
35.2

Tooling (plates and molds associated with our beauty products)
 
13.2

 
14.7

Investment in New Avon (Note 4)
 
—

 
32.8

Other
 
12.3

 
12.3

Other assets
 
$
620.8

 
$
621.7

12. RESTRUCTURING INITIATIVES
Transformation Plan
In January 2016, we announced the Transformation Plan, which includes cost reduction efforts to continue to improve our cost structure and to enable us to reinvest in growth. As a result of this plan, we have targeted pre-tax annualized cost savings of approximately $350 after three years, with an estimated $200 from supply chain reductions and an estimated $150 from other cost reductions, which are expected to be achieved through restructuring actions, as well as other cost-savings strategies that will not result in restructuring charges. We plan to reinvest a portion of these cost savings in growth initiatives, including media, social selling and information technology systems that will help us modernize our business. We initiated the Transformation Plan in order to enable us to achieve our long-term goals of double-digit operating margin and mid single-digit constant-dollar revenue growth. As part of the Transformation Plan, we identified certain actions, that we believe will reduce ongoing costs, primarily consisting of global headcount reductions relating to operating model changes, as well as the closure of Thailand, a smaller, under-performing market. These operating model changes include the streamlining of our corporate functions to align with the current and future needs of the business and an information technology infrastructure outsourcing initiative.
As a result of these restructuring actions approved to-date, we have recorded total costs to implement these restructuring initiatives of $143.6 before taxes, of which $37.5 was recorded during the nine months ended September 30, 2017 , in our Consolidated Statements of Operations. The additional charges not yet incurred associated with the restructuring actions approved to-date of approximately $5 to $10 before taxes are expected to be recorded primarily in 2018. At this time we are unable to quantify the total costs to implement the restructuring initiatives that will be incurred through the time the Transformation Plan is fully implemented as we have not yet identified all actions to be taken.

20


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in millions, except per share data)


Restructuring Charges - Three and Nine Months Ended September 30, 2017
During the three and nine months ended September 30, 2017 , we recorded costs to implement of $6.5 and $37.5 , respectively, related to the Transformation Plan, in our Consolidated Statements of Operations. The costs consisted of the following:
•
net charges of $2.3 and $19.4 , respectively, for employee-related costs, including severance benefits;
•
contract termination and other net charges of $2.0 and $14.2 , respectively, associated with vacating our previous corporate headquarters, including the impairment of fixed assets;
•
implementation costs of $1.8 and $2.5 , respectively, primarily related to professional service fees; and
•
accelerated depreciation of $.4 and $1.4 , respectively.
Of the total costs to implement during the three months ended September 30, 2017 , all $6.5 was recorded in selling, general and administrative expenses. Of the total costs to implement during the nine months ended September 30, 2017 , $37.6 was recorded in selling, general and administrative expenses and a benefit of $.1 was recorded in cost of sales.
Restructuring Charges - Three and Nine Months Ended September 30, 2016
During the three and nine months ended September 30, 2016 , we recorded costs to implement of $14.0 and $71.5 , respectively, related to the Transformation Plan, in the Consolidated Statement of Operations. The costs consisted of the following:
•
net charges of $11.8 and $61.7 , respectively, for employee-related costs, including severance benefits;
•
contract termination and other net charges of $1.0 and $5.6 , respectively;
•
implementation costs of $1.1 and $2.6 , respectively, primarily related to professional service fees;
•
accelerated depreciation of $.1 and $1.3 , respectively ; and
•
inventory write-offs of $.3 for the nine months ended September 30, 2016.
Of the total costs to implement during the three months ended September 30, 2016, all $14.0 was recorded in selling, general and administrative expenses. Of the total costs to implement during the nine months ended September 30, 2016 , $71.2 was recorded in selling, general and administrative expenses and $.3 was recorded in cost of sales.
The liability balance for the Transformation Plan as of September 30, 2017 is as follows:
 
 
Employee-Related Costs
 
Contract Terminations/Other
 
Total
Balance at December 31, 2016
 
$
48.6

 
$
2.8

 
$
51.4

2017 charges
 
21.7

 
—

 
21.7

Adjustments
 
(2.3
)
 
14.2

 
11.9

Cash payments
 
(28.2
)
 
(.1
)
 
(28.3
)
Non-cash write-offs
 
—

 
(14.0
)
 
(14.0
)
Foreign exchange
 
.5

 
—

 
.5

Balance at September 30, 2017
 
$
40.3

 
$
2.9

 
$
43.2

The majority of cash payments, if applicable, associated with these charges are expected to be made during 2017.
The following table presents the restructuring charges incurred to date, under the Transformation Plan, along with the estimated charges expected to be incurred on approved initiatives under the plan:
 
 
Employee- Related Costs
 
Inventory Write-offs
 
Foreign Currency Translation Adjustment Write-offs
 
Contract
Terminations/Other
 
Total
Charges incurred to-date
 
$
103.4

 
$
.4

 
$
2.7

 
$
22.9

 
$
129.4

Estimated charges to be incurred on approved initiatives
 
6.3

 
—

 
—

 
1.2

 
7.5

Total expected charges on approved initiatives
 
$
109.7

 
$
.4

 
$
2.7

 
$
24.1

 
$
136.9


21


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in millions, except per share data)


The charges, net of adjustments, of initiatives under the Transformation Plan, along with the estimated charges expected to be incurred on approved initiatives under the plan, by reportable segment are as follows:
 
 
Europe, Middle East & Africa
 
South Latin America
 
North Latin America
 
Asia
Pacific
 
Global & Other Operating Segments
 
Total
2015
 
$
—

 
$
—

 
$
—

 
$
—

 
$
21.4

 
$
21.4

2016
 
30.9

 
13.2

 
4.4

 
11.7

 
14.2

 
74.4

First quarter 2017
 
3.0

 
2.7

 
(.1
)
 
(.5
)
 
3.9

 
9.0

Second quarter 2017
 
(.1
)
 
3.0

 
—

 
(.1
)
 
17.5

 
20.3

Third quarter 2017
 
(.1
)
 
(.1
)
 
—

 
—

 
4.5

 
4.3

Charges incurred to-date
 
33.7

 
18.8


4.3


11.1


61.5


129.4

Estimated charges to be incurred on approved initiatives
 
1.2

 
—

 
—

 
—

 
6.3

 
7.5

Total expected charges on approved initiatives
 
$
34.9

 
$
18.8

 
$
4.3

 
$
11.1

 
$
67.8

 
$
136.9

The charges above are not included in segment profit, as this excludes costs to implement restructuring initiatives. We expect our total costs to implement restructuring on approved initiatives to be an estimated $150 to $155 before taxes under the Transformation Plan. The amounts shown in the tables above as charges recorded to-date relate to initiatives that have been approved and recorded in the financial statements as the costs are probable and estimable. The amounts shown in the tables above as total expected charges on approved initiatives represent charges recorded to-date plus charges yet to be recorded for approved initiatives as the relevant accounting criteria for recording an expense have not yet been met. In addition to the charges included in the tables above, we have incurred and will continue to incur other costs to implement restructuring initiatives such as professional services fees and accelerated depreciation.
Other Restructuring Initiatives
During the three and nine months ended September 30, 2017 , we recorded net benefits of $.3 and $1.0 , respectively, in selling, general and administrative expenses, in the Consolidated Statements of Operations, associated with the restructuring programs launched in 2005 and 2009, the restructuring initiatives launched in 2012 (including the cost savings initiative known as the "$400M Cost Savings Initiative"), and the restructuring actions identified during 2015 (collectively, the "Other Restructuring Initiatives"), which are substantially complete. During the three and nine months ended September 30, 2016 , we recorded an immaterial amount and a net benefit of $1.3 , respectively, in selling, general and administrative expenses, in the Consolidated Statements of Operations, associated with the Other Restructuring Initiatives. The liability balance associated with the Other Restructuring Initiatives, which primarily consists of employee-related costs, as of September 30, 2017 is not material.
13. GOODWILL
Goodwill
 
 
Europe, Middle East & Africa
 
South Latin
America
 
Asia
Pacific
 
Total
Net balance at December 31, 2016
 
$
18.7

 
$
72.3

 
$
2.6

 
$
93.6

Changes during the period ended September 30, 2017:
 
 
 
 
 
 
 
 
Foreign exchange
 
1.6

 
1.6

 
—

 
3.2

Net balance at September 30, 2017
 
$
20.3

 
$
73.9

 
$
2.6

 
$
96.8

14. FAIR VALUE
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
The assets and liabilities measured at fair value on a recurring basis were immaterial at September 30, 2017 and December 31, 2016.
Fair Value of Financial Instruments
Our financial instruments include cash and cash equivalents, available-for-sale securities, short-term investments, accounts receivable, debt maturing within one year, accounts payable, long-term debt and foreign exchange forward contracts. The

22


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in millions, except per share data)


carrying value for cash and cash equivalents, accounts receivable, accounts payable and short-term investments approximate fair value because of the short-term nature of these instruments.
The net asset (liability) amounts recorded in the balance sheet (carrying amount) and the estimated fair values of our remaining financial instruments at September 30, 2017 and December 31, 2016 , respectively, consisted of the following:
 
September 30, 2017
 
December 31, 2016
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Available-for-sale securities
$
3.4

 
$
3.4

 
$
2.8

 
$
2.8

Debt maturing within one year (1)
(16.1
)
 
(16.1
)
 
(18.1
)
 
(18.1
)
Long-term debt (1)
(1,873.0
)
 
(1,789.9
)
 
(1,875.8
)
 
(1,877.5
)
Foreign exchange forward contracts
(.2
)
 
(.2
)
 
(2.4
)
 
(2.4
)
(1) The carrying value of debt maturing within one year and long-term debt is presented net of debt issuance costs and includes any related discount or premium and unamortized deferred gains on terminated interest-rate swap agreements, as applicable.
The methods and assumptions used to estimate fair value are as follows:
•
Available-for-sale securities - The fair values of these investments were the quoted market prices for issues listed on securities exchanges.
•
Debt maturing within one year and long-term debt - The fair values of our debt and other financing were determined using Level 2 inputs based on indicative market prices.
•
Foreign exchange forward contracts - The fair values of forward contracts were estimated based on quoted forward foreign exchange prices at the reporting date.
15. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
We operate globally, with manufacturing and distribution facilities in various countries around the world. We may reduce our exposure to fluctuations in the fair value and cash flows associated with changes in interest rates and foreign exchange rates by creating offsetting positions, including through the use of derivative financial instruments. If we use foreign currency-rate sensitive and interest-rate sensitive instruments to hedge a certain portion of our existing and forecasted transactions, we would expect that any gain or loss in value of the hedge instruments generally would be offset by decreases or increases in the value of the underlying forecasted transactions.
We do not enter into derivative financial instruments for trading or speculative purposes, nor are we a party to leveraged derivatives. The master agreements governing our derivative contracts generally contain standard provisions that could trigger early termination of the contracts in certain circumstances, including if we were to merge with another entity and the creditworthiness of the surviving entity were to be "materially weaker" than that of Avon prior to the merger.
Derivatives are recognized in the Consolidated Balance Sheets at their fair values. The derivative instruments outstanding were immaterial at September 30, 2017 and December 31, 2016.
Interest Rate Risk
A portion of our borrowings is subject to interest rate risk. In the past we have used interest-rate swap agreements, which effectively converted the fixed rate on long-term debt to a floating interest rate, to manage our interest rate exposure. The agreements were designated as fair value hedges. As of September 30, 2017 , we do not have any interest-rate swap agreements. Approximately 1% of our debt portfolio at September 30, 2017 and December 31, 2016 was exposed to floating interest rates.
In January 2013, we terminated eight of our interest-rate swap agreements previously designated as fair value hedges, with notional amounts totaling $ 1,000 . As of the interest-rate swap agreements’ termination date, the aggregate favorable adjustment to the carrying value (deferred gain) of our debt was $ 90.4 , which was amortized as a reduction to interest expense over the remaining term of the underlying debt obligations. The net impact of the gain amortization was $11.7 and $19.1 , respectively, for the three and nine months ended September 30, 2016 , both of which included $9.2 related to the extinguishment of debt (see Note 16, Debt). At September 30, 2017 , there is no unamortized deferred gain associated with the January 2013 interest-rate swap termination, as the underlying debt obligations have been paid.
In March 2012, we terminated two of our interest-rate swap agreements previously designated as fair value hedges, with notional amounts totaling $ 350 . As of the interest-rate swap agreements’ termination date, the aggregate favorable adjustment to the carrying value (deferred gain) of our debt was $ 46.1 , which is being amortized as a reduction to interest expense over the

23


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in millions, except per share data)


remaining term of the underlying debt obligations through March 2019. The net impact of the gain amortization was $1.2 and $3.6 for the three and nine months ended September 30, 2017 , respectively, and $5.1 and $8.5 for the three and nine months ended September 30, 2016 , respectively, both of which included $3.6 related to extinguishment of debt (see Note 16, Debt). At September 30, 2017 , the unamortized deferred gain associated with the March 2012 interest-rate swap termination was $7.2 , and was classified within long-term debt in our Consolidated Balance Sheets.
Foreign Currency Risk
We may use foreign exchange forward contracts to manage a portion of our foreign currency exchange rate exposures. At September 30, 2017 , we had outstanding foreign exchange forward contracts with notional amounts totaling approximately $26 for various currencies.
We may use foreign exchange forward contracts to manage foreign currency exposure of certain intercompany loans. These contracts are not designated as hedges. The change in fair value of these contracts is immediately recognized in earnings and substantially offsets the foreign currency impact recognized in earnings relating to the associated intercompany loans. During the three and nine months ended September 30, 2017 , we recorded gains of $.6 and $2.8 , respectively, in other expense, net in our Consolidated Statements of Operations related to these undesignated foreign exchange forward contracts. Also during the three and nine months ended September 30, 2017 , we recorded losses of $1.2 and $4.7 , resp ectively, related to the associated intercompany loans, caused by changes in foreign currency exchange rates. During the three and nine months ended September 30, 2016 , we recorded losses of $1.2 and $8.7 , respectively, in other expense, net in our Consolidated Statements of Operations related to these undesignated foreign exchange forward contracts. Also during the three and nine months ended September 30, 2016 , we recorded gains of $.1 and $5.5 , resp ectively, related to the associated intercompany loans, caused by changes in foreign currency exchange rates.
16. DEBT
Revolving Credit Facility
In June 2015, the Company and Avon International Operations, Inc. ("AIO"), a wholly-owned domestic subsidiary of the Company, entered into a five-year $400.0 senior secured revolving credit facility (the “2015 facility”). Borrowings under the 2015 facility bear interest, at our option, at a rate per annum equal to LIBOR plus 250 basis points or a floating base rate plus 150 basis points, in each case subject to adjustment based upon a leverage-based pricing grid. As of September 30, 2017 , there were no amounts outstanding under the 2015 facility.
All obligations of AIO under the 2015 facility are (i) unconditionally guaranteed by each material domestic restricted subsidiary of the Company (other than AIO, the borrower), in each case, subject to certain exceptions and (ii) fully guaranteed on an unsecured basis by the Company. The obligations of AIO and the subsidiary guarantors are secured by first priority liens on and security interest in substantially all of the assets of AIO and the subsidiary guarantors, in each case, subject to certain exceptions.
The 2015 facility will terminate in June 2020; provided, however, that it shall terminate on the 91 st day prior to the maturity of the 6.50% Notes (as defined below) and the 4.60% Notes (as defined below), if on such 91 st day, the applicable notes are not redeemed, repaid, discharged, defeased or otherwise refinanced in full.
The 2015 facility contains affirmative and negative covenants, which are customary for secured financings of this type, as well as financial covenants (interest coverage and total leverage ratios). As of September 30, 2017 , we were in compliance with our interest coverage and total leverage ratios under the 2015 facility. The amount of the facility available to be drawn down is reduced by any standby letters of credit granted by AIO, which, as of September 30, 2017 , was approximately $39 . As of September 30, 2017 , based on then applicable interest rates, approximately $130 could have been drawn down without violating any covenant.
Public Notes
In March 2013, we issued, in a public offering, $250.0 principal amount of 2.375% Notes due March 15, 2016 (the "2.375% Notes"), $500.0 principal amount of 4.60% Notes due March 15, 2020 (the "4.60% Notes"), $500.0 principal amount of 5.00% Notes due March 15, 2023 (the "5.00% Notes") and $250.0 principal amount of 6.95% Notes due March 15, 2043 (the "6.95% Notes") (collectively, the "2013 Notes"). In March 2008, we issued $350.0 principal amount of 6.50% Notes due March 1, 2019 (the "6.50% Notes"). Interest on the 2013 Notes is payable semi-annually on March 15 and September 15 of each year, and interest on the 6.50% Notes are payable semi-annually on March 1 and September 1 of each year.
In August 2015, we prepaid the entire principal amount of our 2.375% Notes plus accrued interest and a make-whole premium. In 2016, we completed cash tender offers totaling to a $300.6 reduction for certain of our outstanding public notes, repurchased

24


AVON PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in millions, except per share data)


$180.5 of certain of our outstanding public notes, and prepaid the remaining principal amounts totaling $238.4 of our 4.20% Notes due July 15, 2018 and our 5.75% Notes due March 1, 2018, plus accrued interest and a make-whole premium (the "2016 debt transactions").
The indenture governing the 2013 Notes contains interest rate adjustment provisions depending on the long-term credit ratings assigned to the 2013 Notes by S&P and Moody's. As described in the indenture, the interest rates on the 2013 Notes increase by .25% for each one-notch downgrade below investment grade on each of our long-term credit ratings assigned to the 2013 Notes by S&P or Moody's. These adjustments are limited to a total increase of 2% above the respective interest rates in effect on the date of issuance of the 2013 Notes. As a result of the long-term credit rating downgrades by S&P and Moody's since issuance of the 2013 Notes, the interest rates on these notes have increased by the maximum allowable increase.
In August 2016, we completed cash tender offers which resulted in a reduction of principal of $108.6 of our 5.75% Notes due March 1, 2018 (the "5.75% Notes"), $73.8 of our 4.20% Notes due July 15, 2018 (the "4.20% Notes"), $68.1 of our 6.50% Notes due March 1, 2019 (the "6.50% Notes") and $50.1 of our 4.60% Notes. In connection with the cash tender offers, we incurred a gain on extinguishment of debt of $3.9 in the third quarter of 2016, consisting of a deferred gain of $12.8 associated with the March 2012 and January 2013 interest-rate swap agreement terminations (see Note 15, Derivative Instruments and Hedging Activities), partially offset by the $5.8 of early tender premium paid for the cash tender offers, $1.2 of a deferred loss associated with treasury lock agreements designated as cash flow hedges of the anticipated interest payments on the 5.75% Notes, $1.0 of deal costs and the write-off of $.9 of debt issuance costs and discounts related to the initial issuances of the notes that were the subject of the cash tender offers.
The indentures governing our outstanding notes described above contain certain customary covenants and customary events of default and cross-default provisions. Further, we would be required to make an offer to repurchase all of our outstanding notes described above at a price equal to 101% of their aggregate principal amount plus accrued and unpaid interest in the event of a change in control involving Avon and, at such time, the outstanding notes are rated below investment grade.
Senior Secured Notes
In August 2016, AIO issued, in a private placement exempt from registration under the Securities Act of 1933, as amended, $500.0 in aggregate principal amount of 7.875% Senior Secured Notes, which will mature on August 15, 2022 (the "Senior Secured Notes"). Interest on the Senior Secured Notes is payable semi-annually on February 15 and August 15 of each year.
All obligations of AIO under the Senior Secured Notes are unconditionally guaranteed by each current and future wholly-owned domestic restricted subsidiary of the Company that is a guarantor under the 2015 facility and fully guaranteed on an unsecured basis by the Company. The obligations of AIO and the subsidiary guarantors are secured by first priority liens on and security interest in substantially all of the assets of AIO and the subsidiary guarantors, in each case, subject to certain exceptions.
The indenture governing our Senior Secured Notes contains certain customary covenants and restrictions as well as customary events of default and cross-default provisions. The indenture also contains a covenant requiring AIO and its restricted subsidiaries to, at the end of each year, own at least a certain percentage of the total assets of API and its restricted subsidiaries, subject to certain qualifications. Further, we would be required to make an offer to repurchase all of our Senior Secured Notes, at a price equal to 101% of their aggregate principal amount plus accrued and unpaid interest, in the event of a change in control involving Avon.
Long-Term Credit Ratings
Our long-term credit ratings are: Moody’s ratings of Stable Outlook with B1 for corporate family debt, B3 for senior unsecured debt, and Ba1 for the Senior Secured Notes; S&P ratings of Stable Outlook with B for corporate family debt and senior unsecured debt and BB- for the Senior Secured Notes; and Fitch rating of Negative Outlook with B+, each of which are below investment grade. We do not believe these long-term credit ratings will have a material impact on our near-term liquidity. However, any rating agency reviews could result in a change in outlook or downgrade, which could further limit our access to new financing, particularly short-term financing, reduce our flexibility with respect to working capital needs, affect the market price of some or all of our outstanding debt securities, and likely result in an increase in financing costs, and less favorable covenants and financial terms under our financing arrangements.

25


AVON PRODUCTS, INC.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)

When used in this report, the terms "Avon," "Company," "we," "our" or "us" mean, unless the context otherwise indicates, Avon Products, Inc. and its majority, wholly owned and controlled subsidiaries.
OVERVIEW
We are a global manufacturer and marketer of beauty and related products. Our business is conducted primarily in the direct-selling channel. During 2016 , we had sales operations in 57 countries and territories, and distributed products in 18 more. All of our consolidated revenue is derived from operations of subsidiaries outside of the U.S. Our reportable segments are based on geographic operations in four regions: Europe, Middle East & Africa; South Latin America; North Latin America; and Asia Pacific. Our product categories are Beauty and Fashion & Home. Beauty consists of skincare (which includes personal care), fragrance and color (cosmetics). Fashion & Home consists of fashion jewelry, watches, apparel, footwear, accessories, gift and decorative products, housewares, entertainment and leisure products, children’s products and nutritional products. Sales are made to the ultimate consumer principally through direct selling by Representatives, who are independent contractors and not our employees.
During the nine months ended September 30, 2017 , revenue was relatively unchanged compared to the prior-year period, partially benefiting from foreign exchange, while Constant $ revenue decreased 2%. Our Constant $ revenue decline was primarily driven by declines in Russia, Brazil, and the United Kingdom, partially offset by growth in Argentina and South Africa. The decline in Constant $ revenue was primarily due to a 3% decrease in Active Representatives, which was partially offset by higher average order. The decrease in Active Representatives was primarily due to South Latin America (driven by Brazil) and Europe, Middle East & Africa. The net impact of price and mix increased 4%, primarily due to the inflationary impact on pricing in Argentina and Brazil. Units sold decreased 6%, primarily due to declines in Russia and Brazil. The revenue performance was negatively impacted most significantly by a decline in Color sales, as we experienced issues in some markets as we have begun the segmentation of our Color category into three distinct brands. The timing of innovation also contributed to the decline in Color sales; however, we expect to strengthen our Color category in the last quarter of 2017 through innovation.
Ending Representatives decreased by 2%. The decrease in Ending Representatives at September 30, 2017 as compared to the prior-year period was most significantly due to a decline in Brazil.
See "Segment Review" in this management's discussion and analysis of financial condition and results of operations ("MD&A") for additional information related to changes in revenue by segment.
Transformation Plan
In January 2016, we initiated a transformation plan (the “Transformation Plan”) in order to enable us to achieve our long-term goals of mid-single-digit Constant $ revenue growth and low double-digit operating margin. The Transformation Plan includes three pillars: invest in growth, reduce costs in an effort to continue to improve our cost structure and improve our financial resilience.
The Transformation Plan was designed to focus on cost savings and financial resilience in the first year, in order to support future investment in growth. In 2016 we estimate that we achieved cost savings of $120 before taxes, and we significantly strengthened the balance sheet. In 2017, our cost savings target related to the Transformation Plan is $230 before taxes when comparing to our costs in 2015, which includes both run-rate savings from 2016, along with in-year savings from current year initiatives. Based on the estimated cost savings of $205 before taxes realized through the first nine months of 2017, we believe we are on track to achieve this target.
To achieve the Transformation Plan, we recognize the need to focus on the foundations of our business and drive a performance-based culture. This will increase our ability to drive results and deliver steady execution going forward. While we are addressing challenges in the business, we are moving forward with urgency, focusing on the following key elements of our roadmap to growth:
•
Deliver a seamless, competitive Representative experience - investment to upgrade systems and drive mobile connectivity in our markets to make doing business easier for our Representatives;
•
Insightful data and analytics - improve our ability to support the Representative and help her run her business more effectively through deeper insight and analytics into Representative behavior and needs;

26

AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



•
Rigorous performance management - the new executive team is a key enabler to driving a performance-based culture for ownership of results; and
•
Relentless focus on execution capabilities - focus on developing a service mindset, and enable the implementation changes, with minimal disruptions, through pilot programs that cover service from end to end.
In connection with the actions and associated savings discussed above, we have incurred costs to implement ("CTI") restructuring initiatives of approximately $144 before taxes associated with the Transformation Plan to-date. In connection with the restructuring actions approved to-date associated with the Transformation Plan, we expect to realize annualized savings of an estimated $105 to $115 before taxes. During the first nine months of 2017, we have realized an estimated $55 before taxes of savings associated with the restructuring actions and are expected to achieve the majority of the annualized savings in 2017. In addition, we have realized savings from other cost-savings strategies that did not result in restructuring charges. For the market closures, the expected annualized savings represented the operating loss no longer included within Avon's operating results as a result of no longer operating in the respective market. For actions that did not result in the closure of a market, the annualized savings represent the net reduction of expenses that will no longer be incurred by Avon.
For additional details on restructuring initiatives, see Note 12, Restructuring Initiatives, to the Consolidated Financial Statements included herein. For additional details on strengthening the balance sheet, see Note 16, Debt, to the Consolidated Financial Statements included herein and "Liquidity and Capital Resources" in this MD&A for additional information.
NEW ACCOUNTING STANDARDS
Information relating to new accounting standards is included in Note 1, Accounting Policies, to the Consolidated Financial Statements included herein.
RESULTS OF OPERATIONS—THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AS COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016
Non-GAAP Financial Measures
To supplement our financial results presented in accordance with generally accepted accounting principles in the United States ("GAAP"), we disclose operating results that have been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, including changes in: revenue, operating profit, Adjusted operating profit, operating margin and Adjusted operating margin. We also refer to these adjusted financial measures as Constant $ items, which are Non-GAAP financial measures. We believe these measures provide investors an additional perspective on trends and underlying business results. To exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, we calculate current-year results and prior-year results at constant exchange rates, which are updated on an annual basis as part of our budgeting process. Foreign currency impact is determined as the difference between actual growth rates and Constant $ growth rates.
We also present gross margin, selling, general and administrative expenses as a percentage of revenue, operating profit, operating margin and effective tax rate on a Non-GAAP basis. We refer to these Non-GAAP financial measures as "Adjusted." We have provided a quantitative reconciliation of the difference between the Non-GAAP financial measures and the financial measures calculated and reported in accordance with GAAP. See "Reconciliation of Non-GAAP Financial Measures" within "Results of Operations - Consolidated" in this MD&A for this quantitative reconciliation.
The Company uses the Non-GAAP financial measures to evaluate its operating performance. These Non-GAAP measures should not be considered in isolation, or as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company believes investors find the Non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the Company's financial results in any particular period. The Company believes that it is meaningful for investors to be made aware of the impacts of 1) CTI restructuring initiatives; 2) a charge for a loss contingency related to a non-U.S. pension plan ("Loss contingency"); 3) the net proceeds recognized as a result of settling claims relating to professional services ("Legal settlement"); 4) charges related to the deconsolidation of our Venezuelan operations as of March 31, 2016 ("Venezuelan special items"); 5) a net gain related to the extinguishment of debt ("Gain on extinguishment of debt"); and, as it relates to our effective tax rate discussion, 6) income tax benefits realized in the first quarter of 2016 as a result of tax planning strategies and in the second quarter of 2016 primarily due to the release of a valuation allowance associated with Russia ("Special tax items").
The Loss contingency includes the impact on the Consolidated Statements of Operations during the second quarter of 2017 caused by a charge of approximately $18 for a loss contingency related to a non-U.S. pension plan, for which an amendment to the plan that occurred in a prior year may not have been appropriately implemented.

27

AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



The Legal settlement includes the impact on the Consolidated Statements of Operations during the third quarter of 2016 associated with the net proceeds of approximately $27 recognized as a result of settling claims relating to professional services that had been provided to the Company prior to 2013 in connection with a previously disclosed legal matter.
The Venezuelan special items include the impact on the Consolidated Statements of Operations during the first quarter of 2016 caused by the deconsolidation of our Venezuelan operations for which we recorded a loss of approximately $120 in other expense, net. The loss was comprised of approximately $39 in net assets of the Venezuelan business and approximately $81 in accumulated foreign currency translation adjustments within accumulated other comprehensive loss ("AOCI") associated with foreign currency changes before Venezuela was accounted for as a highly inflationary economy.
The Gain on extinguishment of debt includes the impact on the Consolidated Statements of Operations during the third quarter of 2016 due to a net gain on extinguishment of debt caused by the deferred gain associated with interest-rate swap agreement terminations, partially offset by the early tender premium paid, the deferred loss associated with treasury lock agreements, deal costs and the write-off of debt issuance costs and discounts associated with the cash tender offers in August 2016.
In addition, the effective tax rate discussion includes Special tax items, including the impact on the provision for income taxes in the Consolidated Statements of Operations during the second quarter of 2016 primarily due to the release of a valuation allowance associated with Russia of approximately $7. Special tax items also include the impact on the provision for income taxes in the Consolidated Statements of Operations during the first quarter of 2016 due to an income tax benefit of approximately $29 recognized as the result of the implementation of foreign tax planning strategies.
See Note 12, Restructuring Initiatives, Note 7, Employee Benefit Plans, Note 1, Accounting Policies, Note 16, Debt, to the Consolidated Financial Statements included herein and "Venezuela Discussion" and "Effective Tax Rate" in this MD&A for more information on these items.

28


AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
%/Point
Change
 
2017
 
2016
 
%/Point
Change
Select Consolidated Financial Information
 
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 
$
1,417.8

 
$
1,408.8

 
1
 %
 
$
4,146.8

 
$
4,149.6

 
—
 %
Cost of sales
 
550.0

 
550.9

 
—
 %
 
1,592.1

 
1,634.7

 
(3
)%
Selling, general and administrative expenses
 
784.8

 
745.9

 
5
 %
 
2,411.4

 
2,300.0

 
5
 %
Operating profit
 
83.0

 
112.0

 
(26
)%
 
143.3

 
214.9

 
(33
)%
Interest expense
 
34.8

 
34.4

 
1
 %
 
106.0

 
100.3

 
6
 %
Gain on extinguishment of debt
 
—

 
(3.9
)
 
*

 
—

 
(3.9
)
 
*

Interest income
 
(3.4
)
 
(3.5
)
 
(3
)%
 
(11.2
)
 
(12.8
)
 
(13
)%
Other expense, net
 
3.6

 
10.4

 
(65
)%
 
19.4

 
142.9

 
(86
)%
Income (loss) before taxes
 
48.0

 
74.6

 
(36
)%
 
29.1

 
(11.6
)
 
*

Income (loss) from continuing operations, net of tax
 
11.9

 
36.3

 
(67
)%
 
(70.4
)
 
(83.7
)
 
16
 %
Net income (loss) attributable to Avon
 
$
12.5

 
$
36.0

 
(65
)%
 
$
(69.5
)
 
$
(96.9
)
 
28
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings (loss) per share from continuing operations
 
$
.01

 
$
.07

 
(86
)%
 
$
(.20
)
 
$
(.22
)
 
9
 %
Diluted earnings (loss) per share attributable to Avon
 
$
.01

 
$
.07

 
(86
)%
 
$
(.20
)
 
$
(.25
)
 
20
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Advertising expenses (1)
 
$
29.5

 
$
30.3

 
(3
)%
 
$
93.2

 
$
78.6

 
19
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Non-GAAP Financial Measures
 
 
 
 
 
 
 
 
 
 
Gross margin
 
61.2
 %
 
60.9
 %
 
.3

 
61.6
 %
 
60.6
 %
 
1.0

CTI restructuring
 
—

 
—

 
—

 
—

 
—

 
—

Adjusted gross margin
 
61.2
 %
 
60.9
 %
 
.3

 
61.6
 %
 
60.6
 %
 
1.0

 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses as a % of total revenue
 
55.4
 %
 
52.9
 %
 
2.5

 
58.2
 %
 
55.4
 %
 
2.8

CTI restructuring
 
(.4
)
 
(1.0
)
 
.6

 
(.9
)
 
(1.7
)
 
.8

Loss contingency
 
—

 
—

 
—

 
(.4
)
 
—

 
(.4
)
Legal settlement
 
—

 
1.9

 
(1.9
)

—

 
.7

 
(.7
)
Adjusted selling, general and administrative expenses as a % of total revenue
 
54.9
 %
 
53.9
 %
 
1.0

 
56.8
 %
 
54.4
 %
 
2.4

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit
 
$
83.0

 
$
112.0

 
(26
)%
 
$
143.3

 
$
214.9

 
(33
)%
CTI restructuring
 
6.2

 
14.0

 


 
36.5

 
70.2

 
 
Loss contingency
 
—

 
—

 
 
 
18.2

 
—

 
 
Legal settlement
 
—

 
(27.2
)
 
 
 
 
 
(27.2
)
 
 
Adjusted operating profit
 
$
89.2

 
$
98.8

 
(10
)%
 
$
198.0

 
$
257.9

 
(23
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating margin
 
5.9
 %
 
8.0
 %
 
(2.1
)
 
3.5
 %
 
5.2
 %
 
(1.7
)
CTI restructuring
 
.4

 
1.0

 
(.6
)
 
.9

 
1.7

 
(.8
)
Loss contingency
 
—

 
—

 
—

 
.4

 
—

 
.4

Legal settlement
 
—

 
(1.9
)
 
1.9

 
—

 
(.7
)
 
.7

Adjusted operating margin
 
6.3
 %
 
7.0
 %
 
(.7
)
 
4.8
 %
 
6.2
 %
 
(1.4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Change in Constant $ Adjusted operating margin (2)
 
 
 
 
 
(.8
)
 
 
 
 
 
(1.4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Performance Metrics
 
 
 
 
 
 
 
 
 
 
 
 
Change in Active Representatives
 
 
 
 
 
(3
)%
 
 
 
 
 
(3
)%
Change in units sold
 
 
 
 
 
(5
)%
 
 
 
 
 
(6
)%
Change in Ending Representatives
 
 
 
 
 
(2
)%
 
 
 
 
 
(2
)%
* Calculation not meaningful
Amounts in the table above may not necessarily sum due to rounding.
(1)
Advertising expenses are recorded in selling, general and administrative expenses.
(2)
Change in Constant $ Adjusted operating margin for all years presented is calculated using the current-year Constant $ rates.

29


AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



Three Months Ended September 30, 2017
Revenue
During the three months ended September 30, 2017 , revenue increased 1% compared to the prior-year period, benefiting from foreign exchange, while Constant $ revenue was relatively unchanged. Constant $ revenue growth in Argentina and the Philippines was offset by declines in Brazil and the United Kingdom. Constant $ revenue was impacted by a 3% decrease in Active Representatives which was offset by higher average order. The decrease in Active Representatives was primarily driven by a decline in Brazil. The net impact of price and mix increased 5%, primarily due to the inflationary impact on pricing in Argentina and Brazil. Units sold decreased 5%, driven by declines in Brazil, Mexico, Russia and the United Kingdom.
Ending Representatives decreased by 2%. The decrease in Ending Representatives at September 30, 2017 as compared to the prior-year period was most significantly due to a decline in Brazil.
On a category basis, our net sales from reportable segments and associated growth rates were as follows:
 
Three Months Ended September 30,
 
%/Point Change
 
2017
 
2016
 
US$
 
Constant $
Beauty:
 
 
 
 
 
 
 
Skincare
$
397.1

 
$
396.7

 
—
 %
 
(2
)%
Fragrance
389.8

 
373.2

 
4

 
4

Color
246.3

 
243.9

 
1

 
—

Total Beauty
1,033.2

 
1,013.8

 
2

 
1

Fashion & Home:
 
 
 
 
 
 
 
Fashion
195.2

 
201.9

 
(3
)
 
(4
)
Home
149.8

 
150.4

 
—

 
(1
)
Total Fashion & Home
345.0

 
352.3

 
(2
)
 
(2
)
Net sales from reportable segments
$
1,378.2

 
$
1,366.1

 
1

 
—

Net sales from Other operating segments and business activities
—

 
1.4

 
*

 
*

Net sales
$
1,378.2

 
$
1,367.5

 
1

 
—

* Calculation not meaningful
See “Segment Review” in this MD&A for additional information related to changes in revenue by segment.
Operating Margin
Operating margin and Adjusted operating margin decreased 210 basis points and 70 basis points, respectively, compared to the same period of 2016. The decreases in operating margin and Adjusted operating margin include the benefits associated with the Transformation Plan, primarily reductions in headcount, as well as other cost reductions. These savings were largely offset by the inflationary impact on costs outpacing revenue growth. The decreases in operating margin and Adjusted operating margin are discussed further below in "Gross Margin" and "Selling, General and Administrative Expenses."
Gross Margin
Gross margin and Adjusted gross margin both increased 30 basis points compared to the same period of 2016, in each case primarily due to the following:
•
an increase of 80 basis points due to the favorable net impact of mix and pricing, primarily due to inflationary pricing in South Latin America.
This item was partially offset by the following:
•
a decrease of 20 basis points due to higher supply chain costs, primarily in North Latin America due to higher obsolescence and material costs, partially offset by lower distribution costs; and
•
a decrease of approximately 20 basis points due to the net unfavorable impact of foreign currency transaction losses and foreign currency translation.

30


AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of revenue and Adjusted selling, general, and administrative expenses as a percentage of revenue increased 250 basis points and 100 basis points, respectively, compared to the same period of 2016. The selling, general and administrative expenses as a percentage of revenue comparison was impacted by approximately 190 basis points for the approximate $27 of net proceeds recognized as a result of a legal settlement in the third quarter of 2016, partially offset by approximately 60 basis for lower CTI restructuring. See Note 12, Restructuring Initiatives, to the Consolidated Financial Statements included herein for more information on CTI restructuring.
The remaining increase in selling, general and administrative expenses as a percentage of revenue and the increase of 100 basis points in Adjusted selling, general and administrative expenses as a percentage of revenue were, in each case, primarily due to the following:
•
an increase of 110 basis points from higher bad debt expense, driven by Brazil due to the lower collection of receivables, primarily impacted by the macroeconomic environment;
•
an increase of 100 basis points primarily due to higher Representative, sales leader and field expense, most significantly in Brazil to support efforts to activate the field and improve Representative recruitment; and
•
an increase of 40 basis points from higher transportation costs, most significantly in Russia which was driven by new delivery rates.
These items were partially offset by the following:
•
a decrease of 80 basis points due to lower expenses associated with employee incentive compensation plans;
•
a decrease of 20 basis points primarily due to lower fixed expenses, including the benefits associated with the Transformation Plan, primarily reductions in headcount, as well as other cost reductions; and
•
various other insignificant items that partially offset the increase in selling, general and administrative expenses as a percentage of revenue and Adjusted selling, general, and administrative expenses as a percentage of revenue.
Other Expenses
Interest expense and interest income each increased by less than $1 compared to the prior-year period.
Other expense, net, decreased by approximately $7 compared to the prior-year period, primarily due to foreign exchange net gains in the current year as compared to net losses in the prior year, resulting in a year-over-year favorable impact of approximately $4. In addition, other expense, net was favorably impacted by the amounts recorded for our proportionate share of New Avon's loss, which decreased approximately $3 as compared to the prior-year period. See Note 4, Investment in New Avon, to the Consolidated Financial Statements included herein for more information on New Avon.
Effective Tax Rate
The effective tax rates in 2017 and 2016 continue to be impacted by our inability to recognize additional deferred tax assets in various jurisdictions related to our current-year operating results. In addition, the effective tax rates in 2017 and 2016 continue to be impacted by withholding taxes associated with certain intercompany payments, including royalties, service charges and dividends, which in the aggregate are relatively consistent each year due to the need to repatriate funds to cover U.S.-based costs, such as interest on debt and corporate overhead. These factors resulted in unusual effective tax rates in 2017 and 2016.
The effective tax rates in 2017 and 2016 were impacted by CTI restructuring. The effective tax rate in 2016 was also impacted by the benefit from the net proceeds recognized as a result of a legal settlement.
In addition, the effective tax rates and the Adjusted effective tax rates in 2017 and 2016 were negatively impacted by the country mix of earnings.
To the extent that taxable income in our subsidiaries is less favorable than currently projected, we may be required to recognize additional valuation allowances on our subsidiaries’ deferred tax assets.
See Note 12, Restructuring Initiatives, to the Consolidated Financial Statements included herein for more information on CTI restructuring.

31


AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



Impact of Foreign Currency
As compared to the prior-year period, foreign currency has impacted our consolidated financial results in the form of:
•
foreign currency transaction losses (classified within cost of sales, and selling, general and administrative expenses), which had an unfavorable impact to operating profit and Adjusted operating profit of an estimated $10, or approximately 30 basis points to operating margin and Adjusted operating margin;
•
foreign currency translation, which had a favorable impact to operating profit and Adjusted operating profit of approximately $5, or approximately 10 basis points to operating margin and Adjusted operating margin; and
•
foreign exchange net gains on our working capital (classified within other expense, net) as compared to net losses in the prior year, resulting in a year-over-year favorable impact of approximately $4 before tax on both a reported and Adjusted basis.
Discontinued Operations
Loss from discontinued operations, net of tax was approximately $1 for 2016. See Note 3, Discontinued Operations, to the Consolidated Financial Statements included herein for more information.
Nine Months Ended September 30, 2017
Revenue
During the nine months ended September 30, 2017 , revenue was relatively unchanged compared to the prior-year period, partially benefiting from foreign exchange, while Constant $ revenue decreased 2%. Our Constant $ revenue decline was primarily driven by declines in Russia, Brazil, and the United Kingdom, partially offset by growth in Argentina and South Africa. The decline in Constant $ revenue was primarily due to a 3% decrease in Active Representatives, which was partially offset by higher average order. The decrease in Active Representatives was primarily due to South Latin America (driven by Brazil) and Europe, Middle East & Africa. The net impact of price and mix increased 4%, primarily due to the inflationary impact on pricing in Argentina and Brazil. Units sold decreased 6%, primarily due to declines in Russia and Brazil. The revenue performance was negatively impacted most significantly by a decline in Color sales, as we experienced issues in some markets as we have begun the segmentation of our Color category into three distinct brands. The timing of innovation also impacted the decline in Color sales; however, we expect to strengthen our Color category in the last quarter of 2017 through innovation.
On a category basis, our net sales from reportable segments and associated growth rates were as follows:
 
Nine Months Ended September 30,
 
%/Point Change
 
2017
 
2016
 
US$
 
Constant $
Beauty:
 
 
 
 
 
 
 
Skincare
$
1,182.0

 
$
1,175.9

 
1
 %
 
(2
)%
Fragrance
1,101.3

 
1,065.2

 
3

 
2

Color
724.3

 
743.7

 
(3
)
 
(5
)
Total Beauty
3,007.6

 
2,984.8

 
1

 
(2
)
Fashion & Home:
 
 
 
 
 
 
 
Fashion
591.8

 
615.0

 
(4
)
 
(5
)
Home
430.3

 
428.6

 
—

 
(1
)
Total Fashion & Home
1,022.1

 
1,043.6

 
(2
)
 
(3
)
Net sales from reportable segments
$
4,029.7

 
$
4,028.4

 
—

 
(2
)
Net sales from Other operating segments and business activities
.1

 
18.6

 
*

 
*

Net sales
$
4,029.8

 
$
4,047.0

 
—

 
(2
)
* Calculation not meaningful
See “Segment Review” in this MD&A for additional information related to changes in revenue by segment.
Operating Margin
Operating margin and Adjusted operating margin decreased 170 basis points and 140 basis points, respectively, compared to the same period of 2016. The decreases in operating margin and Adjusted operating margin include the benefits associated with the Transformation Plan, primarily reductions in headcount, as well as other cost reductions. These savings were largely offset by

32


AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



the inflationary impact on costs outpacing revenue growth. The decreases in operating margin and Adjusted operating margin are discussed further below in "Gross Margin" and "Selling, General and Administrative Expenses."
Gross Margin
Gross margin and Adjusted gross margin both increased 100 basis points compared to the same period of 2016, in each case primarily due to the following:
•
an increase of 110 basis points due to the favorable net impact of mix and pricing, primarily due to inflationary pricing in South Latin America and Europe, Middle East & Africa.
This item was partially offset by the following:
•
a decrease of 20 basis points due to higher supply chain costs, primarily in South Latin America and North Latin America due to higher material and overhead costs, which was partially offset by lower distribution and material costs in Europe, Middle East & Africa.
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of revenue and Adjusted selling, general, and administrative expenses as a percentage of revenue increased 280 basis points and 240 basis points, respectively, compared to the same period of 2016. The selling, general and administrative expenses as a percentage of revenue comparison was impacted by approximately 70 basis points for the approximate $27 of net proceeds recognized as a result of a legal settlement in the third quarter of 2016 and approximately 40 basis points for a loss contingency related to a non-U.S. pension plan as discussed above, partially offset by approximately 80 basis for lower CTI restructuring. See Note 7, Employee Benefit Plans, to the Consolidated Financial Statements included herein for more information on the loss contingency related to a non-U.S. pension plan and Note 12, Restructuring Initiatives, to the Consolidated Financial Statements included herein for more information on CTI restructuring.
The remaining increase in selling, general and administrative expenses as a percentage of revenue and the increase of 240 basis points in Adjusted selling, general and administrative expenses as a percentage of revenue were, in each case, primarily due to the following:
•
an increase of 120 basis points from higher bad debt expense, driven by Brazil due to the lower than anticipated collection of receivables, primarily impacted by the macroeconomic environment, as well as resulting from an adjustment to credit terms available to new Representatives during 2016;
•
an increase of 60 basis points primarily due to the impact of the Constant $ revenue decline causing deleverage of our fixed expenses, partially offset by lower fixed expenses, including the benefits associated with the Transformation Plan, primarily reductions in headcount, as well as other cost reductions;
•
an increase of 50 basis points from higher transportation costs, primarily in Russia which was driven by new delivery rates;
•
an increase of 50 basis points primarily due to higher Representative, sales leader and field expense, most significantly in Brazil to support efforts to activate the field and improve Representative recruitment; and
•
an increase of 30 basis points from higher advertising expense, primarily in Brazil.
These items were partially offset by the following:
•
a decrease of approximately 50 basis points due to the favorable impact of foreign currency translation and foreign currency transaction gains; and
•
a decrease of 50 basis points due to lower expenses associated with employee incentive compensation plans.
Other Expenses
Interest expense increased by approximately $6 compared to the prior-year period, primarily due to the interest associated with $500 of 7.875% Senior Secured Notes issued in August 2016 and lower amortization of gains associated with the termination of interest rate swaps. These items were partially offset by the interest savings associated with prepayment of the remaining principal amount of our 4.20% Notes and 5.75% Notes in November 2016, the August 2016 cash tender offers and the October 2016 and December 2016 repurchases of certain of our outstanding public notes. Refer to Note 16, Debt, and Note 15, Derivative Instruments and Hedging Activities, to the Consolidated Financial Statements included herein for additional information.

33


AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



Gain on extinguishment of debt in the first nine months of 2016 of approximately $4 was associated with the cash tender offers in August 2016. Refer to Note 16, Debt, to the consolidated financial statements included herein for additional information.
Interest income decreased by approximately $2 compared to the prior-year period.
Other expense, net, decreased by approximately $123 compared to the prior-year period, primarily due to the deconsolidation of our Venezuelan operations, as we recorded a loss of approximately $120 in the first quarter of 2016. In addition, other expense, net was positively impacted by foreign exchange net gains in the current year as compared to net losses in the prior year, resulting in a year-over-year benefit of approximately $9. These items were partially offset by the unfavorable impact of the amounts recorded for our proportionate share of New Avon's loss, which increased approximately $3 as compared to the prior-year period. See "Venezuela Discussion" in this MD&A and Note 1, Accounting Policies, to the Consolidated Financial Statements included herein for further discussion of our Venezuela operations, and see Note 4, Investment in New Avon, to the Consolidated Financial Statements included herein for more information on New Avon.
Effective Tax Rate
The effective tax rates in 2017 and 2016 continue to be impacted by our inability to recognize additional deferred tax assets in various jurisdictions related to our current-year operating results. In addition, the effective tax rates in 2017 and 2016 continue to be impacted by withholding taxes associated with certain intercompany payments, including royalties, service charges and dividends, which in the aggregate are relatively consistent each year due to the need to repatriate funds to cover U.S.-based costs, such as interest on debt and corporate overhead. These factors resulted in unusual effective tax rates in 2017 and 2016.
The effective tax rate in 2017 was impacted by a loss contingency related to a non-U.S. pension plan and CTI restructuring. The effective tax rate in 2016 was impacted by the deconsolidation of our Venezuelan operations and CTI restructuring, partially offset by a benefit of approximately $29 as a result of the implementation of foreign tax planning strategies, a net benefit of approximately $7 primarily due to the release of a valuation allowance associated with Russia and a benefit from the net proceeds recognized as a result of a legal settlement.
In addition, the effective tax rates and the Adjusted effective tax rates in 2017 and 2016 were negatively impacted by the country mix of earnings.
See Note 7, Employee Benefit Plans, to the Consolidated Financial Statements included herein for more information on the loss contingency related to a non-U.S. pension plan, Note 12, Restructuring Initiatives, to the Consolidated Financial Statements included herein for more information on CTI restructuring and "Venezuela Discussion" in this MD&A and Note 1, Accounting Policies, to the Consolidated Financial Statements included herein for further discussion of our Venezuela operations.
Impact of Foreign Currency
As compared to the prior-year period, foreign currency has impacted our consolidated financial results in the form of:
•
foreign currency transaction gains (classified within cost of sales, and selling, general and administrative expenses), which had a favorable impact to operating profit and Adjusted operating profit of an estimated $10, or approximately 30 basis points to operating margin and Adjusted operating margin;
•
foreign currency translation, which had a favorable impact to operating profit and Adjusted operating profit of approximately $15, or approximately 30 basis points to operating margin and approximately 20 basis points to Adjusted operating margin; and
•
foreign exchange net gains on our working capital (classified within other expense, net) as compared to net losses in the prior year, resulting in a year-over-year benefit of approximately $9 before tax on both a reported and Adjusted basis.
Discontinued Operations
Loss from discontinued operations, net of tax was approximately $13 for 2016. During the first nine months of 2016, we recorded charges of approximately $16 before tax ($6 after tax) in the aggregate associated with the sale of the North America business which closed on March 1, 2016. See Note 3, Discontinued Operations, to the Consolidated Financial Statements included herein for more information.
Venezuela Discussion
As of March 31, 2016, we deconsolidated our Venezuelan operations, and since then, we account for this business using the cost method of accounting. The decision to deconsolidate our Venezuelan operations was due to the lack of exchangeability between the Venezuelan bolivar and the U.S. dollar. This was caused by Venezuela's restrictive foreign exchange control

34


AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



regulations and our Venezuelan operations' increasingly limited access to U.S. dollars, which restricted our Venezuelan operations' ability to pay dividends and settle intercompany obligations.
As a result of the change to the cost method of accounting, in the first quarter of 2016 we recorded a loss of approximately $120 in other expense, net. The loss was comprised of approximately $39 in net assets of the Venezuelan business and approximately $81 in accumulated foreign currency translation adjustments within AOCI associated with foreign currency movements before Venezuela was accounted for as a highly inflationary economy. The net assets of the Venezuelan business were comprised of inventories of approximately $24, property, plant and equipment, net of approximately $15, other assets of approximately $11, accounts receivable of approximately $5, cash of approximately $4, and accounts payable and accrued liabilities of approximately $20. Our Consolidated Balance Sheets no longer include the assets and liabilities of our Venezuelan operations. We no longer include the results of our Venezuelan operations in our Consolidated Financial Statements, and will include income relating to our Venezuelan operations only to the extent that we receive cash for dividends or royalties remitted by Avon Venezuela.
Segment Review
We determine segment profit by deducting the related costs and expenses from segment revenue. In order to ensure comparability between periods, segment profit includes an allocation of global marketing expenses based on actual revenues. Segment profit excludes global expenses other than the allocation of marketing, CTI restructuring initiatives, certain significant asset impairment charges, and other items, which are not allocated to a particular segment, if applicable. This is consistent with the manner in which we assess our performance and allocate resources. See Note 10, Segment Information, to the Consolidated Financial Statements for a reconciliation of segment profit to operating profit.
Europe, Middle East & Africa
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
 
 
 
%/Point Change
 
 
 
 
 
%/Point Change
 
2017
 
2016
 
US$
 
Constant $
 
2017
 
2016
 
US$
 
Constant $
Total revenue
$
482.8

 
$
476.4

 
1
 %
 
(2
)%
 
$
1,484.9

 
$
1,517.7

 
(2
)%
 
(4
)%
Segment profit
65.9

 
66.2

 
—
 %
 
(9
)%
 
222.5

 
218.3

 
2
 %
 
(3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment margin
13.6
%
 
13.9
%
 
(.3
)
 
(.9
)
 
15.0
%
 
14.4
%
 
.6

 
.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Change in Active Representatives
 
 
 
 
 
 
(2
)%
 
 
 
 
 
 
 
(3
)%
Change in units sold
 
 
 
 
 
 
(5
)%
 
 
 
 
 
 
 
(9
)%
Change in Ending Representatives
 
 
 
 
 
 
1
 %
 
 
 
 
 
 
 
1
 %
Amounts in the table above may not necessarily sum due to rounding.
Three Months Ended September 30, 2017
Total revenue increased 1% compared to the prior-year period, primarily due to the favorable impact of foreign exchange which was primarily driven by the weakening of the U.S. dollar relative to the Russian ruble and the South African rand, partially offset by the strengthening of the U.S. dollar relative to the Turkish lira. On a Constant $ basis, revenue decreased 2%, driven by a decrease in Active Representatives. The increase in Ending Representatives was primarily driven by increases in Turkey and South Africa, partially offset by declines in Russia and the United Kingdom.
In Russia, revenue increased 3%, benefiting significantly from the favorable impact of foreign exchange. On a Constant $ basis, Russia's revenue declined 6%, primarily due to a decrease in Active Representatives, as well as lower average order. The Constant $ revenue decline in Russia was impacted by competitive pressures which negatively impacted Active Representatives. In the United Kingdom, revenue declined 13%, or 12% on a Constant $ basis, primarily due to a decrease in Active Representatives. In South Africa, revenue grew 17%, which was favorably impacted by foreign exchange. On a Constant $ basis, South Africa’s revenue grew 8%, driven by an increase in Active Representatives, partially offset by lower average order.

35


AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



Segment margin decreased .3 points, or .9 points on a Constant $ basis, in each case primarily as a result of:
•
a decline of 1.0 point from higher bad debt expense, primarily in Russia, and to a lesser extent in South Africa. Higher bad debt expense in Russia was driven primarily by a payment facilitation agency that has not remitted to us the funds it received from certain Representatives, and in South Africa was driven primarily by lower collection of receivables as a result of deteriorating economic conditions;
•
a decline of 1.0 point from higher transportation costs, driven primarily by new delivery rates in Russia;
•
a decline of .7 points due to higher Representative, sales leader and field expense, most significantly in Turkey;
•
a benefit of 1.0 point primarily due to lower fixed expenses, benefiting from lower expenses associated with employee incentive compensation plans. In addition, fixed expenses included the benefits associated with the Transformation Plan, primarily reductions in headcount, as well as other cost reductions. These items were partially offset by a settlement charge in the third quarter of 2017 associated with the United Kingdom pension plan which negatively impacted segment margin by .7 points; and
•
a benefit of .6 points due to lower advertising expense, primarily in Russia and South Africa.
Nine Months Ended September 30, 2017
Total revenue decreased 2% compared to the prior-year period, despite the favorable impact of foreign exchange which was primarily driven by the weakening of the U.S. dollar relative to the Russian ruble and the South African rand, partially offset by the strengthening of the U.S. dollar relative to the British pound and the Turkish lira. On a Constant $ basis, revenue decreased 4%, most significantly impacted by declines in Russia and the United Kingdom, partially offset by growth in South Africa. The segment's Constant $ revenue decline was primarily driven by a decrease in Active Representatives.
In Russia, revenue increased 8%, benefiting significantly from the favorable impact of foreign exchange. On a Constant $ basis, Russia's revenue declined 8%, primarily due to a decrease in Active Representatives along with lower average order. The Constant $ revenue decline in Russia was impacted by competitive pressures which negatively impacted Active Representatives, as well as a comparison to strong volume growth in the prior-year period, which benefited primarily from a pricing lag during an inflationary period. In addition, Constant $ revenue in Russia was impacted by service issues related to our delivery provider, particularly in the first quarter of 2017 and the early part of the second quarter of 2017. In the United Kingdom, revenue declined 17%, which was unfavorably impacted by foreign exchange. On a Constant $ basis, the United Kingdom's revenue declined 10%, primarily due to a decrease in Active Representatives, as well as lower average order. The Constant $ revenue decline in the United Kingdom was partially due to the anniversary of the launch of Matte lipstick in the first quarter of 2016 as well as the strong product launches in the second quarter of 2016. In South Africa, revenue grew 27%, which was favorably impacted by foreign exchange. On a Constant $ basis, South Africa’s revenue grew 12%, primarily due to an increase in Active Representatives, partially offset by lower average order.
Segment margin increased .6 points, or .2 points on a Constant $ basis, in each case primarily as a result of:
•
a benefit of 2.5 points due to higher gross margin caused primarily by 1.2 points from the favorable net impact of mix and pricing, an estimated 1 point from the favorable impact of foreign currency transaction net gains and .6 points due to lower supply chain costs. Supply chain costs benefited primarily from lower distribution and material costs, partially due to productivity initiatives;
•
a decline of 1.1 points from higher transportation costs, driven primarily by new delivery rates in Russia;
•
a decline of .6 points from higher bad debt expense, primarily in Russia, South Africa and the United Kingdom. Higher bad debt expense in Russia was driven primarily by a payment facilitation agency that has not remitted to us the funds it received from certain Representatives, and in South Africa was driven primarily by lower collection of receivables as a result of deteriorating economic conditions. In addition, higher bad debt expense in the United Kingdom, primarily in the second quarter of 2017, was due to a declining Representative count which has impacted collections;
•
a decline of .4 points primarily due to the impact of the Constant $ revenue decline causing deleverage of our fixed expenses, partially offset by lower fixed expenses, including the benefits associated with the Transformation Plan, primarily reductions in headcount, as well as other cost reductions. In addition, fixed expenses benefited from lower expenses associated with employee incentive compensation plans; and
•
a decline of .3 points related to the net impact of declining revenue with respect to Representative, sales leader and field expense.

36


AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



South Latin America
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
 
 
 
%/Point Change
 
 
 
 
 
%/Point Change
 
2017
 
2016
 
US$
 
Constant $
 
2017
 
2016
 
US$
 
Constant $
Total revenue
$
589.7

 
$
594.8

 
(1
)%
 
—
 %
 
$
1,647.0

 
$
1,556.9

 
6
 %
 
1
 %
Segment profit
66.3

 
73.8

 
(10
)%
 
(9
)%
 
124.8

 
157.9

 
(21
)%
 
(22
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment margin
11.2
%
 
12.4
%
 
(1.2
)
 
(1.1
)
 
7.6
%
 
10.1
%
 
(2.5
)
 
(2.2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Change in Active Representatives
 
 
 
 
 
 
(6
)%
 
 
 
 
 
 
 
(4
)%
Change in units sold
 
 
 
 
 
 
(7
)%
 
 
 
 
 
 
 
(5
)%
Change in Ending Representatives
 
 
 
 
 
 
(6
)%
 
 
 
 
 
 
 
(6
)%
Amounts in the table above may not necessarily sum due to rounding.
Three Months Ended September 30, 2017
Total revenue decreased 1% compared to the prior-year period, primarily due to the unfavorable impact of foreign exchange. On a Constant $ basis revenue was relatively unchanged compared to the prior year, primarily driven by a decrease in Active Representatives, offset by higher average order which was driven by inflationary pricing in Argentina. The decline in Ending Representatives was primarily driven by declines in Brazil, and to a lesser extent, Colombia.
Revenue in Brazil decreased 3%, favorably impacted by foreign exchange. Brazil’s Constant $ revenue declined 5%, primarily due to a decrease in Active Representatives, partially offset by higher average order. On a Constant $ basis, Brazil’s sales from Beauty products and Fashion & Home products declined 2% and 9%, respectively. The decline in Constant $ Beauty sales in Brazil was driven by weaker performance in Color. Revenue in Brazil, as well as Active Representatives and Ending Representatives, continued to be impacted by a difficult macroeconomic environment combined with the application of stricter credit requirements for the acceptance of new Representatives as compared to the requirements in the prior year. Revenue in Argentina grew 4%, or 19% on a Constant $ basis, which was primarily due to higher average order which was impacted by the inflationary impact on pricing, and to a lesser extent, an increase in Active Representatives.
Segment margin decreased 1.2 points, or 1.1 points on a Constant $ basis, in each case primarily as a result of:
•
a decline of 1.6 points from higher bad debt expense, driven by Brazil due to the lower collection of receivables, primarily impacted by the macroeconomic environment;
•
a decline of 1.2 points due to higher Representative, sales leader and field expense, most significantly in Brazil to support efforts to activate the field and improve Representative recruitment;
•
a benefit of 1.3 points due to higher gross margin caused primarily by 1.4 points from the favorable net impact of mix and pricing, primarily due to inflationary pricing; and
•
a benefit of .3 points primarily due to lower fixed expenses, benefiting from lower expenses associated with employee incentive compensation plans, partially offset by the inflationary impact on costs outpacing revenue growth.
Nine Months Ended September 30, 2017
Total revenue increased 6% compared to the prior-year period, primarily due to the favorable impact of foreign exchange which was primarily driven by the weakening of the U.S. dollar relative to the Brazilian real. On a Constant $ basis, revenue increased 1%. The segment's Constant $ revenue benefited from higher average order, which was driven by inflationary pricing in Argentina, partially offset by a decrease in Active Representatives.
Revenue in Brazil increased 8%, favorably impacted by foreign exchange. Brazil’s Constant $ revenue declined 2%, primarily due to a decrease in Active Representatives, partially offset by higher average order. On a Constant $ basis, Brazil’s sales from Beauty products and Fashion & Home products decreased 2% and 4%, respectively. The decline in Constant $ Beauty sales in Brazil was driven by weaker performance in Color. Revenue in Brazil, as well as Active Representatives and Ending Representatives, continued to be impacted by a difficult macroeconomic environment combined with the application of stricter credit requirements for the acceptance of new Representatives as compared to the requirements in the prior year. Revenue in Argentina grew 9%, or 22% on a Constant $ basis, which was primarily due to higher average order which was impacted by the inflationary impact on pricing.

37


AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



Segment margin decreased 2.5 points, or 2.2 points on a Constant $ basis, in each case primarily as a result of:
•
a decline of 2.3 points from higher bad debt expense, driven by Brazil due to the lower than anticipated collection of receivables, primarily impacted by the macroeconomic environment, as well as resulting from an adjustment to credit terms available to new Representatives during 2016;
•
a decline of .7 points primarily due to higher fixed expenses, driven by the inflationary impact on costs outpacing revenue growth, partially offset by lower expenses associated with employee incentive compensation plans;
•
a decline of .6 points from higher advertising expense, primarily in Brazil which was driven by product launches;
•
a decline of .5 points due to higher Representative, sales leader and field expense, most significantly in Brazil to support efforts to activate the field and improve Representative recruitment; and
•
a benefit of 2.0 points due to higher gross margin caused by 2.2 points from the favorable net impact of mix and pricing, primarily due to inflationary pricing, and approximately .4 points from the favorable impact of foreign currency net gains. These were partially offset by .5 points from higher supply chain costs, which were primarily negatively impacted by higher material costs which included inflationary pressures in Argentina.
North Latin America
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
 
 
 
%/Point Change
 
 
 
 
 
%/Point Change
 
2017
 
2016
 
US$
 
Constant $
 
2017
 
2016
 
US$
 
Constant $
Total revenue
$
206.0

 
$
196.8

 
5
 %
 
2
 %
 
$
607.0

 
$
625.9

 
(3
)%
 
—
 %
Segment profit
17.2

 
24.4

 
(30
)%
 
(28
)%
 
56.0

 
85.0

 
(34
)%
 
(31
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment margin
8.3
%
 
12.4
%
 
(4.1
)
 
(3.5
)
 
9.2
%
 
13.6
%
 
(4.4
)
 
(4.1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Change in Active Representatives
 
 
 
 
 
 
1
 %
 
 
 
 
 
 
 
(1
)%
Change in units sold
 
 
 
 
 
 
(3
)%
 
 
 
 
 
 
 
(2
)%
Change in Ending Representatives
 
 
 
 
 
 
1
 %
 
 
 
 
 
 
 
1
 %
Amounts in the table above may not necessarily sum due to rounding.
Three Months Ended September 30, 2017
North Latin America consists largely of our Mexico business. Total revenue for the segment increased 5% compared to the prior-year period, partially due to the favorable impact of foreign exchange which was primarily driven by the weakening of the U.S. dollar relative to the Mexican peso. On a Constant $ basis, revenue increased 2%, primarily due to higher average order and an increase in Active Representatives, despite the impact of product fulfillment shortfalls in the region. The segment's Constant $ revenue increase was primarily due to growth in Central America, partially offset by a Constant $ revenue decline in Mexico. Revenue in Mexico increased 4%, and was favorably impacted by foreign exchange. On a Constant $ basis, Mexico's revenue declined 1%, primarily due to a decrease in Active Representatives. We anticipate that the earthquake in Mexico in late September 2017 will adversely impact Mexico's fourth quarter 2017 results.
Segment margin decreased 4.1 points, or 3.5 points on a Constant $ basis, in each case primarily as a result of:
•
a decline of 2.1 points due to lower gross margin caused primarily by 1.5 points from the unfavorable impact of foreign currency transaction net losses and 1.0 point from higher supply chain costs, partially offset by .4 points from the favorable net impact of mix and pricing. Supply chain costs were negatively impacted by higher obsolescence and material costs, partially offset by lower distribution costs;
•
a decline of .6 points from higher bad debt expense, primarily in Mexico partially due to the implementation of a new collection process as a result of changes in regulations;
•
a decline of .5 points from higher transportation costs, driven by Mexico primarily due to increased fuel prices; and
•
a decline of .4 points due to higher Representative, sales leader and field expense.

38


AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



Nine Months Ended September 30, 2017
Total revenue for the segment decreased 3% compared to the prior-year period, primarily due to the unfavorable impact from foreign exchange which was primarily driven by the strengthening of the U.S. dollar relative to the Mexican peso. On a Constant $ basis, revenue was relatively unchanged compared to the prior year, as higher average order was offset by a decrease in Active Representatives. In addition, Constant $ revenue was impacted by product fulfillment shortfalls in the region. The segment's Constant $ revenue benefited from growth in Central America, offset by a Constant $ revenue decline in Mexico. Revenue in Mexico declined 5%, and was unfavorably impacted by foreign exchange. On a Constant $ basis, Mexico's revenue declined 2%, primarily due to a decrease in Active Representatives.
Segment margin decreased 4.4 points, or 4.1 points on a Constant $ basis, in each case primarily as a result of:
•
a decline of 1.5 points due to lower gross margin caused primarily by 1.2 points from higher supply chain costs and .6 points from the unfavorable impact of foreign currency transaction net losses, partially offset by .4 points from the favorable net impact of mix and pricing. The impact of supply chain costs on gross margin was primarily due to lower volume and fixed overhead costs, as well as higher material costs;
•
a decline of .8 points from higher bad debt expense, primarily in Mexico partially due to the implementation of a new collection process as a result of changes in regulations discussed above;
•
a decline of .8 points due to higher Representative, sales leader and field expense, primarily as a result of increasing incentives to mitigate impact of the product fulfillment shortfalls in the region;
•
a decline of .5 points from higher transportation costs driven by Mexico primarily due to increased fuel prices; and
•
a decline of .3 points from higher net brochure costs, partly due to an increase in the number of pages in support of the segmentation of our Color category.
Asia Pacific
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
 
 
 
%/Point Change
 
 
 
 
 
%/Point Change
 
2017
 
2016
 
US$
 
Constant $
 
2017
 
2016
 
US$
 
Constant $
Total revenue
$
130.1

 
$
131.4

 
(1
)%
 
3
 %
 
$
379.0

 
$
406.4

 
(7
)%
 
(3
)%
Segment profit
13.0

 
12.9

 
1
 %
 
15
 %
 
34.1

 
43.1

 
(21
)%
 
(13
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment margin
10.0
%
 
9.8
%
 
.2

 
1.1

 
9.0
%
 
10.6
%
 
(1.6
)
 
(1.0
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Change in Active Representatives
 
 
 
 
 
 
—
 %
 
 
 
 
 
 
 
(5
)%
Change in units sold
 
 
 
 
 
 
3
 %
 
 
 
 
 
 
 
(1
)%
Change in Ending Representatives
 
 
 
 
 
 
(3
)%
 
 
 
 
 
 
 
(3
)%
Amounts in the table above may not necessarily sum due to rounding.
Effective in the first quarter of 2017, given that we exited Thailand during 2016, the results of Thailand are now reported in Other operating segments and business activities for all periods presented, while previously the results had been reported in Asia Pacific. The impact was not material to Asia Pacific or Other operating segments and business activities and is consistent with how we present other market exits.
Three Months Ended September 30, 2017
Total revenue decreased 1% compared to the prior-year period, primarily due to the unfavorable impact from foreign exchange. On a Constant $ basis, revenue increased 3%, primarily due to higher average order. The decrease in Ending Representatives was impacted by declines in all markets except the Philippines, most significantly in Malaysia. Revenue in the Philippines increased 4%, or 12% on a Constant $ basis, primarily due to higher average order and an increase in Active Representatives. Revenue growth in the Philippines was driven by strong commercial offers, including pricing, which, along with television advertising associated with our Color category, helped drive momentum in the field. In addition, actions implemented to improve inventory availability provided benefits to revenue growth.

39


AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



Segment margin increased .2 points, or 1.1 points on a Constant $ basis, in each case primarily as a result of:
•
a benefit of 2.9 points primarily due to lower fixed expenses, including the benefits associated with the Transformation Plan, primarily reductions in headcount;
•
a benefit of .7 points due to higher gross margin caused primarily by .9 points from supply chain costs, primarily lower obsolescence;
•
a benefit of .6 points from lower bad debt expense, primarily in the Philippines, driven mainly by improved collection;
•
a decline of 1.7 points related to higher Representative, sales leader and field expense, primarily in the Philippines; and
•
a decline of .9 points due to higher advertising expense, primarily in the Philippines, related to television advertising associated with our Color category.
Nine Months Ended September 30, 2017
Total revenue decreased 7% compared to the prior-year period, partially due to the unfavorable impact from foreign exchange. On a Constant $ basis, revenue decreased 3%, primarily due to a decrease in Active Representatives, most significantly in Malaysia, partially offset by higher average order. Revenue in the Philippines decreased 3%, or increased 3% on a Constant $ basis, primarily due to a higher average order and an increase in Active Representatives. Revenue growth in the Philippines was driven by the third quarter of 2017, as strong commercial offers, including pricing, which, along with television advertising associated with our Color category, helped drive momentum in the field. In addition, actions implemented to improve inventory availability provided benefits to revenue growth.
Segment margin decreased 1.6 points, or 1.0 point on a Constant $ basis, in each case primarily as a result of:
•
a decline of 1.1 points due to lower gross margin caused primarily by .7 points from the unfavorable net impact of mix and pricing and .7 points from supply chain costs. The impact of supply chain costs on gross margin was primarily due to lower volume on fixed overhead costs, partially offset by lower obsolescence;
•
a decline of 1.0 point primarily related to the net impact of declining revenue with respect to Representative, sales leader and field expense;
•
a decline of .4 points due to lower advertising expense, primarily in the Philippines, related to television advertising associated with our Color category during the third quarter of 2017;
•
a benefit of 1.1 points due to the lower fixed expenses, including the benefits associated with the Transformation Plan, primarily reductions in headcount; and
•
a benefit of .4 points from lower bad debt expense, primarily in the Philippines, driven mainly by improved collection.
Earlier this year, we completed the review of our China operations and have determined that we will retain China in our portfolio of businesses.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of funds historically have been cash flows from operations, public offerings of notes, bank financings, issuance of commercial paper, borrowings under lines of credit and a private placement of notes. At September 30, 2017 , we had cash and cash equivalents totaling approximately $664 . We believe that our sources of funding will be sufficient to satisfy our currently anticipated cash requirements through at least the next twelve months. For more information with respect to currency restrictions, see "Segment Review - South Latin America" in this MD&A above, and "Risk Factors - We are subject to financial risks related to our international operations, including exposure to foreign currency fluctuations and the impact of foreign currency restrictions" contained in our 2016 Form 10-K.
We may seek to repurchase our equity or to retire our outstanding debt in open market purchases, privately negotiated transactions, through derivative instruments, cash tender offers or otherwise. Repurchases of equity and debt may be funded by the incurrence of additional debt or the issuance of equity (including shares of preferred stock) or convertible securities and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material. We may also elect to incur additional debt or issue equity (including shares of preferred stock) or convertible securities to finance ongoing operations or to meet our other liquidity needs. Any issuances of equity (including shares of preferred stock) or convertible securities could have a dilutive effect on the ownership interest of our current shareholders and may adversely impact earnings per share in future periods. Our credit ratings were downgraded during the past several years, which may impact our ability to access such transactions on favorable terms, if at all. For more information, see "Risk Factors - Our credit ratings were downgraded in each of the last three years, which could limit our access to

40


AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



financing, affect the market price of our financing and increase financing costs. A further downgrade in our credit ratings may adversely affect our access to liquidity," "Risk Factors - Our indebtedness could adversely affect us by reducing our flexibility to respond to changing business and economic conditions," and "Risk Factors - A general economic downturn, a recession globally or in one or more of our geographic regions or markets or sudden disruption in business conditions or other challenges may adversely affect our business, our access to liquidity and capital, and our credit ratings" contained in our 2016 Form 10-K.
Our liquidity could also be negatively impacted by restructuring initiatives, dividends, capital expenditures, acquisitions, and certain contingencies, including any legal or regulatory settlements, described more fully in Note 8, Contingencies, to the Consolidated Financial Statements included herein. See our Cautionary Statement for purposes of the “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995 contained in this report.  
Cash Flows
Net Cash Provided (Used) by Continuing Operating Activities
Net cash provided by continuing operating activities during the first nine months of 2017 was approximately $35, as compared to net cash used by continuing operating activities of approximately $104 during the first nine months of 2016.
The year-over-year comparison benefited from an injunction we received in May 2016 for cash deposits associated with Industrial Production Tax (“IPI”) in Brazil.  As a result, we were not required to make cash deposits in 2017, while we paid approximately $19 for these cash deposits in 2016, prior to May. See Note 8, Contingencies, to the Consolidated Financial Statements included herein for additional information on the IPI taxes.
The remaining approximate $120 benefit to the year-over-year comparison of net cash provided (used) by continuing operating activities was primarily due to improvements in working capital, most significantly from lower purchases of inventory and the timing of payments, as well as lower net receivables.                              
Net Cash Used by Continuing Investing Activities
Net cash used by continuing investing activities during the first nine months of 2017 was approximately $42, as compared to approximately $68 during the first nine months of 2016. The approximate $26 decrease to net cash used by continuing investing activities was primarily due to an approximate $22 cash distribution received from New Avon in the third quarter of 2017. Capital expenditures for the full year 2017 are estimated to be approximately $100 and are expected to be funded by cash from operations. See Note 4, Investment in New Avon, to the Consolidated Financial Statements included herein for more information on the cash distribution received from New Avon.
Net Cash (Used) Provided by Continuing Financing Activities
Net cash used by continuing financing activities during the first nine months of 2017 was approximately $10, as compared to net cash provided by continuing financing activities of approximately $569 during the first nine months of 2016. The approximate $579 decrease to net cash (used) provided by continuing financing activities was primarily due to the net proceeds related to the $500 principal amount of 7.875% Senior Secured Notes issued in the third quarter of 2016 and the net proceeds from the sale of Series C Preferred Stock, partially offset by the payments for the August 2016 cash tender offers of approximately $301. See Note 16, Debt, and Note 5, Related Party Transactions, to the Consolidated Financial Statements included herein for more information.
Capital Resources
Revolving Credit Facility
In June 2015, the Company and Avon International Operations, Inc. ("AIO"), a wholly-owned domestic subsidiary of the Company, entered into a five-year $400.0 senior secured revolving credit facility (the “2015 facility”). Borrowings under the 2015 facility bear interest, at our option, at a rate per annum equal to LIBOR plus 250 basis points or a floating base rate plus 150 basis points, in each case subject to adjustment based upon a leverage-based pricing grid. As of September 30, 2017 , there were no amounts outstanding under the 2015 facility.
All obligations of AIO under the 2015 facility are (i) unconditionally guaranteed by each material domestic restricted subsidiary of the Company (other than AIO, the borrower), in each case, subject to certain exceptions and (ii) fully guaranteed on an unsecured basis by the Company. The obligations of AIO and the subsidiary guarantors are secured by first priority liens on and security interest in substantially all of the assets of AIO and the subsidiary guarantors, in each case, subject to certain exceptions.

41


AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



The 2015 facility will terminate in June 2020; provided, however, that it shall terminate on the 91 st day prior to the maturity of 6.50% Notes due March 1, 2019 and 4.60% Notes due March 15, 2020, if on such 91 st day, the applicable notes are not redeemed, repaid, discharged, defeased or otherwise refinanced in full.
The 2015 facility contains affirmative and negative covenants, which are customary for secured financings of this type, as well as financial covenants (interest coverage and total leverage ratios). As of September 30, 2017 , we were in compliance with our interest coverage and total leverage ratios under the 2015 facility. The amount of the facility available to be drawn down is reduced by any standby letters of credit granted by AIO, which, as of September 30, 2017 , was approximately $39 . As of September 30, 2017 , based on then applicable interest rates, approximately $130 could have been drawn down without violating any covenant. Depending on our business results (including the impact of any adverse foreign exchange movements and significant restructuring charges), it is possible that we may be non-compliant with our interest coverage or total leverage ratio absent the Company undertaking other alternatives to avoid noncompliance, such as obtaining amendments to the 2015 facility or repurchasing certain debt. If we were to be non-compliant with our interest coverage or total leverage ratio, we would no longer have access to our 2015 facility and our credit ratings may be downgraded. As of September 30, 2017 , there were no amounts outstanding under the 2015 facility.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT STRATEGIES
Interest Rate Risk
In the past we have used interest-rate swaps to manage our interest rate exposure. The interest-rate swaps were used to either convert our fixed rate borrowing to a variable interest rate or to unwind an existing variable interest-rate swap on a fixed rate borrowing. As of September 30, 2017 , we do not have any interest-rate swap agreements. Approximately 1% of our debt portfolio at September 30, 2017 and December 31, 2016 was exposed to floating interest rates.
Foreign Currency Risk
We conduct business globally, with operations in various locations around the world. Over the past three years, all of our consolidated revenue was derived from operations of subsidiaries outside of the U.S. The functional currency for most of our foreign operations is their local currency. We may reduce our exposure to fluctuations in cash flows associated with changes in foreign exchange rates by creating offsetting positions, including through the use of derivative financial instruments.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements in this report (or in the documents it incorporates by reference) that are not historical facts or information may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "estimate," "project," "forecast," "plan," "believe," "may," "expect," "anticipate," "intend," "planned," "potential," "can," "expectation," "could," "will," "would" and similar expressions, or the negative of those expressions, may identify forward-looking statements. They include, among other things, statements regarding our anticipated or expected results, future financial performance, various strategies and initiatives (including our Transformation Plan, stabilization strategies, cost savings initiatives, restructuring and other initiatives and related actions), costs and cost savings, competitive advantages, impairments, the impact of foreign currency, including devaluations, and other laws and regulations, government investigations, internal investigations and compliance reviews, results of litigation, contingencies, taxes and tax rates, potential alliances or divestitures, liquidity, cash flow, uses of cash and financing, hedging and risk management strategies, pension, postretirement and incentive compensation plans, supply chain and the legal status of our Representatives. Such forward-looking statements are based on management's reasonable current assumptions, expectations, plans and forecasts regarding the Company's current or future results and future business and economic conditions more generally. Such forward-looking statements involve risks, uncertainties and other factors, which may cause the actual results, levels of activity, performance or achievement of Avon to be materially different from any future results expressed or implied by such forward-looking statements, and there can be no assurance that actual results will not differ materially from management's expectations. Therefore, you should not rely on any of these forward-looking statements as predictors of future events. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
•
our ability to improve our financial and operational performance and execute fully our global business strategy, including our ability to implement the key initiatives of, and/or realize the projected benefits (in the amounts and time schedules we expect) from, our Transformation Plan, stabilization strategies, cost savings initiatives, restructuring and other initiatives, product mix and pricing strategies, enterprise resource planning, customer service initiatives, sales and operation planning process, outsourcing strategies, Internet platform and technology strategies including e-commerce, marketing and

42


AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



advertising strategies, information technology and related system enhancements and cash management, tax, foreign currency hedging and risk management strategies, and any plans to invest these projected benefits ahead of future growth;
•
our ability to achieve the anticipated benefits of our strategic partnership with Cerberus Capital Management, L.P. ("Cerberus");
•
our broad-based geographic portfolio, which is heavily weighted towards emerging markets, a general economic downturn, a recession globally or in one or more of our geographic regions or markets, such as Brazil, Mexico or Russia, or sudden disruption in business conditions, and the ability to withstand an economic downturn, recession, cost inflation, commodity cost pressures, economic or political instability (including fluctuations in foreign exchange rates), competitive or other market pressures or conditions;
•
the effect of economic factors, including inflation and fluctuations in interest rates and foreign currency exchange rates;
•
the possibility of business disruption in connection with our Transformation Plan, stabilization strategies, cost savings initiatives, or restructuring and other initiatives;
•
our ability to reverse declining revenue, to improve margins and net income, or to achieve profitable growth, particularly in our largest markets, such as Brazil, and developing and emerging markets, such as Mexico and Russia;
•
our ability to improve working capital and effectively manage doubtful accounts and inventory and implement initiatives to reduce inventory levels, including the potential impact on cash flows and obsolescence;
•
our ability to reverse declines in Active Representatives, to enhance our sales leadership programs, to generate Representative activity, to increase the number of consumers served per Representative and their engagement online, to enhance branding and the Representative and consumer experience and increase Representative productivity through field activation and segmentation programs and technology tools and enablers, to invest in the direct-selling channel, to offer a more social selling experience, and to compete with other direct-selling organizations to recruit, retain and service Representatives and to continue to innovate the direct-selling model;
•
general economic and business conditions in our markets, including social, economic and political uncertainties, such as in Russia and Ukraine, and any potential sanctions, restrictions or responses to such conditions imposed by other markets in which we operate;
•
developments in or consequences of any investigations and compliance reviews, and any litigation related thereto, including the investigations and compliance reviews of Foreign Corrupt Practices Act and related United States ("U.S.") and foreign law matters in China and additional countries, as well as any disruption or adverse consequences resulting from such investigations, reviews, related actions or litigation, including the retention of a compliance monitor as required by the deferred prosecution agreement with the U.S. Department of Justice and a consent to settlement with the Securities and Exchange Commission ("SEC"), any changes in Company policy or procedure suggested by the compliance monitor or undertaken by the Company, the duration of the compliance monitor and whether and when the Company will be permitted to undertake self-reporting, the Company’s compliance with the deferred prosecution agreement and whether and when the charges against the Company are dismissed with prejudice;
•
the effect of political, legal, tax, including changes in tax rates, and other regulatory risks imposed on us abroad and in the U.S., our operations or our Representatives, including foreign exchange, pricing, data privacy or other restrictions, the adoption, interpretation and enforcement of foreign laws, including in jurisdictions such as Brazil and Russia, and any changes thereto, as well as reviews and investigations by government regulators that have occurred or may occur from time to time, including, for example, local regulatory scrutiny;
•
competitive uncertainties in our markets, including competition from companies in the consumer packaged goods industry, some of which are larger than we are and have greater resources;
•
the impact of the adverse effect of volatile energy, commodity and raw material prices, changes in market trends, purchasing habits of our consumers and changes in consumer preferences, particularly given the global nature of our business and the conduct of our business in primarily one channel;
•
our ability to attract and retain key personnel;
•
other sudden disruption in business operations beyond our control as a result of events such as acts of terrorism or war, natural disasters, pandemic situations, large-scale power outages and similar events;
•
key information technology systems, process or site outages and disruptions, and any cyber security breaches, including any security breach of our systems or those of a third-party provider that results in the theft, transfer or unauthorized disclosure of Representative, customer, employee or Company information or compliance with information security and privacy laws and regulations in the event of such an incident which could disrupt business operations, result in the loss of

43


AVON PRODUCTS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in millions, except per share data)



critical and confidential information, and adversely impact our reputation and results of operations, and related costs to address such malicious intentional acts and to implement adequate preventative measures against cyber security breaches;
•
the risk of product or ingredient shortages resulting from our concentration of sourcing in fewer suppliers;
•
any changes to our credit ratings and the impact of such changes on our financing costs, rates, terms, debt service obligations, access to lending sources and working capital needs;
•
the impact of our indebtedness, our access to cash and financing, and our ability to secure financing or financing at attractive rates and terms and conditions;
•
the impact of a continued decline in our business results, which includes the impact of any adverse foreign exchange movements, significant restructuring charges and significant legal settlements or judgments, on our ability to comply with certain covenants in our revolving credit facility;
•
our ability to successfully identify new business opportunities, strategic alliances and strategic alternatives and identify and analyze alliance candidates, secure financing on favorable terms and negotiate and consummate alliances;
•
disruption in our supply chain or manufacturing and distribution operations;
•
the quality, safety and efficacy of our products;
•
the success of our research and development activities;
•
our ability to protect our intellectual property rights, including in connection with the separation of the North America business;
•
our ability to repurchase the Series C Preferred Stock (as defined herein) in connection with a change of control; and
•
the risk of an adverse outcome in any material pending and future litigation or with respect to the legal status of Representatives.
Additional information identifying such factors is contained in Item 1A of our 2016 Form 10-K for the year ended December 31, 2016, and other reports and documents we file with the SEC. We undertake no obligation to update any such forward-looking statements.


44


AVON PRODUCTS, INC.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risk from the information provided in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our 2016 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, our principal executive and principal financial officers carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and implementing possible controls and procedures. Based upon their evaluation, the principal executive and principal financial officers concluded that our disclosure controls and procedures were effective as of September 30, 2017 , at the reasonable assurance level. Disclosure controls and procedures are designed to ensure that information relating to Avon (including our consolidated subsidiaries) required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the United States Securities and Exchange Commission’s rules and forms and to ensure that information required to be disclosed is accumulated and communicated to management to allow timely decisions regarding disclosure.
Changes in Internal Control over Financial Reporting
Our management has evaluated, with the participation of our principal executive and principal financial officers, whether any changes in our internal control over financial reporting that occurred during our last fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation we conducted, our management has concluded that no such changes have occurred.

45


AVON PRODUCTS, INC.

PART II. OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS
See Note 8, Contingencies, to the Consolidated Financial Statements included herein.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(c) Repurchases
The following table provides information about our purchases of our common stock during the quarterly period ended September 30, 2017 :
 
 
Total Number
of Shares
Purchased
 
Average Price
Paid per Share
 
Total Number of Shares
Purchased as Part of
Publicly Announced
Programs
 
Approximate Dollar
Value of Shares that
May Yet Be Purchased
Under the Program
7/1 - 7/31/17
 
25,137

(1)  
$
5.38

 
*
 
*
8/1 - 8/31/17
 
5,944

(1)  
3.47

 
*
 
*
9/1 - 9/30/17
 
—

 
—

 
*
 
*
Total
 
31,081

    
$
5.02

 
*
 
*
*
These amounts are not applicable as the Company does not have a share repurchase program in effect.
(1)
All shares were repurchased by the Company in connection with employee elections to use shares to pay withholding taxes upon the vesting of their restricted stock units and performance restricted stock units.
Some of these share repurchases may reflect a delay from the actual transaction date.
ITEM 6. EXHIBITS
4.1**
10.1
10.2
10.3
10.4
31.1
 
 
31.2
 
 
32.1
 
 
32.2
 
 
101
The following materials formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income (Loss), (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements
**
This indenture was filed as exhibit 4.1 to Form 8-K filed with the SEC on August 16, 2016 and inadvertently omitted the language found in section 4.16.


46


AVON PRODUCTS, INC.

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
AVON PRODUCTS, INC.
 
 
(Registrant)
 
 
 
Date:
November 2, 2017
/s/ Robert Loughran
 
 
Robert Loughran
 
 
Group Vice President and
 
 
Chief Accounting Officer
 
 
 
 
 
Signed both on behalf of the
 
 
registrant and as chief
 
 
accounting officer.
 

47

EXHIBIT 4.1


SENIOR SECURED NOTES INDENTURE
Dated as of August 15, 2016

————————
AVON INTERNATIONAL OPERATIONS, INC.
and
THE GUARANTORS FROM TIME TO TIME PARTY HERETO
$500,000,000
7.875% SENIOR SECURED NOTES DUE 2022

————————————————
DEUTSCHE BANK TRUST COMPANY AMERICAS

as Trustee
and
as Collateral Agent





EXHIBIT 4.1

TABLE OF CONTENTS
Page
ARTICLE I

DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions     1
Section 1.02 Other Definitions     44
Section 1.03 Incorporation by Reference of Trust Indenture Act     45
Section 1.04 Rules of Construction     46
Section 1.05 Acts of Holders     47
ARTICLE II

THE NOTES
Section 2.01 Form and Dating; Terms     48
Section 2.02 Execution and Authentication     50
Section 2.03 Registrar and Paying Agent     51
Section 2.04 Paying Agent to Hold Money in Trust     51
Section 2.05 Holder Lists     51
Section 2.06 Transfer and Exchange     51
Section 2.07 Replacement Notes     63
Section 2.08 Outstanding Notes     64
Section 2.09 Treasury Notes     64
Section 2.10 Temporary Notes     64
Section 2.11 Cancellation     65




Section 2.12 Defaulted Interest     65
Section 2.13 CUSIP/ISIN Numbers     65
Section 2.14 Global Securities     66
ARTICLE III

REDEMPTION
Section 3.01 Notices to Trustee     66
Section 3.02 Selection of Notes to Be Redeemed     66
Section 3.03 Notice of Redemption     66
Section 3.04 Effect of Notice of Redemption     67
Section 3.05 Deposit of Redemption Price     68
Section 3.06 Notes Redeemed in Part     68
Section 3.07 Optional Redemption     68
Section 3.08 Mandatory Redemption     69
Section 3.09 Offers to Repurchase by Application of Excess Proceeds     69
ARTICLE IV

COVENANTS
Section 4.01 Payment of Notes     71
Section 4.02 Maintenance of Office or Agency     72
Section 4.03 Reports and Other Information     72
Section 4.04 Compliance Certificate     73
Section 4.05 Taxes     74
Section 4.06 Stay, Extension and Usury Laws     74

ii


Section 4.07 Limitation on Restricted Payments     74
Section 4.08 Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries     80
Section 4.09 Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock     82
Section 4.10 Asset Sales     87
Section 4.11 Transactions with Affiliates     91
Section 4.12 Liens     93
Section 4.13 Company Existence     93
Section 4.14 Offer to Repurchase Upon Change of Control     94
Section 4.15 Limitation on Guarantees of Indebtedness by Restricted Subsidiaries     96
Section 4.16 Limitation on the Issuer Assets     96
Section 4.17 Suspension of Covenants     96
Section 4.18 [Reserved]     97
Section 4.19 Impairment of Security Interest     97
Section 4.20 Further Assurances     98
Section 4.21 Covenant to Provide Mortgages     98
ARTICLE V

SUCCESSORS
Section 5.01 Merger, Consolidation or Sale of All or Substantially All Assets     99
Section 5.02 Successor Person Substituted     100
ARTICLE VI

DEFAULTS AND REMEDIES

iii


Section 6.01 Events of Default     101
Section 6.02 Acceleration     103
Section 6.03 Other Remedies     104
Section 6.04 Waiver of Past Defaults     104
Section 6.05 Control by Majority     104
Section 6.06 Limitation on Suits     105
Section 6.07 Rights of Holders to Receive Payment     105
Section 6.08 Collection Suit by Trustee     105
Section 6.09 Restoration of Rights and Remedies     105
Section 6.10 Rights and Remedies Cumulative     105
Section 6.11 Delay or Omission Not Waiver     106
Section 6.12 Trustee May File Proofs of Claim     106
Section 6.13 Priorities     106
Section 6.14 Undertaking for Costs     107
ARTICLE VII

TRUSTEE
Section 7.01 Duties of Trustee     107
Section 7.02 Rights of Trustee     108
Section 7.03 Individual Rights of Trustee     109
Section 7.04 Trustee’s Disclaimer     110
Section 7.05 Notice of Defaults     110
Section 7.06 [Reserved]     110

iv


Section 7.07 Compensation and Indemnity     110
Section 7.08 Replacement of Trustee     111
Section 7.09 Successor Trustee by Merger, etc     112
Section 7.10 Eligibility; Disqualification     112
ARTICLE VIII

LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance     112
Section 8.02 Legal Defeasance and Discharge     112
Section 8.03 Covenant Defeasance     113
Section 8.04 Conditions to Legal or Covenant Defeasance     113
Section 8.05 Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions     115
Section 8.06 Repayment to Issuer     115
Section 8.07 Reinstatement     115
ARTICLE IX

AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01 Without Consent of Holders     116
Section 9.02 With Consent of Holders     117
Section 9.03 [Reserved]     119
Section 9.04 Revocation and Effect of Consents     119
Section 9.05 Notation on or Exchange of Notes     119
Section 9.06 Trustee to Sign Amendments, etc     119

v


ARTICLE X

INTERCREDITOR AGREEMENT
Section 10.01 Intercreditor Agreement     120
ARTICLE XI

COLLATERAL
Section 11.01 Collateral Documents     120
Section 11.02 Collateral Agent     120
Section 11.03 Authorization of Actions to Be Taken     121
Section 11.04 Release or Modification of Collateral     122
Section 11.05 [Reserved]     123
Section 11.06 Powers Exercisable by Receiver or Trustee     123
Section 11.07 Authorization of Receipt of Funds by the Trustee Under the Collateral Documents     123
Section 11.08 Release upon Termination of the Issuer’s Obligations     123
Section 11.09 Trustee’s Duties with Respect to Collateral     123
Section 11.10 Intercreditor Agreements     124
ARTICLE XII

GUARANTEES
Section 12.01 Guarantee     124
Section 12.02 Limitation on Guarantor Liability     126
Section 12.03 Execution and Delivery     126
Section 12.04 Subrogation     127
Section 12.05 Benefits Acknowledged     127

vi


Section 12.06 Release of Guarantees     127
ARTICLE XIII

SATISFACTION AND DISCHARGE
Section 13.01 Satisfaction and Discharge     128
Section 13.02 Application of Trust Money     129
ARTICLE XIV

MISCELLANEOUS
Section 14.01 [Reserved]     130
Section 14.02 Notices     130
Section 14.03 [Reserved]     131
Section 14.04 Certificate and Opinion as to Conditions Precedent     131
Section 14.05 Statements Required in Certificate or Opinion     132
Section 14.06 Rules by Trustee and Agents     132
Section 14.07 No Personal Liability of Directors, Officers, Employees and Stockholders     132
Section 14.08 Governing Law     132
Section 14.09 Waiver of Jury Trial     132
Section 14.10 Force Majeure     133
Section 14.11 No Adverse Interpretation of Other Agreements     133
Section 14.12 Successors     133
Section 14.13 Severability     133
Section 14.14 Counterpart Originals     133
Section 14.15 Table of Contents, Headings, etc.     133

vii


Section 14.16 U.S.A. Patriot Act     133


viii


EXHIBITS
Exhibit A    Form of Note
Exhibit B    Form of Certificate of Transfer
Exhibit C    Form of Certificate of Exchange
Exhibit D    Form of Supplemental Indenture to Be Delivered by Subsequent Guarantors
Exhibit E    Form of Second Lien Intercreditor Agreement




ix


SENIOR SECURED NOTES INDENTURE, dated as of August 15, 2016, among Avon International Operations, Inc., a corporation duly organized and existing under the laws of the State of Delaware (“ AIO ” or the “ Issuer ”) and a wholly-owned subsidiary of Avon Products, Inc. (“ API ” or the “ Company ”), a New York corporation, the Subsidiary Guarantors (as defined herein) and Deustche Bank Trust Company Americas, as Trustee and as Collateral Agent.
W I T N E S S E T H
WHEREAS, the Issuer has duly authorized the creation of an issue of $500,000,000 aggregate principal amount of the Issuer’s 7.875% senior secured notes due 2022 (the “ Notes ”);
WHEREAS, the Guarantors have duly authorized the guarantee, on a senior basis, the full and punctual payment when due, whether at maturity, by acceleration or otherwise, of all the Issuer’s obligations under this Indenture and the Notes, whether for payment of principal of, premium, if any, or interest on the Notes, expenses, indemnification or otherwise;
WHEREAS, the Issuer and Guarantors have duly authorized the execution and delivery of this Indenture (as defined herein);
NOW, THEREFORE, the Issuer, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined herein).




Article I

DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01
     Definitions .
“ 144A Global Note ” means a Global Note substantially in the form of Exhibit A attached hereto, bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.
“ Acquired Indebtedness ” means, with respect to any specified Person,
(a)    Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Restricted Subsidiary of such specified Person, and
(b)    Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.
“ Additional Notes ” means additional Notes (other than the Initial Notes) issued under this Indenture in accordance with Sections 2.02, 4.09 and 4.12 hereof, as part of the same series as the Initial Notes.
“ Adjusted AIO Total Assets ” means the total assets of the Issuer and its Restricted Subsidiaries, excluding (i) intercompany balances among the Company and its Subsidiaries and (ii) deferred tax assets, as shown on the most recent annual balance sheet of the Issuer.
“ Adjusted API Total Assets ” means the total assets of the Company and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, less deferred tax assets, as shown on the most recent annual balance sheet of the Company.
“ 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 purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.
“ Agent ” means any Registrar, co-registrar, Paying Agent or additional paying agent.

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“ AIO Credit Agreement ” means that certain credit agreement, dated on June 5, 2015, by and among the Issuer, as borrower, API, as guarantor, the banks and other lenders from time to time, Citibank, N.A. as the administrative agent and Bank of America, N.A. as L/C issuer, among others, as amended, restated, supplemented, modified, renewed, refunded, replaced or refinanced.
“ AIO First Lien Leverage Ratio ” means, with respect to any Test Period, the ratio of (a) Consolidated Net Debt of AIO secured by a first priority Lien on the assets of AIO and of its Restricted Subsidiaries on a consolidated basis in accordance with GAAP plus (without duplication) any Indebtedness incurred by any Restricted Subsidiary of the Issuer (other than a Subsidiary Guarantor) incurred under Section 4.09(b)(i) to (b) EBITDA for the Test Period, in each case with such pro forma adjustments as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of Fixed Charge Coverage Ratio.
“ AIO Leverage Ratio ” means, with respect to any Test Period, the ratio of (a) Consolidated Net Debt of AIO outstanding on the last day of such Test Period to (b) EBITDA for such Test Period, in each case with such pro forma adjustments as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of Fixed Charge Coverage Ratio.
“ API Leverage Ratio ” means, with respect to any Test Period, the ratio of (a) Consolidated Net Debt of API outstanding on the last day of such Test Period to (b) EBITDA for such Test Period, in each case with such pro forma adjustments as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of Fixed Charge Coverage Ratio.
“ Applicable Authorized Representative ” means, with respect to any Shared Collateral, (i) until the earliest of (x) the Discharge of Credit Facility Obligations, (y) the date on which the outstanding principal amount of loans and commitments under the AIO Credit Agreement is less than $200.0 million and (z) the Non-Controlling Authorized Representative Enforcement Date (as defined in the First Lien Intercreditor Agreement) (such earliest date, the “Trigger Date”), the Administrative Agent (as defined in the AIO Credit Agreement), and (ii) from and after the Trigger Date, the Major Non-Controlling Authorized Representative.
“ Applicable Premium ” means, with respect to any Note on any Redemption Date, the greater of:
(a)    1.0% of the principal amount of such Note; and
(b)    the excess, if any, of (a) the present value at such Redemption Date of (i) the redemption price of such Note at August 15, 2019 (each such redemption price being set forth in Section 3.07(d) hereof), plus (ii) all required remaining scheduled interest payments due on such Note through August 15, 2019 (excluding accrued but unpaid interest to the Redemption Date), computed using a discount rate equal to the Treasury Rate as of such Redemption Date plus 50 basis points; over (b) the then outstanding principal amount of such Note.

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“ Applicable Procedures ” means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange.
“ Asset Sale ” means:
(a)    the sale, conveyance, transfer or other disposition, whether in a single transaction or a series of related transactions (including by way of a Sale and Lease-Back Transaction) of property or assets of the Company or any Restricted Subsidiaries (each referred to in this definition as a “disposition”); or
(b)    the issuance or sale of Equity Interests by any Restricted Subsidiaries or the sale by the Company or any Restricted Subsidiaries of Equity Interests in any of the Company’s Restricted Subsidiaries (other than Preferred Stock of Restricted Subsidiaries issued in compliance with Section 4.09 hereof), whether in a single transaction or a series of related transactions;
in each case, other than:
(a)    any disposition of Cash Equivalents or Investment Grade Securities or obsolete, worn out, used or surplus property or equipment, whether now owned or hereafter acquired, in the ordinary course of business and dispositions of property no longer used or useful in the conduct of the business of the Company or the Restricted Subsidiaries;
(b)     (i) dispositions of inventory and goods held for sale in the ordinary course of business and (ii) dispositions of immaterial assets and termination of leases, licenses and sublicenses in the ordinary course of business (including, without limitation, intercompany intellectual property licenses and sublicenses by and among Foreign Subsidiaries of the Company);
(c)     the disposition of all or substantially all of the assets of the Issuer or a Guarantor in a manner permitted pursuant to the provisions described above under Section 5.01 hereof or any disposition that constitutes a Change of Control pursuant to this Indenture;
(d)     the making of any Restricted Payment that is permitted to be made, and is made, under the covenant described above under Section 4.07 hereof or any Permitted Investment;
(e)     any disposition of property or assets or the issuance of securities by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary; provided that transfers of intellectual property-related assets constituting Collateral from the Issuer or a Subsidiary Guarantor to a Person that is not the Issuer or a Subsidiary Guarantor shall only be permitted pursuant to this clause (e) if (i) the Issuer or a Subsidiary Guarantor receives an intercompany note in an amount

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equal to the Fair Market Value (as determined in good faith by the Issuer) of the property or assets transferred; provided that the intercompany note is pledged as Collateral to the Collateral Agent on behalf of the holders of First Lien Obligations or (ii) with respect to Brazilian intellectual property-related assets constituting Collateral, in lieu of satisfying the requirements set forth in the preceding clause (i), the transferee of such assets is a Subsidiary directly owned by the Issuer or a Subsidiary Guarantor and such transferee’s Capital Stock has been or will be pledged as Collateral to the Collateral Agent on behalf of the holders of First Lien Obligations, subject to the terms of the Collateral Documents;
(f)     the disposition, issuance or sale by the Company or any Restricted Subsidiaries of Equity Interests of any of API’s Subsidiaries to the Company or any Restricted Subsidiary;
(g)     any disposition of assets or issuance or sale of Equity Interests of any Restricted Subsidiary in any transaction or series of related transactions with an aggregate Fair Market Value of less than $50.0 million;
(h)     to the extent allowable under Section 1031 of the Code, any exchange of like property (excluding any boot thereon) for use in a Similar Business;
(i)     the lease, assignment or sub-lease of any real or personal property in the ordinary course of business;
(j)     any issuance or sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary;
(k)     dispositions of accounts receivable in the ordinary course of business in connection with the collection or compromise thereof;
(l)     transfers of property subject to Casualty Events;
(m)     foreclosures, condemnation or any similar action on assets or the granting of Liens not prohibited by this Indenture;
(n)     (i) leases, subleases, licenses or sublicenses (including the provision of software under an open source license), in each case in the ordinary course of business and which do not materially interfere with the business of API and its Restricted Subsidiaries, taken as a whole (including, without limitation, licenses and sublicenses of intellectual property by and among API and its Restricted Subsidiaries) and (ii) dispositions of intellectual property (including inbound licenses) that is no longer material to the business of the Issuer and its Subsidiaries;
(o)     the unwinding or settlement of any Hedging Obligations;

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(p)     any financing transaction with respect to property built or acquired by the Company or any Restricted Subsidiary after the Issue Date, including Sale and Lease-Back Transactions and asset securitizations permitted by this Indenture;
(q)     the sale or discount of inventory, accounts receivable or notes receivable in the ordinary course of business or the conversion of accounts receivable to notes receivable, or the sale, transfer or other disposition of accounts receivable in connection with the collection or compromise thereof;
(r)     any surrender or waiver of contract rights or the settlement, release or surrender of contract rights or other litigation claims in the ordinary course of business;
(s)     sales, transfers and other dispositions of Investments in joint ventures to the extent required by, or made pursuant to, customary buy/sell arrangements between the joint venture parties set forth in joint venture arrangements and similar binding arrangements;
(t)     the granting of a Lien that is permitted under Section 4.12 hereof;
(u)    the lapse or abandonment in the ordinary course of business of any registrations or applications for registration of any immaterial intellectual property rights;
(v)     the disposition by the Issuer (by sale, “pre-paid royalty” arrangement or otherwise) of intellectual property rights to one or more Special-Purpose IP Subsidiaries in exchange for an IP Intercompany Note; provided that such disposition shall be made on an arms’ length basis and for Fair Market Value (as determined in good faith by the Issuer);
(w)     dispositions of property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such disposition are promptly applied to the purchase price of such replacement property; provided that to the extent the property being transferred constitutes Collateral, such replacement property shall constitute Collateral; and
(x)     dispositions pursuant to Permitted Intercompany Factoring Arrangements.
“ Authorized Representative ” means (i) in the case of any Credit Facility Obligations or the lenders and other secured parties under the AIO Credit Agreement, the administrative agent and/or collateral agent under the AIO Credit Agreement, (ii) in the case of the Notes Obligations or the Holders, the Trustee and (iii) in the case of any other Series of additional First Lien Obligations or additional First Lien Secured Parties that become subject to the Intercreditor Agreements, the Authorized Representative named for such Series in the applicable joinder agreement.

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“ Bankruptcy Law ” means Title 11, U.S. Code or any similar federal or state law for the relief of debtors.
“ Business Day ” means each day which is not a Saturday, a Sunday or a day on which commercial banking institutions are not required to be open in the State of New York or place of payment.
“ Capital Lease ” shall mean, with respect to any Person, any obligation of such Person to pay rent or other amounts under a lease with respect to any property (whether real, personal or mixed) acquired or leased by such Person that is required to be accounted for as a liability on a balance sheet of such Person in accordance with GAAP.
“ Capital Stock ” means:
(a)    in the case of a corporation, corporate stock or shares in the capital of such corporation;
(b)    in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
(c)    in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and
(d)    any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.
“ Capitalized Lease Obligation ” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) prepared in accordance with GAAP.
“ Cash Equivalents ” means:
(a)    United States dollars, Euros or Canadian dollars;
(b)    in the case of any Foreign Subsidiary that is a Restricted Subsidiary, such local currencies held by it from time to time in the ordinary course of business and not for speculation;
(c)    readily marketable direct obligations issued or directly and fully and unconditionally guaranteed or insured by the United States government or any agency or instrumentality thereof the securities of which are unconditionally guaranteed as a full

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faith and credit obligation of such government with maturities of 12 months or less from the date of acquisition;
(d)    certificates of deposit, time deposits and eurodollar time deposits with maturities of one year or less from the date of acquisition, demand deposits, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any domestic or foreign commercial bank having capital and surplus of not less than $500.0 million;
(e)    repurchase obligations for underlying securities of the types described in clauses (c) and (d) above or clause (g) below entered into with any financial institution meeting the qualifications specified in clause (d) above;
(f)    commercial paper rated at least P-2 by Moody’s or at least A-2 by S&P (or, if at any time neither Moody’s nor S&P shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency) and in each case maturing within 12 months after the date of creation thereof;
(g)    marketable short-term money market and similar highly liquid funds having a rating of at least P-2 or A-2 from either Moody’s or S&P, respectively (or, if at any time neither Moody’s nor S&P shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency);
(h)    readily marketable direct obligations issued by any state, commonwealth or territory of the United States or any political subdivision or taxing authority thereof having an Investment Grade rating from either Moody’s or S&P (or, if at any time neither Moody’s nor S&P shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency) with maturities of 12 months or less from the date of acquisition;
(i)    Investments with average maturities of 12 months or less from the date of acquisition in money market funds rated AAA- (or the equivalent thereof) or better by S&P or Aaa3 (or the equivalent thereof) or better by Moody’s (or, if at any time neither Moody’s nor S&P shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency); and
(j)    investment funds investing substantially all of their assets in securities of the types described in clauses (a) through (i) above.
In the case of Investments by any Foreign Subsidiary that is a Restricted Subsidiary or Investments made in a country outside the United States of America, Cash Equivalents shall also include (i) investments of the type and maturity described in clauses (a) through (j) above of foreign obligors, which Investments or obligors (or the parents of such obligors) have ratings described in such clauses or equivalent ratings from comparable foreign rating agencies and (ii) other short-term investments utilized by Foreign Subsidiaries that are Restricted Subsidiaries in accordance with normal investment practices for cash management in

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investments analogous to the foregoing investments in clauses (a) through (j) and in this paragraph.
Notwithstanding the foregoing, Cash Equivalents shall include amounts denominated in currencies other than those set forth in clause (a) above, provided that such amounts are converted into United States dollars as promptly as practicable and in any event within ten Business Days following the receipt of such amounts.
At any time at which the value, calculated in accordance with GAAP, of all investments of the Issuer and its Restricted Subsidiaries that were deemed, when made, to be Cash Equivalents in accordance with clauses (a) through (j) above exceeds the Indebtedness of the Issuer and its Restricted Subsidiaries, “Cash Equivalents” shall also mean any investment (a “ Qualifying Investment ”) that satisfies the following two conditions: (a) the Qualifying Investment is of a type described in clauses (a) through (j) of this definition, but has an effective maturity (whether by reason of final maturity, a put option or, in the case of an asset-backed security, an average life) of five years and one month or less from the date of such Qualifying Investment (notwithstanding any provision contained in such clauses (a) through (j) requiring a shorter maturity); and (b) the weighted average effective maturity of such Qualifying Investment and all other investments that were made as Qualifying Investments in accordance with this paragraph, does not exceed two years from the date of such Qualifying Investment.
“ Cash Management Services ” means any agreement or arrangement to provide cash management services, including treasury, depository, overdraft, credit card processing or credit or debit card, purchase card, electronic funds transfer and other cash management arrangements.
“ Casualty Event ” shall mean any event that gives rise to the receipt by API, the Issuer or any Restricted Subsidiary of any insurance proceeds or condemnation awards in respect of any equipment, fixed assets or real property (including any improvements thereon) to replace or repair such equipment, fixed assets or real property.
“ Change of Control ” means the occurrence of any of the following after the Issue Date:
(a)    the sale, lease, transfer, conveyance or other disposition in one or a series of related transactions (other than by merger or consolidation), of all or substantially all of the assets of API and API’s Subsidiaries, taken as a whole, to any Person other than API or one of API’s Subsidiaries;
(b)    the Company becomes aware of (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) the acquisition by (A) any Person or (B) Persons that are together a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any such group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), in a single transaction or in a related series of transactions, by way of merger,

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consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision) of 50.0% or more of the total voting power of the Voting Stock of the Company directly or indirectly through any of its direct or indirect parent holding companies, other than in connection with any transaction or transactions in which the Company shall become the Wholly-Owned Subsidiary of a parent company, and thereafter, the foregoing shall instead apply to such parent company; or
(c)     (x) at any time prior to the consummation of the MIH Merger, (i) MIH ceases to be a direct Wholly-Owned Subsidiary of API and (ii) the Issuer ceases to be a direct Wholly-Owned Subsidiary of MIH or (y) at any time on and after the consummation of the MIH Merger, the Issuer ceases to be a direct Wholly- Owned Subsidiary of API.
“ Clearstream ” means Clearstream Banking, Société Anonyme and its successors.
“ Collateral ” means all the “Collateral” (or equivalent term) as defined in any Collateral Document.
“ Collateral Agent ” shall mean Deutsche Bank Trust Company Americas, together with its affiliates, as the collateral agent under the Collateral Documents.
“ Collateral Documents ” means the security agreements, pledge agreements, agency agreements, the Intercreditor Agreements and any other intercreditor agreement executed and delivered pursuant to this Indenture, and other instruments and documents executed and delivered pursuant to this Indenture or any of the foregoing, as the same may be amended, supplemented or otherwise modified from time to time and pursuant to which Collateral is pledged, assigned or granted to or on behalf of the Collateral Agent for the benefit of the Trustee and the holders of Notes or notice of such pledge, assignment or grant is given.
“ Consolidated Interest Expense ” means, with respect to any Person for any period, without duplication, the sum of:
(i)    consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted (and not added back) in computing Consolidated Net Income (including (a) amortization of original issue discount resulting from the issuance of Indebtedness at less than par, (b) all commissions, discounts and other fees and charges owed with respect to letters of credit or bankers acceptances, (c) non-cash interest payments (but excluding any non-cash interest expense attributable to the movement in the mark to market valuation of Hedging Obligations or other derivative instruments pursuant to GAAP), (d) the interest component of Capitalized Lease Obligations and (e) net payments, if any, made (less net payments, if any, received), pursuant to interest rate Hedging Obligations with respect to Indebtedness, and excluding (r) any expense resulting from the discounting of any Indebtedness in connection with the application of recapitalization accounting or, if applicable, purchase accounting in connection with any acquisition, (s) hyperinflationary

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interest expense in any country that is offset by corresponding foreign exchange-related gains, (t) interest expense attributable to pension accruals in Germany and Italy, (u) interest payable to the U.S. Internal Revenue Service in respect of taxes, (v) amortization of deferred financing fees, debt issuance costs, commissions, fees and expenses, (w) any expensing of bridge, commitment and other financing fees and (x) any accretion of accrued interest on discounted liabilities); plus
(ii)    consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued; less
(iii)    interest income of such Person and its Restricted Subsidiaries for such period.
For purposes of this definition, interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by such Person to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP.
“ Consolidated Net Debt ” shall mean, as of the any date of determination, the Consolidated Total Debt of such Person and its Restricted Subsidiaries less the cash and Cash Equivalents of such Person and its Restricted Subsidiaries (and in the case of the Issuer, the Guarantors) in excess of $250.0 million.
“ Consolidated Net Income ” means, with respect to any Person for any period, the aggregate of the net income (loss) of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends; provided that, without duplication,
(a)    any net after-tax effect of extraordinary, non-recurring or unusual gains or losses (less all fees and expenses relating thereto) or expenses, and relocation costs, integration costs, consolidation and closing costs for offices and facilities, severance costs and expenses, one-time compensation charges, signing, retention and completion bonuses, costs incurred in connection with any strategic initiatives, transition costs, costs incurred in connection with non-recurring product and intellectual property development after the Issue Date, other business optimization expenses (including costs and expenses relating to business optimization programs), and new systems design and implementation costs and project start-up costs shall be excluded;
(b)    the cumulative effect of a change in accounting principles and changes as a result of the adoption or modification of accounting policies during such period shall be excluded;
(c)    any net after-tax gains or losses on disposal of disposed, abandoned or discontinued operations shall be excluded;
(d)    any net after-tax effect of gains or losses (less all fees, expenses and charges relating thereto) attributable to asset dispositions or abandonments or the sale or

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other disposition of any Capital Stock of any Person other than in the ordinary course of business shall be excluded;
(e)    the net income for such period of any Person that is an Unrestricted Subsidiary shall be excluded, and, solely for the purpose of determining the amount available for Restricted Payments under Section 4.07(a)(iv)(C)(1) hereof, the net income for such period of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting shall be excluded; provided that Consolidated Net Income of the Company shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) to the Company or a Restricted Subsidiary thereof in respect of such period;
(f)    [reserved];
(g)    effects of adjustments (including the effects of such adjustments pushed down to the Company and its Restricted Subsidiaries) in such Person’s consolidated financial statements pursuant to GAAP resulting from the application of recapitalization accounting or, if applicable, purchase accounting in relation to any consummated acquisition or the amortization or write-off of any amounts thereof, net of taxes, shall be excluded;
(h)    any after-tax effect of income (loss) from the early extinguishment of (a) Indebtedness, (b) Hedging Obligations or (c) other derivative instruments shall be excluded;
(i)    any impairment charge or asset write-off or write-down, including impairment charges or asset write-offs or write-downs related to intangible assets, long-lived assets, investments in debt and equity securities or as a result of a change in law or regulation, in each case, pursuant to GAAP, and the amortization of intangibles arising pursuant to GAAP, shall be excluded;
(j)    [reserved];
(k)    any fees, expenses or charges incurred during such period, or any amortization thereof for such period, in connection with any acquisition, Investment, Asset Sale, incurrence or repayment of Indebtedness (including such fees, expenses or charges related to the offering of the Notes), issuance of Equity Interests, refinancing transaction or amendment or modification of any debt instrument (including any amendment or other modification of the Notes and the Credit Facilities) and including, in each case, any such transaction consummated prior to the Issue Date and any transaction undertaken but not completed, and any charges or non-recurring merger costs incurred during such period as a result of any such transaction, in each case whether or not successful, shall be excluded;

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(l)    accruals and reserves that are established within twelve months after the closing of any acquisition that are so required to be established as a result of such acquisition in accordance with GAAP shall be excluded;
(m)    to the extent covered by insurance and actually reimbursed, or, so long as the Company has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer and only to the extent that such amount is (a) not denied by the applicable carrier in writing within 180 days and (b) in fact reimbursed within 365 days of the date of the insurable event (with a deduction for any amount so added back to the extent not so reimbursed within such 365 day period), expenses with respect to liability or casualty events or business interruption shall be excluded;
(n)    any noncash compensation charge and expense shall be excluded; and
(o)    the following items shall be excluded:
(i)    any net unrealized gain or loss (after any offset) resulting in such period from Hedging Obligations; and
(ii)    any net unrealized gain or loss (after any offset) resulting in such period from currency translation gains or losses including those related to currency remeasurements of Indebtedness (including any net loss or gain resulting from Hedging Obligations for currency exchange risk) and any other foreign currency translation gains and losses, to the extent such gain or losses are non-cash items.
In addition, to the extent not already included in the Consolidated Net Income of such Person and its Restricted Subsidiaries, notwithstanding anything to the contrary in the foregoing, Consolidated Net Income shall include the amount of proceeds received from business interruption insurance and reimbursements of any expenses and charges that are covered by indemnification or other reimbursement provisions in connection with any Permitted Investment or any sale, conveyance, transfer or other disposition of assets permitted under this Indenture.
Notwithstanding the foregoing, for the purpose of Section 4.07 hereof only (other than Section 4.07(a)(iv)(C)(4) hereof), there shall be excluded from Consolidated Net Income any income arising from any sale or other disposition of Restricted Investments made by the Company and its Restricted Subsidiaries, any repurchases and redemptions of Restricted Investments from the Company and its Restricted Subsidiaries, any repayments of loans and advances which constitute Restricted Investments by the Company or any of its Restricted Subsidiaries, any sale of the stock of an Unrestricted Subsidiary or any distribution or dividend from an Unrestricted Subsidiary, in each case only to the extent such amounts increase the amount of Restricted Payments permitted under Section 4.07(a)(iv)(C)(4) hereof.

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“ Consolidated Total Debt ” means, as of any date of determination, the aggregate principal amount of Indebtedness of such Person and its Restricted Subsidiaries outstanding on such date, determined on a consolidated basis in accordance with GAAP, consisting of Indebtedness for borrowed money; provided that Consolidated Total Debt shall (a) not include undrawn amounts in respect of letters of credit or similar instruments, Hedging Obligations, Permitted Intercompany Factoring Arrangements and Disqualified Stock and (b) will be (i) reduced by gains under foreign exchange Hedging Obligations used to hedge intercompany debt owed by Foreign Subsidiaries of API to API, the Issuer or a Guarantor in a given foreign currency (each, an “ Intercompany Foreign Currency Hedge ”) and (ii) increased by losses under Intercompany Foreign Currency Hedges.
“ Contingent Obligations ” means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent:
(a)    to purchase any such primary obligation or any property constituting direct or indirect security therefor;
(b)    to advance or supply funds:
(i)    for the purchase or payment of any such primary obligation, or
(ii)    to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; or
(c)    to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.
“ Controlling Secured Parties ” means, with respect to any Shared Collateral, the holders of the Series of First Lien Obligations whose Authorized Representative is the Applicable Authorized Representative for such Shared Collateral.
“ Corporate Trust Office of the Trustee ” shall be at the address of the Trustee specified in Section 14.02 hereof or such other address as to which the Trustee may give notice to the Issuer.
“ Credit Facility ” means the AIO Credit Agreement, including any guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, renewals, restatements, refundings or refinancings thereof and any one or more indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or investors that replace, refund or refinance any part of the loans, notes, other credit facilities or commitments thereunder, including any

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such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under “Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock” above); provided that the aggregate principal amount of Indebtedness incurred under Section 4.09(a)(i) hereof by a Person other than the Issuer or a Subsidiary Guarantor shall not exceed $200.0 million in the aggregate at any one time outstanding.
“ Credit Facility Obligations ” means (a) Indebtedness and other obligations under the Credit Facilities and (b) obligations under any Hedging Obligations entered into by the Issuer or a Subsidiary Guarantor with a lender or affiliate of a lenders at the time the documentation related to such Hedging Obligations was entered into.
“ Custodian ” means the Trustee, as custodian with respect to the Notes, each in global form, or any successor entity thereto.
“ Default ” means any event that is, or with the passage of time or the giving of notice or both, unless cured or waived, would be, an Event of Default.
“ Definitive Note ” means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06(c) hereof, substantially in the form of Exhibit A attached hereto, except that such Note shall not bear the Global Note Legend and shall not have the “Schedule of Exchanges of Interests in the Global Note” attached thereto.
“ Depositary ” means, with respect to the Notes issuable or issued in whole or in part in global form, any Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as Depositary hereunder and having become such pursuant to the applicable provision of this Indenture.
“ Designated Non-cash Consideration ” means the Fair Market Value of non-cash consideration received by API, the Issuer or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Non-cash Consideration pursuant to an Officer’s Certificate, setting forth the basis of such valuation, executed by an Officer, which amount will be reduced by the Fair Market Value of the portion of the non-cash consideration converted to cash within 180 days following the consummation of the applicable Asset Sale.
“ Discharge of Credit Facility Obligations ” means, with respect to any Collateral, the date on which the Credit Facility Obligations are no longer secured by such Collateral; provided that the Discharge of Credit Facility Obligations shall not be deemed to have occurred in connection with a refinancing, refunding, replacement, renewal, extension, restatement, amendment, supplement or modification of such Credit Facility Obligations with additional First Lien Obligations secured by such Collateral under an agreement relating to additional First Lien Obligations which has been designated in writing by the administrative agent under the AIO Credit Agreement or any Credit Facility so refinanced, refunded, replaced, renewed, extended, restated, amended, supplemented or modified to the Collateral Agent and each other

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Authorized Representative as the “Credit Facility” or similar term for purposes of the Intercreditor Agreements.
“ Disqualified Stock ” means, with respect to any Person, any Capital Stock of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is putable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable (other than solely as a result of a change of control or asset sale) pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof (other than solely as a result of a change of control or asset sale), in whole or in part, in each case prior to the date 91 days after the earlier of the maturity date of the Notes or the date the Notes are no longer outstanding; provided that if such Capital Stock is issued to any plan for the benefit of employees of the Issuer or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Issuer or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations; provided , further , that any Capital Stock held by any future, current or former employee, director, officer, manager or consultant (or their respective Immediate Family Members), of the Issuer, any of its Subsidiaries, any of its direct or indirect parent companies or any other entity in which the Issuer or a Restricted Subsidiary has an Investment and is designated in good faith as an “affiliate” by the board of directors of the Issuer (or the compensation committee thereof), in each case pursuant to any stock subscription or shareholders’ agreement, management equity plan or stock option plan or any other management or employee benefit plan or agreement shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Issuer or its Subsidiaries.
“ Domestic Subsidiary ” shall mean any Subsidiary that is organized under the laws of the United States, any state thereof or the District of Columbia.
“ EBITDA ” shall mean, for any period, for API and its Restricted Subsidiaries on a consolidated basis, an amount equal to Consolidated Net Income for such period plus:
(a)     the following to the extent deducted in calculating such Consolidated Net Income and without duplication:
(i)     Consolidated Interest Expense for such period plus amounts reducing Consolidated Interest Expense as set forth in clause (iii) in the definition thereof,
(ii)     provision for taxes based on income or profits or capital, including, without limitation, state, franchise and similar taxes, foreign withholding taxes (including any future taxes or other levies which replace or are intended to be in lieu of such taxes and any penalties and interest related to such taxes or arising from tax examinations) and the net tax expense associated with any adjustments made pursuant to clauses (a) through (o) of the definition of “Consolidated Net Income,”
(iii)     depreciation and amortization expense and impairment charges,

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(iv)     extraordinary, non-recurring or unusual charges, expenses or losses,
(v)     any other non-cash charges, including any (x) losses related to minority ownership in certain investments that are accounted for under the equity method of accounting and (y) write offs or write downs reducing Consolidated Net Income for such period (provided that if any such non-cash charges represent an accrual or reserve for potential cash items in any future period, (x) the Company may determine not to add back such non-cash charge in the current period and (y) to the extent the Company does decide to add back such non-cash charge, the cash payment in respect thereof in such future period shall be subtracted from EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period),
(vi)     one-time fees, cash charges and other cash expenses, premiums or penalties incurred in connection with any asset sale, any issuance of equity interests or any issuance, incurrence or repayment of indebtedness and/or any refinancing transaction or modification or amendment of any debt instrument (including any transaction undertaken but not completed),
(vii)     Fixed Charges of such Person for such period (including (x) net losses or Hedging Obligations or other derivative instruments entered into for the purpose of hedging interest rate risk, (y) bank fees and (z) costs of surety bonds in connection with financing activities, plus amounts excluded from Consolidated Interest Expense as set forth in clauses (i)(t) through (z) in the definition thereof),
(viii)     any costs, charges, losses or expenses related to signing, retention, relocation, recruiting or completion bonuses or recruiting, stock options, employee benefit plans and other equity based compensation, stock subscription or shareholder agreements, severance and transition payments, closing and consolidation of facilities, facility start-ups, business optimization initiatives (including intellectual property restructurings), or any legal or regulatory action, settlement, judgment or ruling,
(ix)     the amount of any restructuring charges or reserves, integration and facilities opening costs or other business optimization expenses (including cost and expenses relating to costs to implement (“ CTI ”) restructuring, business optimization programs and new systems design and implementation costs) or accruals or reserves, including any one-time costs incurred in connection with acquisitions after the Issue Date, project start-up costs and costs related to the closure and/or consolidation of facilities,
(x)     the amount of any minority interest expense consisting of Subsidiary income attributable to minority equity interests of third parties in any non-Wholly-Owned Subsidiary,

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(xi)     the amount of “run rate” cost savings, operating expense reductions and synergies related to any Specified Transactions, restructurings or cost savings initiatives (including, without limitation, the CTI restructuring) projected by API in good faith to result from actions actually taken or expected to be taken during, or committed to be taken, no later than 12 months after the end of, such period (which “run rate” cost savings, operating expense reductions and synergies shall be calculated on a pro forma basis as though such “run rate” cost savings, operating expense reductions and synergies had been realized on the first day of the period for which EBITDA is being determined and realized during the entirety of such period, without duplication of any pro forma adjustment for any such subsequent period that would otherwise be permitted under this clause (xi) with respect to the same cost savings, operating expense reductions and synergies), net of the amount of actual benefits realized during such period from such actions; provided that such “run rate” cost savings, operating expense reductions and synergies are reasonably identifiable and factually supportable (in the good faith determination of API) (it being understood that pro forma adjustments need not be prepared in compliance with Regulation S-X),
(xii)     cash receipts (or any netting arrangements resulting in reduced cash expenditures) not representing EBITDA or Consolidated Net Income in any period to the extent non-cash gains relating to such income were deducted in the calculation of EBITDA pursuant to clause (b) below for any previous period and not added back,
(xiii)     any net loss from disposed or discontinued operations or from operations expected to be disposed of or discontinued within twelve months after the end of such period,
(xiv)     extraordinary losses and unusual or non-recurring charges (including any unusual or non-recurring operating expenses attributable to the implementation of cost-savings initiatives, severance, retention and relocation costs and curtailments and modifications to pension and post-retirement employee benefit plans),
(xv)     losses on asset sales (other than asset sales made in the ordinary course of business), disposals and abandonments,
(xvi)     foreign exchange losses resulting from the impact of foreign currency changes on the valuation of assets or liabilities (both third party and intercompany) on the balance sheet of the Company and Restricted Subsidiaries, and
(xvii)     costs and charges related to jurisdictions designated as highly inflationary economies and the impacts of the devaluations of their currency; minus

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(b)     the sum of (i) all non-cash items increasing Consolidated Net Income for such period (excluding any such non-cash item to the extent it represents (A) the reversal of an accrual or reserve for potential cash item in any prior period or is expected to be a cash item in any future period, (B) foreign exchange gains resulting from the impact of foreign currency changes on the valuation of assets or liabilities (both third party and intercompany) on the balance sheet of the Company and Restricted Subsidiaries or (C) gains related to minority ownership in certain investments that are accounted for under the equity method of accounting) and (ii) net income relating to disposed, abandoned, closed or discontinued operations; provided that, for purposes of the calculation of this definition, Consolidated Net Income shall not include clause (o)(ii) of the definition thereof.
“ EMU Legislation ” means the legislative measures of the European Council for the introduction of, changeover to or operation of a single or unified European currency.
“ Equity Interests ” means Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.
“ Equity Offering ” means any public or private sale of common stock or Preferred Stock of API (excluding Disqualified Stock), other than:
(a)    public offerings with respect to API’s common stock registered on Form S-3, Form S-4 or Form S-8; and
(b)    issuances to any Subsidiary of API.
“ Euros ” means the lawful currency of the Participating Member States introduced in accordance with the EMU Legislation.
“ Euroclear ” means Euroclear Bank S.A./N.V., as operator of the Euroclear system, and its successors.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.
“ Existing API Notes ” shall mean, collectively, (a) the 5.75% senior unsecured notes due 2018, the 6.50% senior unsecured notes due 2019 and the 4.60% senior unsecured notes due 2020, the 5.00% senior unsecured notes due 2023 and the 6.950% senior unsecured notes due 2043, in each case, of API issued under that certain Indenture dated as of February 27, 2008 between API and Deutsche Bank Trust Company Americas, as trustee, and (b) the 4.20% senior unsecured notes due 2018 of API issued under that certain Indenture dated as of May 13, 2003 between API and JPMorgan Chase Bank, as trustee.
“ Fair Market Value ” means, with respect to any asset or liability, the fair market value of such asset or liability as determined by the Issuer in good faith.

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“ First Lien Intercreditor Agreement ” means that certain first lien intercreditor agreement, dated as of August 15, 2016, by and among the Issuer, the other grantors party thereto, Citibank, N.A., as Authorized Representative for the Credit Agreement Secured Parties (as each such term is defined therein), and Deutsche Bank Trust Company Americas, as Authorized Representative for the Notes Secured Parties (as each such term is defined therein), as amended, restated, amended and restated, supplemented and/or otherwise modified from time to time.
“ First Lien Obligations ” means collectively (a) all Credit Facility Obligations, (b) the Notes Obligations and (c) any other Permitted Pari Passu Secured Refinancing Debt permitted to be incurred pursuant to Section 4.09 hereof; provided that (i) the representative of such Indebtedness executes a joinder agreement to the First Lien Intercreditor Agreement and (ii) the Issuer has designated such Indebtedness as “Additional First Lien Obligations” thereunder.
“ First Lien Secured Parties ” means (a) the “Secured Parties” (or similar term), as defined in the AIO Credit Agreement, (b) the Holders of Notes and the Trustee and (c) any other holders of any other Series of additional First Lien Obligations and any Authorized Representative thereof.
“ Fixed Charge Coverage Ratio ” means, with respect to any Person for any period, the ratio of EBITDA of such Person for such period to the Fixed Charges of such Person for such period. In the event that API, the Issuer or any Restricted Subsidiary incurs, assumes, guarantees, redeems, repays, retires or extinguishes any Indebtedness (other than Indebtedness incurred or repaid under any revolving credit facility in the ordinary course of business for working capital purposes) or issues or redeems Disqualified Stock or Preferred Stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to or simultaneously with the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “ Fixed Charge Coverage Ratio Calculation Date ”), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, redemption, repayment, retirement or extinguishment of Indebtedness, or such issuance or redemption of Disqualified Stock or Preferred Stock, as if the same had occurred at the beginning of the applicable four-quarter period.
For purposes of making the computation referred to above, any Specified Transaction that has been made by API, the Issuer or any of their Restricted Subsidiaries during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Fixed Charge Coverage Ratio Calculation Date shall be calculated on a pro forma basis assuming that all such Specified Transactions (and the change in any associated fixed charge obligations and the change in EBITDA resulting therefrom) had occurred on the first day of the four-quarter reference period. If since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged with or into API, the Issuer or any of their Restricted Subsidiaries since the beginning of such period shall have made any Specified Transaction that would have required adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect thereto for such period

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as if such Specified Transaction had occurred at the beginning of the applicable four-quarter period.
For purposes of this definition, whenever pro forma effect is to be given to any Specified Transaction, the pro forma calculations shall be made in good faith by a responsible financial or accounting officer of the Company and may include, for the avoidance of doubt, cost savings and synergies resulting from or related to any such Specified Transaction which is being given pro forma effect that have been or are expected to be realized and for which the actions necessary to realize such cost savings and synergies are taken or expected to be taken no later than 18 months after the date of any such Specified Transaction (in each case as though such cost savings and synergies had been realized on the first day of the applicable period). If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Fixed Charge Coverage Ratio Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligations applicable to such Indebtedness). Interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined 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. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Company may designate.
“ Fixed Charges ” means, with respect to any Person for any period, the sum of, without duplication:
(a)    Consolidated Interest Expense of such Person for such period and interest expense paid by such Person in respect of Indebtedness guaranteed by such Person (to the extent not constituting Interest Expense);
(b)    all cash dividends or other distributions paid (excluding items eliminated in consolidation) on any series of Preferred Stock during such period; and
(c)    all cash dividends or other distributions paid (excluding items eliminated in consolidation) on any series of Disqualified Stock during such period.
“ Foreign Subsidiary ” means, with respect to any Person, any Restricted Subsidiary of such Person that is not organized or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof and any Restricted Subsidiary of such Foreign Subsidiary.
“ GAAP ” means generally accepted accounting principles in the United States of America which are in effect on the Issue Date.
“ Global Note Legend ” means the legend set forth in Section 2.06(f)(i) hereof, which is required to be placed on all Global Notes issued under this Indenture.

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“ Global Notes ” means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of Exhibit A attached hereto, issued in accordance with Section 2.01, 2.06(b) or 2.06(d) hereof.
“ Government Securities ” means securities that are:
(a)    direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged; or
(b)    obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America,
which, in either case, are not callable or redeemable at the option of the issuers thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; 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 depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt.
“ guarantee ” means a guarantee (other than by endorsement of negotiable instruments for collection or deposit in the ordinary course of business), direct or indirect, in any manner (including letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations.
“ Guarantee ” means the guarantee by any Guarantor of the Issuer’s Obligations under this Indenture and the Notes.
“ Guarantor ” means each Restricted Subsidiary of API or the Issuer, if any, that Guarantees the Notes in accordance with the terms of this Indenture.
“ Hedging Obligations ” means, with respect to any Person, the obligations of such Person under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, commodity swap agreement, commodity cap agreement, commodity collar agreement, foreign exchange contract, currency swap agreement or similar agreement providing for the transfer or mitigation of interest rate, currency or commodity risks either generally or under specific contingencies.
“ Holder ” means the Person in whose name a Note is registered on the Registrar’s books.

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“ Immediate Family Members ” means with respect to any individual, such individual’s child, stepchild, grandchild or more remote descendant, parent, stepparent, grandparent, spouse, former spouse, qualified domestic partner, sibling, mother-in-law, father-in-law, son-in-law and daughter-in-law (including adoptive relationships) and any trust, partnership or other bona fide estate-planning vehicle the only beneficiaries of which are any of the foregoing individuals or any private foundation or fund that is controlled by any of the foregoing individuals or any donor-advised fund of which any such individual is the donor.
“ Indebtedness ” means, with respect to any Person at any date, without duplication:
(a)     all obligations of such Person for borrowed money,
(b)     all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments,
(c)     all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business,
(d)     all obligations of such Person as lessee under Capital Leases,
(e)     all contingent or non-contingent obligations of such Person to reimburse or prepay any bank or other Person in respect of amounts paid or payable (currently or in the future, on a contingent or non-contingent basis) under a letter of credit, bankers’ acceptance or similar instrument, other than contingent obligations relating to letters of credit issued to support trade payables,
(f)     all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person,
(g)     Disqualified Stock in such Person, valued, as of the date of determination, at the greater of (i) the maximum aggregate amount that would be payable upon maturity, redemption, repayment or repurchase thereof (or of Disqualified Stock or Indebtedness into which such Disqualified Stock are convertible or exchangeable) and (ii) the maximum liquidation preference of such Disqualified Stock, and
(h)     all Indebtedness of others Guaranteed by such Person,
in each case, if and to the extent that any of the foregoing Indebtedness (other than letters of credit (excluding commercial letters of credit), Hedging Obligations and guarantees) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP; provided , however, that (i) Indebtedness shall not include (x) any obligations incurred in connection with the funding of a trust established under Section 501(c)(9) of the Code and (y) obligations permitted to be incurred pursuant to Section 4.09(b)

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(x) hereof, and (ii) for purposes of calculating the AIO Leverage Ratio, the API Leverage Ratio and the AIO First Lien Leverage Ratio only, (x) Indebtedness shall not include undrawn amounts in respect of letters of credit or similar instruments, Hedging Obligations, Indebtedness under Permitted Intercompany Factoring Arrangements and Disqualified Stock and (y) Indebtedness will be (1) reduced by gains under foreign exchange Hedging Obligations used in an Intercompany Foreign Currency Hedge and (2) increased by losses under Intercompany Foreign Currency Hedges.
“ Indenture ” means this Senior Secured Notes Indenture, as amended or supplemented from time to time.
“ Independent Financial Advisor ” means an accounting, appraisal, investment banking firm or consultant to Persons engaged in Similar Businesses of nationally recognized standing that is, in the good faith judgment of the Issuer, qualified to perform the task for which it has been engaged.
“ Intercreditor Agreements ” means the First Lien Intercreditor Agreement, together with the Second Lien Intercreditor Agreement, each as defined elsewhere in this Indenture.
“ Indirect Participant ” means a Person who holds a beneficial interest in a Global Note through a Participant.
“ Initial Notes ” means the $500.0 million aggregate principal amount of Notes issued under this Indenture on the date hereof.
“ Initial Purchasers ” means Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Goldman, Sachs & Co., HSBC Securities (USA) Inc., Santander Investment Securities Inc., SunTrust Robinson Humphrey, Inc. and The Williams Capital Group, L.P.
“ Interest Payment Date ” means February 15 and August 15 of each year to stated maturity.
“ Investment Grade ” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB- (or the equivalent) by S&P, or an equivalent rating by any other Rating Agency.
“ Investment Grade Securities ” means:
(a)    securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (other than Cash Equivalents);
(b)    debt securities or debt instruments with an Investment Grade rating, but excluding any debt securities or instruments constituting loans or advances among the Issuer and its Subsidiaries;

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(c)    investments in any fund that invests exclusively in investments of the type described in clauses (a) and (b) which fund may also hold immaterial amounts of cash pending investment or distribution; and
(d)    corresponding instruments in countries other than the United States customarily utilized for high quality investments.
“ Investments ” means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances or capital contributions (excluding accounts receivable, credit card and debit card receivables, trade credit, advances to customers, commission, travel and similar advances to employees, directors, officers, managers and consultants in each case made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities issued by any other Person and investments that are required by GAAP to be classified on the balance sheet (excluding the footnotes) of API in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property. For purposes of the definition of “Unrestricted Subsidiary” and Section 4.07 hereof:
(a)    “Investments” shall include the portion (proportionate to API’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of a Subsidiary of API or the Issuer at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided that upon a redesignation of such Subsidiary as a Restricted Subsidiary, API shall be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive) equal to:
(i)    API’s “Investment” in such Subsidiary at the time of such redesignation; less
(ii)    the portion (proportionate to API’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
(b)    any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer.
The amount of any Investment outstanding at any time shall be the original cost of such Investment, reduced by any dividend, distribution, interest payment, return of capital, repayment or other amount received in cash by API or a Restricted Subsidiary in respect of such Investment.
“ IP Intercompany Note ” means an intercompany note payable by a Special-Purpose IP Subsidiary to API or the Issuer; provided that (i) the interest payable thereunder shall be payable in cash on a quarterly basis and accrue at a “market” rate of interest determined on an arm’s length basis at the time of issuance and (ii) upon maturity thereof (in the case of a “pre-paid royalty” arrangement) or any material breach of the terms thereof by such Special-

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Purpose IP Subsidiary, the intellectual property rights held by such Special-Purpose IP Subsidiary (and acquired in exchange therefor from API or the Issuer, as the case may be) shall revert to API or the Issuer, as the case may be.
“ Issue Date ” means the date of original issuance of the Notes under this Indenture.
“ Issuer ” has the meaning assigned to it in the preamble to this Indenture.
“ Issuer’s Order ” means a written request or order signed on behalf of the Issuer by an Officer of the Issuer, who must be the principal executive officer, the principal financial officer, the president, any vice president, the treasurer, the assistant treasurer or the principal accounting officer of the Issuer, and delivered to the Trustee.
“ Lien ” means, with respect to any asset, any mortgage, lien (statutory or otherwise), pledge, hypothecation, charge, security interest, preference, priority or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction; provided that in no event shall an operating lease be deemed to constitute a Lien.
“ Major Non-Controlling Authorized Representative ” means, with respect to any Shared Collateral, the Authorized Representative of the Series of Additional First-Lien Obligations (as defined in the First Lien Intercreditor Agreement) that constitutes the largest outstanding principal amount of any then outstanding Series of First-Lien Obligations with respect to such Shared Collateral.
“ Material Real Property ” shall mean any real property owned by the Issuer or any Subsidiary Guarantor with a Fair Market Value in excess of $10,000,000, other than any real property located in the State of New York.
“ MIH ” means MI Holdings, Inc., a Missouri corporation.
“ MIH Merger ” means the merger or consolidation of MIH with and into the Issuer, with the Issuer as the continuing or surviving Person thereof.
“ Moody’s ” means Moody’s Investors Service, Inc. and any successor to its rating agency business.
“ Mortgages ” shall mean, collectively, the deeds of trust, trust deeds, hypothecs and mortgages made by the Issuer and the Subsidiary Guarantors in favor or for the benefit of the Collateral Agent on behalf of the Secured Parties, in form and substance substantially consistent with the deeds of trust, trust deeds, hypothecs and mortgages delivered to the

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administrative agent under the AIO Credit Agreement or any other Credit Facility, and any other mortgages executed and delivered pursuant to clause (ii) of Section 4.21 hereof.
“ Net Proceeds ” means the aggregate cash proceeds received by API, the Issuer or any of their Restricted Subsidiaries in respect of any Asset Sale, including any cash received upon the sale or other disposition of any Designated Non-cash Consideration received in any Asset Sale, net of the direct costs relating to such Asset Sale and the sale or disposition of such Designated Non-cash Consideration, including legal, accounting and investment banking fees, payments made in order to obtain a necessary consent or required by applicable law, and brokerage and sales commissions, any relocation expenses incurred as a result thereof, other fees and expenses, including title and recordation expenses, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of principal, premium, if any, and interest on Senior Indebtedness required (other than required by clause (i) of Section 4.10(b) hereof) to be paid as a result of such transaction and any deduction of appropriate amounts to be provided by the Issuer or any of its Restricted Subsidiaries as a reserve in accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by the Issuer or any of its Restricted Subsidiaries after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction.
“ Non-Controlling Authorized Representative ” means, at any time with respect to any Shared Collateral, any Authorized Representative that is not the Applicable Authorized Representative at such time with respect to such Shared Collateral.
“ Non-U.S. Person ” means a Person who is not a U.S. Person.
“ Notes ” has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and the Additional Notes shall be treated as a single class for all purposes under this Indenture, and unless the context otherwise requires, all references to the Notes shall include the Initial Notes and any Additional Notes.
“ Notes Obligations ” means Obligations in respect of the Notes, the Guarantees, this Indenture and the Collateral Documents.
“ Obligations ” means any principal, interest (including any interest accruing on or subsequent to the filing of a petition in bankruptcy, reorganization or similar proceeding at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable state, federal or foreign law), premium, penalties, fees, expenses, indemnifications, reimbursements (including reimbursement obligations with respect to letters of credit and banker’s acceptances), damages and other liabilities, and guarantees of payment of such principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities, payable under the documentation governing any Indebtedness.

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“ Offering Memorandum ” means the confidential offering memorandum, dated August 4, 2016, relating to the sale of the Initial Notes.
“ Officer ” means the Chairman of the board of directors, the Chief Executive Officer, the Chief Financial Officer, the President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer, Assistant Treasurer or the Secretary of the Issuer or the Company.
“ Officer’s Certificate ” means a certificate signed on behalf of a Person by an Officer of such Person, who must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of such Person, that meets the requirements set forth in this Indenture.
“ Opinion of Counsel ” means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Issuer.
“ Participant ” means, with respect to the Depositary, a Person who has an account with the Depositary (and, with respect to DTC, shall include Euroclear and Clearstream).
“ Participating Member State ” means each state so described in any EMU Legislation.
“ Permitted Intercompany Factoring Arrangement ” shall mean sale of receivables by Foreign Subsidiaries of the Company that are Restricted Subsidiaries to financial institutions (each, an “ Intermediary Bank ”) at a discount, so long as (a) such Restricted Subsidiary promptly repatriates the net cash proceeds of such sale (by way of distribution, repayment of intercompany loan or otherwise) to the Issuer or a Guarantor, (b) the Issuer or a Guarantor promptly repurchases such receivables from the applicable Intermediary Bank subject to the same discount (but with a deduction for a de minimis balance sheet chargeback in favor of such financial institution), and (c) the receivables so repurchased are thereafter pledged as Collateral.
“ Permitted Investments ” means:
(a)     any Investment in the Company or any of its Restricted Subsidiaries; provided that Investments of intellectual property-related assets constituting Collateral from the Issuer or a Subsidiary Guarantor to a Person that is not the Issuer or a Subsidiary Guarantor shall only be permitted pursuant to this clause (a) if (i) the Issuer or a Subsidiary Guarantor receives an intercompany note in an amount equal to the Fair Market Value (as determined in good faith by the Issuer) of the Investment; provided that the intercompany note is pledged as Collateral to the Collateral Agent on behalf of the holders of First Lien Obligations or (ii) with respect to Brazilian intellectual property-related assets constituting Collateral, in lieu of satisfying the requirements set forth in the preceding clause (i), the recipient of such Investment is a Subsidiary directly owned by the Issuer or a Subsidiary Guarantor and such recipient’s Capital Stock has been or will be pledged as Collateral to the Collateral Agent on behalf of the holders of First Lien Obligations, subject to the terms of the Collateral Documents;

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(b)     any Investment in Cash Equivalents or Investment Grade Securities;
(c)     any Investment by the Company or any of its Restricted Subsidiaries in a Person that is engaged in a Similar Business if as a result of such Investment:
(i)     such Person becomes a Restricted Subsidiary of the Company; or
(ii)     such Person, in one transaction or a series of related transactions, is merged or consolidated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary,
and, in each case, any Investment held by such Person; provided that such Investment was not acquired by such Person in contemplation of such acquisition, merger, consolidation or transfer;
(d)     any Investment in securities or other assets not constituting Cash Equivalents or Investment Grade Securities and received in connection with an Asset Sale made pursuant to Section 4.10 hereof or any other disposition of assets not constituting an Asset Sale;
(e)     any Investment existing on the Issue Date or made pursuant to legally binding commitments in effect on the Issue Date or an Investment consisting of any extension, modification or renewal of any Investment or binding commitment existing on the Issue Date; provided that the amount of any such Investment or binding commitment may be increased:
(i)     as required by the terms of such Investment or binding commitment as in existence on the Issue Date, or
(ii)     as otherwise permitted under this Indenture;
(f)     any Investment in the Company or any of its Restricted Subsidiaries with the Equity Interests of any of API’s Subsidiaries;
(g)     any Investment acquired by the Company or any of its Restricted Subsidiaries:
(i)     in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable (including any trade creditor or customer); or
(ii)     in satisfaction of judgments against other Persons; or

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(iii)     as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;
(h)     Investments held by a Restricted Subsidiary acquired after the Issue Date or of a Person merged into API or the Issuer or merged or consolidated with a Restricted Subsidiary under after the Issue Date (other than existing Investments in subsidiaries of such Subsidiary or Person, which must comply with the requirements of clause (g) above to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date of such acquisition, merger or consolidation;
(i)     Hedging Obligations permitted under clause (ix) of Section 4.09(b) hereof;
(j)     Investments the payment for which consists of Equity Interests (other than Disqualified Stock) of the Company or any of its direct or indirect parent companies; provided that such Equity Interests will not increase the amount available for Restricted Payments under Section 4.07(a)(iv)(C) hereof;
(k)     guarantees of Indebtedness permitted under Section 4.09 hereof, performance guarantees and Contingent Obligations incurred in the ordinary course of business and the creation of Liens on the assets of the Issuer or any Restricted Subsidiary in compliance with Section 4.12 hereof;
(l)     any transaction to the extent it constitutes an Investment that is permitted by and made in accordance with the provisions of Section 4.11(b) hereof (except transactions described in clause (ii) of such Section);
(m)     Investments consisting of purchases and acquisitions of inventory, supplies, material or equipment or the licensing or contribution of intellectual property pursuant to joint marketing arrangements with other Persons;
(n)     Investments in joint ventures and Unrestricted Subsidiaries, taken together with all other Investments made pursuant to this clause (n) that are at that time outstanding, not to exceed the greater of (i) $100.0 million and (ii) 3.0% of Total Assets (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value);
(o)     Investments (including debt obligations and Equity Interests) received in connection with the bankruptcy or reorganization of suppliers and customers or in settlement of delinquent obligations of, or other disputes with, customers and suppliers arising in the ordinary course of business or upon the foreclosure with respect to any secured Investment;

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(p)     loans and advances to employees, directors and officers of API or any Restricted Subsidiary (i) for reasonable and customary business-related travel expenses, entertainment, relocation and similar ordinary business expenses, in each case incurred in the ordinary course of business or consistent with past practices and (ii) for any other purpose, in an aggregate principal amount not to exceed $10.0 million at any time outstanding;
(q)     advances, loans or extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business by API, the Issuer or any Restricted Subsidiaries, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors and other credits to supplier in the ordinary course of business;
(r)     Investments consisting of purchases and acquisitions of assets or services in the ordinary course of business;
(s)     advances to, or guarantees of Indebtedness of, employees not in excess of $10.0 million outstanding at any one time, in the aggregate;
(t)     Investments made in the ordinary course of business in connection with obtaining, maintaining or renewing client contacts and loans or advances made to distributors in the ordinary course of business;
(u)     Investments in prepaid expenses, negotiable instruments held for collection and lease, utility and workers compensation, performance and similar deposits entered into as a result of the operations of the business in the ordinary course of business;
(v)     repurchases of the Notes;
(w)     additional Investments, taken together with all other Permitted Investments made pursuant to this clause (w) that are at the time outstanding, not to exceed $150.0 million (with the Fair Market Value of each Investment being measured at the time made and without giving effect to subsequent changes in value);
(x)     Investments made by a non-Guarantor Restricted Subsidiary to the extent such Investments are financed with the proceeds received by such Restricted Subsidiary from an Investment in such Restricted Subsidiary by API, the Issuer or a Guarantor permitted under this covenant;
(y)     Investments in the IP Intercompany Note;
(z)     guarantees of Indebtedness permitted by this Indenture; and
(aa)     Investments in the ordinary course of business consisting of Uniform Commercial Code Article 3 endorsements for collection or deposit and Article 4 customary trade arrangements with customers consistent with past practices.

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“ Permitted Junior Secured Refinancing Debt ” shall mean any Indebtedness of API, the Issuer and the Guarantors issued, incurred or otherwise obtained (including by means of the extension or renewal of existing Indebtedness) in exchange for, or to extend, renew, replace, repurchase, retire, defease or otherwise refinance, in whole or part, any Existing API Notes or any then-existing Permitted Junior Secured Refinancing Debt; provided that:
(a)     such Indebtedness shall not have a greater principal amount than the principal amount (or accreted value, if applicable) of the Existing API Notes or other Indebtedness so refinanced plus accrued interest, fees, premiums (if any) and penalties thereon and fees and expenses associated with such refinancing,
(b)     such Indebtedness is (i) if secured, secured by Liens on the Collateral that are junior to the Liens on the Collateral securing the obligations under the First Lien Obligations (but without regard to control of remedies), (ii) not secured by any property or assets of API, the Issuer or any Restricted Subsidiary other than the Collateral and (iii) not guaranteed by any person other than API, the Issuer and the Guarantors,
(c)     the security agreements and guarantees relating to such Indebtedness have terms not more favorable to the respective creditors than the terms of the Collateral Documents (with such differences as are appropriate to reflect the nature of such Permitted Junior Secured Refinancing Debt), and
(d)     if such Indebtedness is secured, a representative acting on behalf of the holders of such Indebtedness shall have become party to, or otherwise be subject to the provisions of, the Second Lien Intercreditor Agreement.
“ Permitted Liens ” means, with respect to any Person:
(a)    (i) pledges or deposits by such Person under workmen’s compensation laws, unemployment insurance, other social security legislation or other insurance related obligations (including, but not limited to, in respect of deductibles, self-insured retention amounts and premiums and adjustments thereto) and (ii) pledges and deposits in the ordinary course of business securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carries providing property, casualty or liability insurance to API, the Issuer or any Restricted Subsidiary;
(b)    pledges or deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or U.S. government bonds to secure surety, stay, customs, performance or appeal bonds and other obligations of like nature (including those to secure health, safety and environmental obligations) to which such Person is a party, incurred in the ordinary course of business;

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(c)    Liens imposed by law, such as landlords’, carriers’, warehousemen’s and mechanics’, repairmen’s, construction contractor’s or the like Liens, or other customary Liens (other than in respect of Indebtedness) in favor of landlords, so long as, in each case for sums not yet overdue for a period of more than 30 days or, if more than 30 days overdue, are unfiled and no other action has been taken to enforce such Lien or being contested in good faith by appropriate actions, if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;
(d)    Liens arising out of judgments or awards against such Person not constituting an Event of Default;
(e)    Liens for taxes, assessments or other governmental charges not yet overdue for a period of more than the applicable grace period related thereto or which are being contested in good faith by appropriate proceedings;
(f)    survey exceptions, covenants, conditions, encroachments, encumbrances, easements or reservations of, or rights of others for, licenses, building codes, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or Liens incidental, to the conduct of the business of such Person or to the ownership of its properties which do not materially adversely affect the ordinary conduct of the business of such Person;
(g)    Liens securing obligations in respect of Indebtedness permitted to be incurred pursuant to Section 4.09(b)(iv) hereof; provided that (i) Liens securing Indebtedness, Disqualified Stock or Preferred Stock to be incurred extend only to the assets so acquired, constructed, repaired, replaced, leased or improved (except for additions and accessions to such assets subject to, or acquired, constructed, repaired, replaced or improved with the proceeds of such Indebtedness), (ii) such Liens attach concurrently with or within 270 days after completion of the acquisition, construction, repair, replacement, lease or improvement (as applicable) of the property subject to such Liens, and (iii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, replacements thereof and additions and accessions to such property and the proceeds and the products thereof and customary security deposits;
(h)    Liens existing on the Issue Date (excluding Liens securing Credit Facilities and the Notes);
(i)    Liens on property or shares of stock or other assets of a Person at the time such Person becomes a Subsidiary; provided that such Liens are not created or incurred in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided , further , that such Liens may not extend to any other property or other assets owned by the Issuer or any of its Restricted Subsidiaries;
(j)    Liens on property or other assets at the time API, the Issuer or a Restricted Subsidiary acquired the property or such other assets, including any

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acquisition by means of a merger or consolidation with or into the Issuer or any of its Restricted Subsidiaries; provided that such Liens are not created or incurred in connection with, or in contemplation of, such acquisition; provided , further , that (i) the Liens may not extend to any other property owned by the Issuer or any of its Restricted Subsidiaries and (ii) the indebtedness secured thereby is permitted under clauses (iv) through (xxi) of Section 4.09(b) hereof;
(k)    Liens securing obligations in respect of Indebtedness or other obligations of a Restricted Subsidiary owing to the Issuer or another Restricted Subsidiary permitted to be incurred in accordance with Section 4.09 hereof;
(l)    Liens securing (i) Hedging Obligations and (ii) obligations in respect of Cash Management Services;
(m)    Liens on property of any non-Guarantor Restricted Subsidiary, which Liens secure Indebtedness of any non-Guarantor Restricted Subsidiary permitted under Section 4.09 hereof;
(n)    Liens securing the Notes Obligations with respect to the Notes issued on the Issue Date;
(o)    leases, subleases, licenses or sublicenses granted to others in the ordinary course of business which do not materially interfere with the ordinary conduct of the business of the Issuer or any of its Restricted Subsidiaries and do not secure any Indebtedness;
(p)    Liens arising by operation of law in the United States under Article 2 of the Uniform Commercial Code in favor of a reclaiming seller of good or buyer of goods;
(q)    purported Liens evidenced by the filing of precautionary Uniform Commercial Code financing statements or similar public filings;
(r)    other Liens on assets of Restricted Subsidiaries of API and not constituting Collateral securing Indebtedness or other obligations of such Restricted Subsidiaries in an aggregate principal amount at any time outstanding not to exceed $100.0 million, in each case determined as of the date of incurrence;
(s)    Liens (i) in favor of API, the Issuer or any Guarantor, and (ii) in favor of a non-Guarantor Restricted Subsidiary on assets of a non-Guarantor Restricted Subsidiary securing Indebtedness permitted under Section 4.09 hereof;
(t)    Liens on specific items of inventory or other goods and the proceeds thereof securing such Person’s obligations in respect of documentary letters of credit or banker’s acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or goods;

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(u)    (i) zoning, building, entitlement and other land use regulations by governmental authorities with which the normal operation of the business complies, and (y) any zoning or similar law or right reserved to or vested in any governmental authority to control or regulate the use of any real property that does not materially interfere with the ordinary conduct of the business of API, the Issuer or the Guarantors, taken as a whole;
(v)    Liens securing Indebtedness of a Restricted Subsidiary that is a Foreign Subsidiary that is deemed to exist pursuant to Permitted Intercompany Factoring Arrangements;
(w)    deposits made in the ordinary course of business to secure liability to insurance carriers;
(x)    Liens securing judgments for the payment of money not constituting an Event of Default under clause (e) of Section 6.01 hereof;
(y)     Liens to secure any modification, refinancing, restructuring, extension, renewal or replacement (or successive modification, refinancing, restructuring, extension, renewal or replacement) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (g), (h), (i) and (j); provided that (a) such new Lien does not extend to any additional property and shall be limited to all or part of the same property that secured the original Lien (plus after-acquired property that is affixed or incorporated into such property) and proceeds and products thereof, and (b) the modification, refinancing, restructuring, extension, renewal or replacement of the obligations secured or benefited by such Liens is permitted under Section 4.09 hereof;
(z)    in the case of any non-wholly owned Restricted Subsidiary, any put and call arrangements or restrictions on disposition related to its Equity Interests set forth in its organizational documents or any related joint venture or similar agreement;
(aa)    Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;
(bb)    Liens securing any Indebtedness permitted under Sections 4.09(b)(i) and 4.09(b)(xxv) hereof;
(cc)    Liens (a) of a collection bank arising under Section 4-208 of the Uniform Commercial Code on items in the course of collection, (b) attaching to commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business and not for speculative purposes, and (c) in favor of banking or other financial institutions arising as a matter of law encumbering deposits maintained with a financial institution (including the right of set-off) and which are within the general parameters customary in the banking industry;

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(dd)    Liens that are customary contractual rights of set-off (i) relating to the establishment of depository relations with banks or other deposit-taking financial institutions not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of API, the Issuer or any Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of API, the Issuer and any Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of API, the Issuer or any Restricted Subsidiaries in the ordinary course of business;
(ee)    Liens on property incurred pursuant to any Sale and Lease-Back Transactions and general intangibles related thereto permitted under this Indenture;
(ff)     Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale or purchase of goods entered into by API, the Issuer or any Restricted Subsidiary in the ordinary course of business;
(gg)    Liens deemed to exist in connection with Investments in repurchase agreements permitted under Section 4.09 hereof; provided that such Liens do not extend to any assets other than those that are the subject of such repurchase agreement;
(hh)    Liens encumbering reasonable customary deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;
(ii)    during a Suspension Period only, Liens securing Indebtedness (other than Indebtedness that is secured equally and ratably with (or on a basis subordinated to) the Notes), and Indebtedness represented by Sale and Lease-Back Transactions in an amount not to exceed 15.0% of Total Assets at any one time outstanding;
(jj)    any encumbrance or restriction (including put and call arrangements) with respect to Equity Interests of any joint venture or similar arrangement pursuant to any joint venture or similar agreement;
(kk)    Liens solely on any cash earnest money deposits made by API, the Issuer or any Restricted Subsidiaries in connection with any letter of intent or purchase agreement permitted under this Indenture;
(ll)    ground leases in respect of real property on which facilities owned or leased by API, the Issuer or any of API’s Subsidiaries are located;
(mm)    Liens on insurance policies and the proceeds thereof securing the financing of the premiums with respect thereto;
(nn)    Liens on Capital Stock of an Unrestricted Subsidiary that secure Indebtedness or other obligations of such Unrestricted Subsidiary;

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(oo)    Liens on the assets of non-guarantor Subsidiaries securing Indebtedness of API, the Issuer or the Restricted Subsidiaries that are permitted by the terms of this Indenture to be incurred;
(pp)    any interest or title of a lessor, sublessor, licensor or sublicensor or secured by a lessor’s, sublessor’s, licensor’s or sublicensor’s interest under leases or licenses entered into by the Issuer or any of the Restricted Subsidiaries in the ordinary course of business;
(qq)    Liens consisting of an agreement to dispose of any property in an Asset Sale permitted under Section 4.10 hereof, in each case, solely to the extent such Asset Sale would have been permitted on the date of the creation of such Lien; and
(rr)    deposits of cash with the owner or lessor of premises leased and operated by API, the Issuer or any of API’s Subsidiaries to secure the performance of API’s, the Issuer’s or such Subsidiary’s obligations under the terms of the lease for such premises.
For purposes of this definition, the term “Indebtedness” shall be deemed to include interest on such Indebtedness.
“ Permitted Pari Passu Secured Refinancing Debt ” shall mean any Indebtedness of API, the Issuer or the Guarantors issued, incurred or otherwise obtained (including by means of the extension or renewal of existing Indebtedness) in exchange for, or to extend, renew, replace, repurchase, retire, defease or otherwise refinance, in whole or part, any Existing API Notes or any then-existing Permitted Pari Passu Secured Refinancing Debt; provided that (a) such Indebtedness shall not have a greater principal amount than the principal amount (or accreted value, if applicable) of the Existing API Notes or other Indebtedness so refinanced plus accrued interest, fees, premiums (if any) and penalties thereon and fees and expenses associated with such refinancing, (b) such Indebtedness is (i) if secured, secured by the Collateral on a pari passu basis with the obligations under the AIO Credit Agreement (but without regard to control of remedies), (ii) not secured by any property or assets of API, the Issuer or any Restricted Subsidiary other than the Collateral and (iii) not guaranteed by any person other than API, the Issuer and the Guarantors, (c) the security agreements and guarantees relating to such Indebtedness have terms not more favorable to the respective creditors than the terms of the Collateral Documents (with such differences as are appropriate to reflect the nature of such Permitted Pari Passu Secured Refinancing Debt) and (d) if such Indebtedness is secured, a representative acting on behalf of the holders of such Indebtedness shall have become party to, or otherwise be subject to the provisions of, the First Lien Intercreditor Agreement.
“ Person ” means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.
“ Preferred Stock ” means any Equity Interest with preferential rights of payment of dividends or upon liquidation, dissolution, or winding up.

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“ Private Placement Legend ” means the legend set forth in Section 2.06(f)(i) hereof to be placed on all Notes issued under this Indenture, except where otherwise permitted by the provisions of this Indenture.
“ QIB ” means a “qualified institutional buyer” as defined in Rule 144A.
“ Rating Agencies ” means Moody’s and 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 Issuer which shall be substituted for Moody’s or S&P or both, as the case may be.
“ Record Date ” for the interest payable on any applicable Interest Payment Date means the February 1 and August 1 (whether or not a Business Day) immediately preceding such Interest Payment Date.
“ Refinancing Indebtedness ” means (a) Indebtedness incurred by API, the Issuer or any Restricted Subsidiary, (b) Disqualified Stock issued by API, the Issuer or any Restricted Subsidiary or (z) Preferred Stock issued by any Restricted Subsidiary which, in each case, serves to extend, replace, refund, refinance, renew or defease any Indebtedness (other than the Existing API Notes unless the new Indebtedness, Disqualified Stock or Preferred Stock is incurred or issued by API), Disqualified Stock or Preferred Stock, so long as such Indebtedness, Disqualified Stock or Preferred Stock was existing and outstanding on the Issue Date or is incurred or issued after the Issue Date in compliance with this Indenture and so long as:
(a)    the principal amount (or accreted value, if applicable) of such new Indebtedness, the amount of such new Preferred Stock or the liquidation preference of such new Disqualified Stock does not exceed the principal amount of (or accreted value, if applicable), plus any accrued and unpaid interest on, the Indebtedness, the amount of Preferred Stock or the liquidation preference of, plus any accrued and unpaid dividends on, the Disqualified Stock being so modified, refinanced, refunded, renewed, extended or defeased, plus the amount of any tender premium or premium required to be paid under the terms of the instrument governing the Indebtedness, Preferred Stock or Disqualified Stock being so extended, replaced, refunded, refinanced, renewed or defeased, defeasance costs and any reasonable fees and expenses (including original issue discount, upfront fees or similar fees) incurred in connection with the issuance of such new Indebtedness, Preferred Stock or Disqualified Stock;
(b)    such Refinancing Indebtedness has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred which is not less than the remaining Weighted Average Life to Maturity of, the Indebtedness, Disqualified Stock or Preferred Stock being extended, replaced, refunded, refinanced, renewed or defeased;
(c)    such Refinancing Indebtedness has a final scheduled maturity date equal to or later than the final scheduled maturity date of the Indebtedness, Preferred Stock or Disqualified Stock being so extended, replaced, refunded, refinanced, renewed or defeased;

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(d)    to the extent such Refinancing Indebtedness extends, replaces, refunds, refinances, renews or defeases (i) Indebtedness subordinated to the Notes or any Guarantee thereof, such Refinancing Indebtedness is subordinated to the Notes or the Guarantee thereof at least to the same extent as the Indebtedness being extended, replaced, refunded, refinanced, renewed or defeased or (ii) Disqualified Stock or Preferred Stock, such Refinancing Indebtedness must be Disqualified Stock or Preferred Stock, respectively; and
(e)    Refinancing Indebtedness shall not include:
(i)    Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary of the Company that is not a Guarantor (other than the Issuer) that refinances Indebtedness or Disqualified Stock of the Issuer;
(ii)    Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary of the Issuer that is not a Subsidiary Guarantor that refinances Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary Guarantor;
(iii)    Indebtedness or Disqualified Stock of the Company or Indebtedness, Disqualified Stock or Preferred Stock of a Restricted Subsidiary that refinances Indebtedness, Disqualified Stock or Preferred Stock of an Unrestricted Subsidiary;
(iv)    Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or any of its Restricted Subsidiaries that refinances Indebtedness, Disqualified Stock or Preferred Stock of API; or
(v)     Indebtedness, Disqualified Stock or Preferred Stock of the Issuer that is guaranteed by any Person that does not guarantee the Indebtedness, Disqualified Stock or Preferred Stock being so extended, replaced, refunded, refinanced, renewed or defeased.
“ Regulation S ” means Regulation S promulgated under the Securities Act.
“ Regulation S Global Note ” means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as applicable.
“ Regulation S Permanent Global Note ” means a permanent Global Note in the form of Exhibit A attached hereto, bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the applicable Restricted Period.
“ Regulation S Temporary Global Note ” means a temporary Global Note in the form of Exhibit A attached hereto, bearing the Global Note Legend, the Private Placement Legend and the Regulation S Temporary Global Note Legend and deposited with or on behalf

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of, and registered in the name of, the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903.
“ Regulation S Temporary Global Note Legend ” means the legend set forth in Section 2.06(f)(iii) hereof.
“ Responsible 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.
“ Restricted Definitive Note ” means a Definitive Note bearing, or that is required to bear, the Private Placement Legend.
“ Restricted Global Note ” means a Global Note bearing, or that is required to bear, the Private Placement Legend.
“ Restricted Investment ” means an Investment other than a Permitted Investment.
“ Restricted Period ” means, in respect of any Note issued pursuant to Regulation S, the 40-day distribution compliance period as defined in Regulation S applicable to such Note.
“ Restricted Subsidiary ” means, at any time, any direct or indirect Subsidiary of the Company (including the Issuer and any Foreign Subsidiary) that is not then an Unrestricted Subsidiary; provided that (a) upon an Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of “Restricted Subsidiary” and (b) if GAAP (for purposes of determining compliance with any covenant) does not permit the continued consolidation of the operations of any Restricted Subsidiary with the operations of the Company and its other consolidated Restricted Subsidiaries (e.g., because the accounting criteria of “control” is not met for such Restricted Subsidiary), then the assets, liabilities, income, cash flows and results of operations of such Restricted Subsidiary shall not be included in the calculation of compliance with the covenants (or the component definitions used therein).
“ Rule 144 ” means Rule 144 promulgated under the Securities Act.
“ Rule 144A ” means Rule 144A promulgated under the Securities Act.
“ Rule 903 ” means Rule 903 promulgated under the Securities Act.
“ Rule 904 ” means Rule 904 promulgated under the Securities Act.
“ S&P ” means S&P Global Ratings or any successor thereto.

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“ Sale and Lease-Back Transaction ” means any arrangement providing for the leasing by the Issuer or any of its Restricted Subsidiaries of any real or tangible personal property, which property has been or is to be sold or transferred by the Issuer or such Restricted Subsidiary to a third Person in contemplation of such leasing.
“ SEC ” means the U.S. Securities and Exchange Commission.
“ Secured Indebtedness ” means any Indebtedness of the Issuer or any of its Restricted Subsidiaries secured by a Lien.
“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.
“ Senior Indebtedness ” means:
(a)    all Indebtedness of API, the Issuer or any Guarantor outstanding under the AIO Credit Agreement or Notes and related Guarantees (including interest accruing on or after the filing of any petition in bankruptcy or similar proceeding or for reorganization of API, the Issuer or any Guarantor (at the rate provided for in the documentation with respect thereto, regardless of whether or not a claim for post-filing interest is allowed in such proceedings)), and any and all other fees, expense reimbursement obligations, indemnification amounts, penalties, and other amounts (whether existing on the Issue Date or thereafter created or incurred) and all obligations of API, the Issuer or any Guarantor to reimburse any bank or other Person in respect of amounts paid under letters of credit, acceptances or other similar instruments;
(b)    all (i) Hedging Obligations (and guarantees thereof) and (y) obligations in respect of Cash Management Services (and guarantees thereof) owing to a Lender (as defined in the AIO Credit Agreement) or any Affiliate of such Lender (or any Person that was a Lender or an Affiliate of such Lender at the time the applicable agreement giving rise to such Hedging Obligation was entered into), provided that such Hedging Obligations and obligations in respect of Cash Management Services, as the case may be, are permitted to be incurred under the terms of this Indenture;
(c)    any other Indebtedness of API, the Issuer or any Guarantor permitted to be incurred under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the Notes or any related Guarantee; and
(d)    all Obligations with respect to the items listed in the preceding clauses (a), (b) and (c);
provided that Senior Indebtedness shall not include:
(i)    any obligation of such Person to API, the Issuer or any of its Subsidiaries;

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(ii)    any liability for federal, state, local or other taxes owed or owing by such Person;
(iii)    any accounts payable or other liability to trade creditors arising in the ordinary course of business;
(iv)    any Indebtedness or other Obligation of such Person which is subordinate or junior in any respect to any other Indebtedness or other Obligation of such Person; or
(v)    that portion of any Indebtedness which at the time of incurrence is incurred in violation of this Indenture.
“ Series ” means:
(a)     with respect to the First Lien Secured Parties, each of (i) the “Secured Parties” (or similar term), as defined in the AIO Credit Agreement (in their capacities as such), (ii) the Holders and the Trustee (each in their capacity as such) and (iii) each other group of additional First Lien Secured Parties that become subject to the Intercreditor Agreements after the date hereof that are represented by a common Authorized Representative (in its capacity as such for such Additional First Lien Secured Parties); and
(b)    with respect to any First Lien Obligations, each of (i) the Credit Facility Obligations, (ii) the Notes Obligations and (iii) the additional First Lien Obligations incurred pursuant to any applicable common agreement, which pursuant to any joinder agreement, are to be represented under the Intercreditor Agreements by a common Authorized Representative (in its capacity as such for such other additional First Lien Obligations).
“ Shared Collateral ” means, at any time, Collateral in which the holders of two or more Series of First Lien Obligations (or their respective Authorized Representatives) hold a valid and perfected security interest at such time. If more than two Series of First Lien Obligations are outstanding at any time and the holders of less than all Series of First Lien Obligations hold a valid and perfected security interest in any Collateral at such time, then such Collateral shall constitute Shared Collateral for those Series of First Lien Obligations that hold a valid and perfected security interest in such Collateral at such time and shall not constitute Shared Collateral for any Series which does not have a valid and perfected security interest in such Collateral at such time.
“ Significant Subsidiary ” means any Restricted Subsidiary of the Company which at the time of determination either (a) had assets which, based on the consolidated balance sheet of the Company for the fiscal quarter most recently ended for which internal financial statements are available, constituted at least 10% of the Company’s total assets on a consolidated basis as of such date or (b) had revenues for the 12-month period which, based on the consolidated income statements of the Company for the fiscal quarter most recently ended

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for which internal financial statements are available, constituted at least 10% of the Company’s total revenues on a consolidated basis for such period, in each case, on a pro forma basis to give effect to any acquisition or disposition of companies, divisions, lines of businesses or operations by the Company and the Restricted Subsidiaries subsequent to such date and on or prior to the date of determination.
“ Similar Business ” means (a) any business engaged in by the Issuer or any of its Restricted Subsidiaries on the Issue Date, and (b) any business or other activities that are reasonably similar, ancillary, complementary or related to, or a reasonable extension, development or expansion of, the businesses in which the Issuer and its Restricted Subsidiaries are engaged on the Issue Date.
“ Special-Purpose IP Subsidiary ” means a direct or indirect wholly-owned Restricted Subsidiary of API that shall have no Indebtedness or intercompany payables (other than (a) Indebtedness owing under the IP Intercompany Note and (b) Indebtedness and intercompany payables owing to any other Affiliate of API that are subordinated in right of payment to the Indebtedness of such Restricted Subsidiary under the IP Intercompany Note) and no other material liabilities, assets or operations unrelated to the licensing and exploitation of intellectual property rights disposed of by API or the Issuer to such Restricted Subsidiary in accordance with a disposition as permitted under Section 4.10 hereof (other than (i) tax liabilities, (ii) Equity Interests of, and intercompany notes and receivables owing by, Foreign Subsidiaries and (iii) net operating losses and other tax attributes) (it being understood and agreed that a Special-Purpose IP Subsidiary may be a member of any combined, consolidated or other group for tax purposes and may (x) join in the filing of any such combined, consolidated or other group tax return and (y) enter into tax sharing or similar arrangements with, in either case, any member or the members of such group).
“ Specified Transaction ” means (v) any designation of operations or assets of API, the Issuer or a Restricted Subsidiary as discontinued operations (as defined under GAAP), (w) any Investment that results in a Person becoming a Restricted Subsidiary, (x) any designation of a Subsidiary as a Restricted Subsidiary or an Unrestricted Subsidiary in compliance with this Indenture, (y) any purchase or other acquisition of a business of any Person, of assets constituting a business unit, line of business or division of any Person or (z) any Asset Sale (i) that results in a Restricted Subsidiary ceasing to be a Subsidiary of API or (ii) of a business, business unit, line of business or division of API, the Issuer or a Restricted Subsidiary, in each case whether by merger, consolidation or otherwise.
“ Subordinated Indebtedness ” means, with respect to the Notes,
(a)    any Indebtedness of the Issuer which is by its terms subordinated in right of payment to the Notes, and
(b)    any Indebtedness of any Guarantor which is by its terms subordinated in right of payment to the Guarantee of such entity of the Notes.
“ Subsidiary ” means, with respect to any Person:

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(a)    any corporation, association, or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50.0% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof or is consolidated under GAAP with such Person at such time; and
(b)    any partnership, joint venture, limited liability company or similar entity of which
(i)    more than 50.0% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof whether in the form of membership, general, special or limited partnership or otherwise, and
(ii)    such Person or any Restricted Subsidiary of such Person is a controlling general partner or otherwise controls such entity.
“ Subsidiary Guarantor ” means each of the Company’s current and future wholly-owned domestic subsidiaries that is a guarantor under the Issuer’s Revolving Credit Agreement, dated as of June 5, 2015, as amended or supplemented.
“ Supplemental Indenture ” means a supplemental indenture to this Indenture, substantially in the form of Exhibit D hereto.
“ Test Period ” in effect at any time means the Company’s most recently ended four fiscal quarters for which internal financial statements are available.
“ Total Assets ” means the total assets of API and the Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, as shown on the most recent balance sheet of API.
“ Treasury Rate ” means, as of any Redemption Date, the yield to maturity as of such Redemption Date 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 the 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 the Redemption Date to August 15, 2019; provided 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 will be used.

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“ Trust Indenture Act ” means the Trust Indenture Act of 1939, as amended (15 U.S.C. §§ 77aaa-777bbbb).
“ Trustee ” means Deutsche Bank Trust Company Americas, as trustee, until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.
“ Uniform Commercial Code ” means the Uniform Commercial Code or any successor provision thereof as the same may from time to time be in effect in the State of New York.
“ Unrestricted Definitive Note ” means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend.
“ Unrestricted Global Note ” means a permanent Global Note, substantially in the form of Exhibit A attached hereto, that bears the Global Note Legend and that has the “Schedule of Exchanges of Interests in the Global Note” attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing Notes that do not bear the Private Placement Legend.
“ Unrestricted Subsidiary ” means:
(a)    any Subsidiary of the Company which at the time of determination is an Unrestricted Subsidiary (as designated by the Company, as provided below); and
(b)    any Subsidiary of an Unrestricted Subsidiary.
The Company may designate any of its Subsidiaries (including any existing Subsidiary and any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or holds any Lien on, any property of, the Company or any of its Subsidiaries (other than solely any Subsidiary of the Subsidiary to be so designated); provided that:
(a)    any Unrestricted Subsidiary must be an entity of which the Equity Interests entitled to cast at least a majority of the votes that may be cast by all Equity Interests having ordinary voting power for the election of directors or Persons performing a similar function are owned, directly or indirectly, by the Company;
(b)    such designation complies with Section 4.07 hereof; and
(c)    each of (i) the Subsidiary to be so designated and (ii) its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Issuer or any Restricted Subsidiary.

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The Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that, immediately after giving effect to such designation, no Default shall have occurred and be continuing and either: (1) the Issuer could incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Test or (2) the Fixed Charge Coverage Ratio for the Issuer would be equal to or greater than such ratio for the Issuer immediately prior to such designation, in each case, on a pro forma basis taking into account such designation.
Any such designation by the Company shall be notified by the Company to the Trustee by promptly filing with the Trustee a copy of the resolution of the board of directors of the Company or any committee thereof giving effect to such designation and an Officer’s Certificate certifying that such designation complied with the foregoing provisions.
“ U.S. Person ” means a U.S. person as defined in Rule 902(k) under the Securities Act.
“ Voting Stock ” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the board of directors of such Person.
“ Weighted Average Life to Maturity ” means, when applied to any Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, at any date, the quotient obtained by dividing:
(a)    the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Disqualified Stock or Preferred Stock multiplied by the amount of such payment; by
(b)    the sum of all such payments;
provided that for purposes of determining the Weighted Average Life to Maturity of any Indebtedness that is being extended, replaced, refunded, refinanced, renewed or defeased (the “ Applicable Indebtedness ”), the effects of any prepayments made on such Applicable Indebtedness prior to the date of the applicable extension, replacement, refunding, refinancing, renewal or defeasance shall be disregarded.
“ Wholly-Owned Subsidiary ” of any Person means a Subsidiary of such Person, 100.0% of the outstanding Equity Interests of which (other than directors’ qualifying shares and shares of Capital Stock of Foreign Subsidiaries issued to foreign nationals as required under applicable law) shall at the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person or by such Person and one or more Wholly-Owned Subsidiaries of such Person.
SECTION 1.02
     Other Definitions .

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Term
Defined in Section
“Acceptable Commitment”
4.10
“Affiliate Transaction”
4.11
“Applicable Premium Deficit”
8.04
“Asset Date of Determination”
4.16
“Asset Sale Offer”
4.10
“Authentication Order”
2.02
“Change of Control Offer”
4.14
“Change of Control Payment”
4.14
“Change of Control Payment Date”
4.14
“Covenant Defeasance”
8.03
“Covenant Suspension Event”
4.17
“DTC”
2.03
“Event of Default”
6.01
“Excess Proceeds”
4.10
“Fixed Charge Coverage Test”
4.07
“Foreign Disposition”
4.10
“incur” and “incurrence”
4.09
“Legal Defeasance”
8.02
“Minimum AIO Asset Level”
4.16
“Note Register”
2.03
“Offer Amount”
3.09
“Offer Period”
3.09
“Pari Passu Indebtedness”
4.10
“Paying Agent”
2.03
“Purchase Date”
3.09
“Redemption Date”
3.01
“Refunding Capital Stock”
4.07
“Registrar”
2.03
“Restricted Payments”
4.07
“Reversion Date”
4.17
“Second Lien Intercreditor Agreement”
10.01
“Successor Company”
5.01
“Successor Person”
5.01
“Suspended Covenants”
4.17
“Suspension Date”
4.17
“Suspension Period”
4.17
“Treasury Capital Stock”
4.07

SECTION 1.03
     Incorporation by Reference of Trust Indenture Act . Whenever

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this Indenture refers to a provision of the Trust Indenture Act, the provision is incorporated by reference in and made a part of this Indenture.
The following Trust Indenture Act terms used in this Indenture have the following meanings:
“ indenture securities ” means the Notes and the Guarantees;
“ indenture security Holder ” means a Holder of a Note;
“ indenture to be qualified ” means this Indenture;
“ indenture trustee ” or “ institutional trustee ” means the Trustee; and
“ obligor ” on the Notes and the Guarantees means the Issuer and the Guarantors, respectively, and any successor obligor upon the Notes and the Guarantees, respectively.
SECTION 1.04
     Rules of Construction . Unless the context otherwise requires:
(a)     a term has the meaning assigned to it;
(b)     an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; provided that if GAAP (for purposes of determining compliance with any covenant in this Indenture) does not permit the continued consolidation of the operations of any Restricted Subsidiary with the operations of the Company and its other consolidated Restricted Subsidiaries (e.g., because the accounting criteria of “control” is not met for such Restricted Subsidiary), then the assets, liabilities, income, cash flows and results of operations of such Restricted Subsidiary shall not be included in the calculation of compliance with the covenants (or the component definitions used therein);
(c)     “or” is not exclusive;
(d)     the words “including,” “includes” and similar words shall be deemed to be followed by without limitation;
(e)     words in the singular include the plural, and in the plural include the singular;
(f)     “will” shall be interpreted to express a command;
(g)     provisions apply to successive events and transactions;
(h)     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;

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(i)     unless the context otherwise requires, any reference to an “Article,” “Section” or “clause” refers to an Article, Section or clause, as the case may be, of this Indenture;
(j)     the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not any particular Article, Section, clause or other subdivision; and
(k)     words used herein implying any gender shall apply to both genders.
SECTION 1.05
     Acts of Holders .
(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 an agent duly appointed in writing. 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 Issuer. Proof of execution of any such instrument or of a writing appointing any such agent, or the holding by any Person of a Note, shall be sufficient for any purpose of this Indenture and (subject to Section 7.01 hereof) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Section 1.05.
(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 or on behalf of any legal entity other than an individual, such certificate or affidavit shall also constitute proof of the authority of the Person executing the same. 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 every future Holder of the same Note and the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of any action taken, suffered or omitted by the Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note.
(e)     The Issuer may set a record date for purposes of determining the identity of Holders entitled to give any request, demand, authorization, direction, notice, consent, waiver or take any other act, or to vote or consent to any action by vote or consent authorized or permitted to be given or taken by Holders. Unless otherwise specified, if not set by the Issuer

49


prior to the first solicitation of a Holder made by any Person in respect of any such action, or in the case of any such vote, prior to such vote, any such record date shall be the later of 10 days prior to the first solicitation of such consent or the date of the most recent list of Holders furnished to the Trustee prior to such solicitation.
(f)     Without limiting the foregoing, a Holder entitled 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. Any notice given or action taken by a Holder or its agents with regard to different parts of such principal amount pursuant to this paragraph shall have the same effect as if given or taken by separate Holders of each such different part.
(g)     Without limiting the generality of the foregoing, a Holder, including DTC, that is a 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 any Person, that is a Holder of a Global Note, including DTC, 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.
(h)     The Issuer may fix a record date for the purpose of determining the Persons who are beneficial owners of interests in any Global Note held by DTC entitled under the procedures of such Depositary to 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. 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.
ARTICLE II
    

THE NOTES
SECTION 2.01      Form and Dating; Terms .
(a)     General . The Notes and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit A attached hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rules or usage. Each Note shall be dated the date of its authentication. The Notes shall be issued initially in minimum denominations of $2,000 and any integral multiple of $1,000 in excess thereof.

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(b)     Global Notes . Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified in the “Schedule of Exchanges of Interests in the Global Note” attached thereto and each shall provide that it shall represent up to the aggregate principal amount of Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as applicable, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof.
(c)     Temporary Global Notes . Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Custodian and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream, duly executed by the Issuer and authenticated by the Trustee as hereinafter provided.
Following (i) the termination of the applicable Restricted Period and (ii) the receipt by the Trustee of (A) a certification or other evidence in a form reasonably acceptable to the Issuer of non-United States beneficial ownership of 100% of the aggregate principal amount of each Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who shall take delivery of a beneficial ownership interest in a 144A Global Note bearing a Private Placement Legend, all as contemplated by Section 2.06(b) hereof) and (B) an Officer’s Certificate from the Issuer, the Trustee shall remove the Regulation S Temporary Global Note Legend from the Regulation S Temporary Global Note, following which temporary beneficial interests in the Regulation S Temporary Global Note shall automatically become beneficial interests in the Regulation S Permanent Global Note pursuant to the Applicable Procedures.
The aggregate principal amount of a Regulation S Temporary Global Note and a Regulation S Permanent Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided.
(d)     Terms . The aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is unlimited.
The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Issuer and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound

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thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.
The Notes shall be subject to repurchase by the Issuer pursuant to an Asset Sale Offer as provided in Section 4.10 hereof or a Change of Control Offer as provided in Section 4.14 hereof. The Notes shall not be redeemable, other than as provided in Article III hereof.
Additional Notes ranking pari passu with the Initial Notes may be created and issued from time to time by the Issuer without notice to or consent of the Holders and shall be consolidated with and form a single class with the Initial Notes and shall have the same terms as to status, redemption or otherwise as the Initial Notes; provided that the Issuer’s ability to issue Additional Notes shall be subject to the Issuer’s compliance with Section 4.09 and 4.12 hereof. Any Additional Notes shall be issued with the benefit of an indenture supplemental to this Indenture.
(e)     Euroclear and Clearstream Applicable Procedures . The provisions of the “Operating Procedures of the Euroclear System” and “Terms and Conditions Governing Use of Euroclear” and the “General Terms and Conditions of Clearstream Banking” and “Customer Handbook” of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes that are held by Participants through Euroclear or Clearstream and this Indenture shall not govern such transfers.
SECTION 2.02     Execution and Authentication . At least one Officer of the Issuer shall execute the Notes on behalf of the Issuer by manual or facsimile signature.
If an Officer of the Issuer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall nevertheless be valid.
A Note shall not be entitled to any benefit under this Indenture or be valid or obligatory for any purpose until authenticated substantially in the form of Exhibit A attached hereto, by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been duly authenticated and delivered under this Indenture.
On the Issue Date, the Trustee shall, upon receipt of an Issuer’s Order (an “ Authentication Order ”), authenticate and deliver the Initial Notes in the aggregate principal amount or amounts specified in such Authentication Order. In addition, at any time, from time to time, the Trustee shall, upon receipt of an Authentication Order, authenticate and deliver any Additional Notes for an aggregate principal amount specified in such Authentication Order for such Additional Notes issued hereunder. In authenticating such Additional Notes, the Trustee shall receive, and shall be fully protected in relying upon:
(a)
a copy of the resolution or resolutions of the Board of Directors authorizing the issuance of such Additional Notes, certified by the Secretary or an Assistant Secretary of the Company.

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(b)
an executed supplemental indenture, if any:
(c)
an Officer’s Certificate delivered in accordance with Section 14.04: and
(d)
an Opinion of Counsel which shall state that such Additional Notes, when authenticated and delivered by the Trustee and issued by the Issuer will constitute valid and legally valid obligations of the Issuer, enforceable in accordance with their terms, subject to customary limitations and qualifications by counsel.
The Trustee may appoint an authenticating agent acceptable to the Issuer to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Issuer.
SECTION 2.03     Registrar and Paying Agent . The Issuer shall maintain (i) an office or agency where Notes may be presented for registration of transfer or for exchange (“ Registrar ”) and (ii) an office or agency where Notes may be presented for payment (“ Paying Agent ”). The Registrar shall keep a register of the Notes (“ Note Register ”) and of their transfer and exchange. The registered Holder of a Note will be treated as the owner of the Note for all purposes. The Issuer may appoint one or more co-registrars and one or more additional paying agents. The term “Registrar” includes any co-registrar, and the term “Paying Agent” includes any additional paying agents. The Issuer initially appoints the Trustee as Paying Agent. The Issuer may change any Paying Agent or Registrar without prior notice to any Holder. The Issuer shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Issuer fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall, to the extent that it is capable, act as such. The Issuer or any of its domestic Subsidiaries may act as Paying Agent or Registrar.
The Issuer initially appoints The Depository Trust Company (“ DTC ”) to act as Depositary with respect to the Global Notes representing the Notes.
The Issuer initially appoints the Trustee to act as the Registrar for the Notes.
SECTION 2.04     Paying Agent to Hold Money in Trust . The Issuer shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium, if any, or interest on the Notes, and will notify the Trustee of any default by the Issuer in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Issuer at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Issuer or a Subsidiary) shall have no further liability for the money. If the Issuer or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Issuer, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05     Holder Lists . The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with Section 312(a) of the Trust Indenture Act. If the Trustee is not the Registrar, the Issuer shall furnish to the Trustee at least two Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders and the Issuer shall otherwise comply with Section 312(a) of the Trust Indenture Act.
SECTION 2.06      Transfer and Exchange .
(a)      Transfer and Exchange of Global Notes . Except as otherwise set forth in this Section 2.06, a Global Note may be transferred, in whole and not in part, only to another nominee of the Depositary or to a successor thereto or a nominee of such successor thereto. A beneficial interest in a Global Note may not be exchanged for a Definitive Note unless (A) the Depositary (x) notifies the Issuer that it is unwilling or unable to continue as Depositary for such Global Note or (y) has ceased to be a clearing agency registered under the Exchange Act, and, in either case, a successor Depositary is not appointed by the Issuer within 120 days or (B) upon the request of a Holder if there shall have occurred and be continuing an Event of Default with respect to the Notes. Upon the occurrence of any of the events in clauses (A) or (B) above, Definitive Notes delivered in exchange for any Global Note or beneficial interests therein will be registered in the names, and issued in any approved denominations, requested by or on behalf of the Depositary (in accordance with its customary procedures). Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Sections 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note, except for Definitive Notes issued subsequent to any of the events in (A) or (B) above and pursuant to Section 2.06

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(c) hereof. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a); provided , however , beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b) or (c) hereof.
(b)      Transfer and Exchange of Beneficial Interests in the Global Notes . The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:
(i)      Transfer of Beneficial Interests in the Same Global Note . Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Temporary Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person other than pursuant to Rule 144A. Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i).
(ii)      All Other Transfers and Exchanges of Beneficial Interests in Global Notes . In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) hereof, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (A) the expiration of the Restricted Period therefor and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B).

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(iii)      Transfer of Beneficial Interests to Another Restricted Global Note . A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) hereof and the Registrar receives the following:
(A)      if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; or
(B)      if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof.
(iv)      Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note . A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) hereof and if the Registrar receives the following:
(A)      if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such Holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or
(B)      if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case, if the Registrar or the Issuer so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
If any such transfer is effected at a time when an Unrestricted Global Note has not yet been issued, the Issuer shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted

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Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred.
Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note.
(c)      Transfer or Exchange of Beneficial Interests for Definitive Notes .
(i)      Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes . If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon the occurrence of any of the events in clauses (A) or (B) of Section 2.06(a) hereof and receipt by the Registrar of the following documentation:
(A)      if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder substantially in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;
(B)      if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (1) thereof;
(C)      if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (2) thereof;
(D)      if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(a) thereof;
(E)      if such beneficial interest is being transferred to the Issuer or any of its Subsidiaries, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(b) thereof; or
(F)      if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(c) thereof,

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the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(g) hereof, and the Issuer shall execute and the Trustee shall authenticate and mail to the Person designated in the instructions a Definitive Note in the applicable principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall mail such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) (except transfers pursuant to clause (F) above) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.
(ii)      Beneficial Interests in Regulation S Temporary Global Note to Definitive Notes . Notwithstanding Sections  2.06(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (A) the expiration of the Restricted Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B), except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904.
(iii)      Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes . A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only upon the occurrence of any of the events in subsection (A) of Section 2.06(a) hereof and if the Registrar receives the following:
(A)      if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or
(B)      if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder substantially in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case, if the Registrar or the Issuer so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

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(iv)      Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes . If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon the occurrence of any of the events in clauses (A) or (B) of Section 2.06(a) hereof and satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(g) hereof, and the Issuer shall execute and the Trustee shall authenticate and mail to the Person designated in the instructions a Definitive Note in the applicable principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from or through the Depositary and the Participant or Indirect Participant. The Trustee shall mail such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall not bear the Private Placement Legend.
(d)      Transfer and Exchange of Definitive Notes for Beneficial Interests .
(i)      Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes . If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation:
(A)      if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder substantially in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof;
(B)      if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (1) thereof;
(C)      if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (2) thereof;
(D)      if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(a) thereof;

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(E)      if such Restricted Definitive Note is being transferred to the Issuer or any of its Subsidiaries, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(b) thereof; or
(F)      if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate substantially in the form of Exhibit B hereto, including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note and increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the applicable Restricted Global Note, in the case of clause (B) above, the applicable 144A Global Note, and in the case of clause (C) above, the applicable Regulation S Global Note.
(ii)      Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes . A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if the Registrar receives the following:
(A)      if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or
(B)      if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder substantially in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case, if the Registrar or the Issuer so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of this Section 2.06(d)(ii), the Trustee shall cancel the Restricted Definitive Note and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note.
(iii)      Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes . A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such

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an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraph (ii) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Issuer shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred.
(e)      Transfer and Exchange of Definitive Notes for Definitive Notes . Upon request by a Holder of Definitive Notes and such Holder’s compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer or exchange in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e):
(i)      Restricted Definitive Notes to Restricted Definitive Notes . Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following:
(A)      if the transfer will be made to a QIB in accordance with Rule 144A, then the transferor must deliver a certificate substantially in the form of Exhibit B hereto, including the certifications in item (1) thereof;
(B)      if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; or
(C)      if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications required by item (3) thereof, if applicable.
(ii)      Restricted Definitive Notes to Unrestricted Definitive Notes . Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if the Registrar receives the following:
(A)      if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from

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such Holder substantially in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or
(B)      if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder substantially in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case, if the Registrar or the Issuer so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
(iii)      Unrestricted Definitive Notes to Unrestricted Definitive Notes . A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.
(f)      Legends . The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture:
(i)      Private Placement Legend .
(A)      Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:
THIS NOTE AND THE RELATED GUARANTEES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR THE RELATED GUARANTEES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS NOTE AND THE RELATED GUARANTEES BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE WHICH IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE

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LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS NOTE AND THE RELATED GUARANTEES (OR ANY PREDECESSOR OF THIS NOTE AND THE RELATED GUARANTEES) (THE “ RESALE RESTRICTION TERMINATION DATE ”) ONLY (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (B) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“ RULE 144A ”), TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) PURSUANT TO OFFERS AND SALES TO NON U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (C) PRIOR TO THE END OF THE DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR PURSUANT TO CLAUSE (D) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER ONLY AT THE DIRECTION AND IN THE ABSOLUTE DISCRETION OF THE ISSUER AFTER THE DISTRIBUTION COMPLIANCE PERIOD OR RESALE RESTRICTION TERMINATION DATE, AS APPLICABLE.
(B)      Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(iii), (c)(iv), (d)(ii),

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(d)(iii), (e)(ii) or (e)(iii) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend.
(ii)      Global Note Legend . Each Global Note shall bear a legend in substantially the following form (with appropriate changes in the last sentence if DTC is not the Depositary):
“THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06(H) OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(A) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUER. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE 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 OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“ DTC ”) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE 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.”
(iii)      Regulation S Temporary Global Note Legend . The Regulation S Temporary Global Note shall bear a legend in substantially the following form:

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“THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION ORIGINALLY EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), AND MAY NOT BE TRANSFERRED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS. TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT.”
(g)      Cancellation and/or Adjustment of Global Notes . At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or cancelled in whole and not in part, each such Global Note shall be returned to or retained and cancelled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase.
(h)      General Provisions Relating to Transfers and Exchanges .
(i)      To permit registrations of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 hereof or at the Registrar’s request.
(ii)      No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Issuer shall require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.07, 2.10, 3.06, 3.09, 4.10, 4.14 and 9.05 hereof).
(iii)      The Issuer shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of the Notes to be redeemed under Section 3.03 hereof and ending at the close of business on the day of such mailing or (B) to register the transfer of or to exchange a Note between a Record

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Date with respect to such Note and the next succeeding Interest Payment Date with respect to such Note.
(iv)      Neither the Registrar nor the Issuer shall be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.
(v)      All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.
(vi)      Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Issuer may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of (and premium, if any) and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Issuer shall be affected by notice to the contrary.
(vii)      Upon surrender for registration of transfer of any Note at the office or agency of the Issuer designated pursuant to Section 4.02 hereof, the Issuer shall execute, and the Trustee shall authenticate and mail, in the name of the designated transferee or transferees, one or more replacement Notes of any authorized denomination or denominations of a like aggregate principal amount.
(viii)      At the option of the Holder, subject to Section 2.06(a) hereof, Notes may be exchanged for other Notes of any authorized denomination or denominations of a like aggregate principal amount upon surrender of the Notes to be exchanged at such office or agency. Whenever any Global Notes or Definitive Notes are so surrendered for exchange, the Issuer shall execute, and the Trustee shall authenticate and mail, the replacement Global Notes and Definitive Notes to which the Holder making the exchange is entitled in accordance with the provisions of Section 2.02 hereof.
(ix)      All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile.
(x)      The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions or transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depositary participants or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and

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when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.
SECTION 2.07      Replacement Notes . If any mutilated Note is surrendered to the Trustee, the Registrar or the Issuer or the Trustee receives evidence to its satisfaction of the ownership and destruction, loss or theft of any Note, the Issuer shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee’s requirements are met. An indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Issuer to protect the Issuer, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Issuer and the Trustee may charge the Holder for their expenses in replacing a Note.
Every replacement Note is a contractual obligation of the Issuer and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.
SECTION 2.08      Outstanding Notes . The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof and those described in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Issuer or a Guarantor or an Affiliate of the Issuer or a Guarantor holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser (as defined in Section 8-303 of the Uniform Commercial Code).
If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Issuer or a Guarantor or an Affiliate of the Issuer or a Guarantor) holds, on a Redemption Date or maturity date, money sufficient to pay Notes (or portions thereof) payable on that date, then on and after that date such Notes (or portions thereof) shall be deemed to be no longer outstanding and shall cease to accrue interest.
SECTION 2.09      Treasury Notes . In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Issuer or a Guarantor or by any Affiliate of the Issuer or a Guarantor, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Notes so owned which have been pledged in good faith shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right to deliver any such direction, waiver or consent with respect to such pledged Notes and that the pledgee is not the Issuer or a Guarantor or any Affiliate of the Issuer or a Guarantor.

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SECTION 2.10      Temporary Notes . Until certificates representing Notes are ready for delivery, the Issuer may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Issuer considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Issuer shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders and beneficial holders, as the case may be, of temporary Notes shall be entitled to all of the benefits accorded to Holders, or beneficial holders, respectively, of Notes under this Indenture.
SECTION 2.11      Cancellation . The Issuer at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee or, at the direction of the Trustee, the Registrar or the Paying Agent and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of such cancelled Notes in accordance with its customary procedures (subject to the record retention requirement of the Exchange Act). Certification of the cancellation of all surrendered Notes shall be delivered to the Issuer at the Issuer’s written request. The Issuer may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12      Defaulted Interest . If the Issuer defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Issuer may pay the defaulted interest to the Persons who are Holders on a subsequent special record date. The Issuer shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Issuer shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such defaulted interest as provided in this Section 2.12. The Trustee shall fix or cause to be fixed any such special record date and payment date; provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. The Trustee shall promptly notify the Issuer of any such special record date. At least 15 days before any such special record date, the Issuer (or, upon the written request of the Issuer, the Trustee in the name and at the expense of the Issuer) shall mail or cause to be mailed, first-class postage prepaid, to each Holder, with a copy to the Trustee, a notice at his or her address as it appears in the Note Register that states the special record date, the related payment date and the amount of such interest to be paid.
Subject to the foregoing provisions of this Section 2.12 and for greater certainty, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in

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lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note.
SECTION 2.13      CUSIP/ISIN Numbers . The Issuer in issuing the Notes may use CUSIP and ISIN numbers (in each case, if then generally in use) and, if so, the Trustee shall use CUSIP and ISIN numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Issuer will as promptly as practicable notify the Trustee in writing of any change in the CUSIP and ISIN numbers.
SECTION 2.14      Global Securities . Neither the Trustee nor any Agent shall have any responsibility or liability for any actions taken or not taken by the Depositary.
ARTICLE III
    

REDEMPTION
SECTION 3.01      Notices to Trustee .
If the Issuer elects to redeem the Notes pursuant to Section 3.07 hereof, it shall furnish to the Trustee, at least two Business Days before notice of redemption is required to be delivered to Holders pursuant to Section 3.03 hereof, an Officer’s Certificate setting forth (i) the paragraph or subparagraph of such Note and/or Section of this Indenture pursuant to which the redemption shall occur, (ii) the date of redemption (the “ Redemption Date ”), (iii) the principal amount of the Notes to be redeemed and (iv) the redemption price.
SECTION 3.02      Selection of Notes to Be Redeemed . If less than all of the Notes are to be redeemed at any time, the Trustee shall select the Notes to be redeemed (a) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which such Notes are listed or (b) on a pro rata basis to the extent practicable, or, if the pro rata basis is not practicable for any reason, by lot or by such other method, all in accordance with the Applicable Procedures of the Depositary. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the Redemption Date by the Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Issuer 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. No Notes of $2,000 or less can be redeemed in part, except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder shall be redeemed. Except as provided in the preceding sentence, provisions of this

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Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption.
SECTION 3.03      Notice of Redemption . Subject to Section 3.09 hereof, the Issuer shall deliver electronically, mail or cause to be mailed by first-class mail, postage prepaid, notices of redemption at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at such Holder’s registered address or otherwise in accordance with Applicable Procedures, except that redemption notices may be delivered more than 60 days prior to a Redemption Date if the notice is issued in connection with Article VIII or Article XIII hereof. Notice of any redemption may, at the Issuer’s discretion, be subject to one or more conditions precedent.
The notice shall identify the Notes to be redeemed and shall state:
(a)      the Redemption Date;
(b)      the redemption price;
(c)      if any Definitive Note is to be redeemed in part only, the portion of the principal amount of that Note that is to be redeemed and that, after the Redemption Date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion of the original Note representing the same indebtedness to the extent not redeemed will be issued in the name of the Holder upon cancellation of the original Note;
(d)      the name and address of the Paying Agent;
(e)      that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;
(f)      that, unless the Issuer defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date;
(g)      the paragraph or subparagraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed;
(h)      the CUSIP and ISIN number, if any, printed on the Notes being redeemed and that no representation is made as to the correctness or accuracy of any such CUSIP and ISIN number that is listed in such notice or printed on the Notes; and
(i)      any condition to such redemption.
At the Issuer’s request, the Trustee shall give the notice of redemption in the Issuer’s name and at its expense; provided that the Issuer shall have delivered to the Trustee, at least two Business Days before notice of redemption is required to be delivered to Holders pursuant to this Section 3.03 (unless a shorter notice shall be agreed to by the Trustee), an

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Officer’s Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.
If any Notes are listed on an exchange, and the rules of such exchange so require, the Issuer will notify the exchange of any such redemption and, if applicable, of the principal amount of any Notes outstanding following any partial redemption of Notes.
SECTION 3.04      Effect of Notice of Redemption . The notice of redemption, if delivered in a manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to deliver such notice or any defect in the notice to the Holder of any Note designated for redemption in whole or in part shall not affect the validity of the proceedings for the redemption of any other Note. Subject to Section 3.05 hereof, on and after the Redemption Date, interest shall cease to accrue on Notes or portions of Notes called for redemption.
SECTION 3.05      Deposit of Redemption Price .
(a)      Prior to 11:00 a.m. (New York City time) on the Redemption Date, the Issuer shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued and unpaid interest on all Notes to be redeemed on that Redemption Date. The Trustee or the Paying Agent shall promptly return to the Issuer any money deposited with the Trustee or the Paying Agent by the Issuer in excess of the amounts necessary to pay the redemption price of, and accrued and unpaid interest on, all Notes to be redeemed.
(b)      If the Issuer complies with the provisions of the preceding paragraph (a), on and after the Redemption Date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after a Record Date but on or prior to the related Interest Payment Date, then any accrued and unpaid interest to the Redemption Date shall be paid to the Person in whose name such Note was registered at the close of business on such Record Date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Issuer to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the Redemption Date until such principal is paid, and to the extent lawful on any interest accrued to the Redemption Date not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.
SECTION 3.06      Notes Redeemed in Part . Upon surrender of a Definitive Note that is redeemed in part, the Issuer shall issue and the Trustee shall authenticate for the Holder at the expense of the Issuer a new Note equal in principal amount to the unredeemed portion of the Note surrendered representing the same indebtedness to the extent not redeemed; provided that each new Note will be in a principal amount of $2,000 and any integral multiple of $1,000 in excess thereof. It is understood that, notwithstanding anything in this Indenture to the contrary, only an Authentication Order and not an Opinion of Counsel or Officer’s Certificate is required for the Trustee to authenticate such new Note.
SECTION 3.07      Optional Redemption .

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(a)      At any time prior to August 15, 2019, the Issuer may, at its option and on one or more occasions redeem all or a part of the Notes, upon notice as described under Section 3.03 hereof at a redemption price equal to the sum of (i) 100.0% of the principal amount of the Notes redeemed, plus (ii) the Applicable Premium as of the Redemption Date plus (iii) 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.
(b)      At any time prior to August 15, 2019, the Issuer may, at its option and on one or more occasions, redeem up to 35.0% of the aggregate principal amount of Notes and Additional Notes issued under this Indenture at a redemption price equal to 107.875% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the Redemption Date, subject to the right of Holders of Notes of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date, with the net cash proceeds from one or more Equity Offerings; provided that (a) at least 65.0% of the aggregate principal amount of Notes originally issued under this Indenture on the Issue Date and any Additional Notes issued under this Indenture after the Issue Date (excluding notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of each such redemption; and (b) each such redemption occurs within 90 days of the date of closing of each such Equity Offering.
(c)      Except pursuant to clause (a) or (b) of this Section 3.07, the Notes will not be redeemable at the Issuer’s option prior to August 15, 2019.
(d)      On and after August 15, 2019, the Issuer may, at its option and on one or more occasions, redeem the Notes, in whole or in part, upon notice in accordance with Section 3.03 hereof at the redemption prices (expressed as percentages of principal amount of the Notes to be redeemed) set forth below, 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, if redeemed during the twelve-month period beginning on August 15 of each of the years indicated below:
Year
Percentage
2019
103.938
%
2020
101.969
%
2021 and thereafter
100.000
%

(e)      Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.
SECTION 3.08      Mandatory Redemption . The Issuer shall not be required to make any mandatory redemption or sinking fund payments with respect to the Notes. However, under certain circumstances, the Issuer may be required to offer to purchase Notes as described under Sections 4.10 and 4.14 hereof.
SECTION 3.09      Offers to Repurchase by Application of Excess Proceeds .

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(a)      In the event that, pursuant to Section 4.10 hereof, the Issuer shall be required to commence an Asset Sale Offer, it shall follow the procedures specified below.
(b)      The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the “ Offer Period ”). No later than five Business Days after the expiration of the Offer Period (the “ Purchase Date ”), the Issuer shall apply all Excess Proceeds (the “ Offer Amount ”) to the purchase of Notes and, if required, Pari Passu Indebtedness (on a pro rata basis, if applicable), or, if less than the Offer Amount has been tendered, all Notes and Pari Passu Indebtedness tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made.
(c)      If the Purchase Date is on or after a Record Date and on or before the related Interest Payment Date, any accrued and unpaid interest, up to but excluding the Purchase Date, shall be paid to the Person in whose name a Note is registered at the close of business on such Record Date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer (if different than the Holder on such Record Date).
(d)      Upon the commencement of an Asset Sale Offer, the Issuer shall deliver electronically or send, by first-class mail, postage prepaid, a notice to each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders and holders of such Pari Passu Indebtedness. The notice, which shall govern the terms of the Asset Sale Offer, shall state:
(i)      that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open;
(ii)      the Offer Amount, the purchase price and the Purchase Date;
(iii)      that any Note not tendered or accepted for payment shall continue to accrue interest;
(iv)      that, unless the Issuer defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Purchase Date;
(v)      that any Holder electing to have less than all of the aggregate principal amount of its Notes purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in an amount not less than $2,000;
(vi)      that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” attached to the Note completed, or transfer such Note by book-entry transfer, to the Issuer, the Depositary, if appointed by the Issuer, or a Paying

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Agent at the address specified in the notice at least two Business Days before the Purchase Date;
(vii)      that Holders shall be entitled to withdraw their election if the Issuer, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;
(viii)      that, if the aggregate principal amount of Notes and Pari Passu Indebtedness surrendered by the holders thereof exceeds the Offer Amount, the Trustee shall select the Notes and the Issuer shall select such Pari Passu Indebtedness to be purchased on a pro rata basis based on the accreted value or principal amount of the Notes or such Pari Passu Indebtedness tendered (with such adjustments as may be deemed appropriate by the Trustee so that only Notes in an amount not less than $2,000 are purchased); and
(ix)      that Holders whose certificated Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer) representing the same indebtedness to the extent not repurchased.
(e)      On or before the Purchase Date, the Issuer shall, to the extent lawful, (1) accept for payment, on a pro rata basis as described in clause (d)(viii) of this Section 3.09, the Offer Amount of Notes or portions thereof validly tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered and (2) deliver or cause to be delivered to the Trustee the Notes properly accepted, together with an Officer’s Certificate stating the aggregate principal amount of Notes or portions thereof so tendered.
(f)      The Issuer, the Depositary or the Paying Agent, as the case may be, shall promptly mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes properly tendered by such Holder and accepted by the Issuer for purchase, and the Issuer shall promptly issue a new Note, and the Trustee, upon receipt of an Authentication Order, shall authenticate and mail or deliver (or cause to be transferred by book-entry) such new Note to such Holder (it being understood that, notwithstanding anything in this Indenture to the contrary, no Opinion of Counsel or Officer’s Certificate is required for the Trustee to authenticate and deliver such new Note) in a principal amount equal to any unpurchased portion of the Note surrendered representing the same indebtedness to the extent not repurchased. Any Note not so accepted shall be promptly delivered by the Issuer to the Holder thereof. The Issuer shall publicly announce the results of the Asset Sale Offer promptly after the Purchase Date.
(g)      Prior to 11:00 a.m. (New York City time) on the Purchase Date, the Issuer shall deposit with the Trustee or with the Paying Agent money sufficient to pay the purchase price of and accrued and unpaid interest on all Notes to be purchased on that purchase date. The Trustee or the Paying Agent shall promptly return to the Issuer any money deposited with

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the Trustee or the Paying Agent by the Issuer in excess of the amounts necessary to pay the purchase price of, and accrued and unpaid interest on, all Notes to be redeemed.
Other than as specifically provided in this Section 3.09 or Section 4.10 hereof, any purchase pursuant to this Section 3.09 shall be made pursuant to the applicable provisions of Sections 3.01 through 3.06 hereof, and references therein to “redeem,” “redemption,” “Redemption Date” and similar words shall be deemed to refer to “purchase,” “repurchase,” “Purchase Date” and similar words, as applicable.
ARTICLE IV
    

COVENANTS
SECTION 4.01      Payment of Notes . The Issuer shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Issuer or a Guarantor or an Affiliate of the Issuer or a Guarantor, holds as of 11:00 a.m. New York City time on the due date money deposited by the Issuer in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due.
The Issuer shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to the then applicable interest rate on the Notes to the extent lawful; the Issuer shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful.
SECTION 4.02      Maintenance of Office or Agency . The Issuer shall maintain the offices or agencies (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) required under Section 2.03 hereof where Notes may be surrendered for registration of transfer or for exchange or presented for payment and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuer shall fail to maintain any such required 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.
The Issuer 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 such purposes and may from time to time rescind such designations; provided that no such designation or rescission shall in any manner relieve the Issuer of its obligation to maintain such offices or agencies as required by Section 2.03 hereof for such purposes. The Issuer shall give prompt written notice

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to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.
The Issuer hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Issuer in accordance with Section 2.03 hereof.
SECTION 4.03      Reports and Other Information .
(a)      Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall furnish to the Holders of the Notes (i) all quarterly and annual financial information that is substantially equivalent to that which would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such Forms, including a “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and, with respect to the annual information only, a report thereon by the Company’s certified independent accountants and (ii) all reports that are substantially equivalent to that which would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports, in each case within the timeframes required for non-accelerated filers.
(b)      In addition, whether or not required by the rules and regulations of the SEC, the Company shall file a copy of all such information with the SEC for public availability (unless the SEC will not accept such a filing) and make such information available to investors, potential investors and securities analysts by posting such information on its website, on Intralinks or any comparable password-protected online data system which will require a confidentiality acknowledgment. Delivery of the reports, information and documents in this Section is for informational purposes only and shall not constitute constructive notice to the Trustee 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 Officers’ Certificates).
(c)      Any such annual financial information required to be delivered pursuant to Section 4.03(a) hereof shall include (i) disclosure with respect to the total indebtedness incurred by the Issuer as of the end of such period and (ii) related consolidating financial statements reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) from the Company’s consolidated financial statements if the Unrestricted Subsidiaries accounted for at least 10% of API’s Total Assets at the end of such fiscal year.
(d)      In addition, to the extent not satisfied by Sections 4.03(a) to 4.03(c) hereof, API has agreed that, for so long as any Notes are outstanding, it will furnish to Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(e)      API’s reporting obligations with respect to the requirements set forth in Sections 4.03(a) to 4.03(c) hereof will be satisfied in the event it timely files such reports with the SEC on EDGAR or otherwise makes such reports publically available on its website.

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SECTION 4.04      Compliance Certificate .
(a)      The Issuer shall deliver to the Trustee, within 90 days after the end of each fiscal year ending after the Issue Date, a certificate from the principal executive officer, principal financial officer, principal accounting officer, president, any vice president, treasurer or assistant treasurer stating that a review of the activities of the Issuer and its Restricted Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officer with a view to determining whether the Issuer has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to such Officer signing such certificate, that to the best of his or her knowledge the Issuer has kept, observed, performed and fulfilled each and every condition and covenant contained in this Indenture during such fiscal year and is not in Default in the performance or observance of any of the terms, provisions, covenants and conditions of this Indenture (or, if a Default shall have occurred, describing all such Defaults of which he or she may have knowledge and what action the Issuer is taking or proposes to take with respect thereto).
(b)      When any Default has occurred and is continuing under this Indenture, or if the Trustee or the holder of any other evidence of Indebtedness of the Issuer or any Subsidiary gives any notice or takes any other action with respect to a claimed Default, the Issuer shall promptly (which shall be no more than five Business Days after becoming aware of such Default) deliver to the Trustee by registered or certified mail or by facsimile transmission an Officer’s Certificate specifying such event and what action the Issuer proposes to take with respect thereto.
SECTION 4.05      Taxes .
The Issuer shall pay or discharge, and shall cause each of its Restricted Subsidiaries to pay or discharge, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate actions or where the failure to effect such payment or discharge is not adverse in any material respect to the Holders.
SECTION 4.06      Stay, Extension and Usury Laws . The Issuer and each of the Guarantors covenant (to the extent that they may lawfully do so) that they shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer and each of the Guarantors (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and covenant (to the extent that they may lawfully do so) that they shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted.
SECTION 4.07      Limitation on Restricted Payments .

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(a)      The Company will not, and will not permit any Restricted Subsidiaries to, directly or indirectly:
(i)      declare or pay any dividend or make any payment or distribution on account of the Company’s or any of the Restricted Subsidiaries’ Equity Interests (in each case, solely in such Person’s capacity as holder of such Equity Interests), including any dividend or distribution payable in connection with any merger or consolidation other than:
(A)      dividends or distributions by the Company payable solely in Equity Interests (other than Disqualified Stock) of the Company; or
(B)      dividends or distributions by a Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary other than a Wholly-Owned Subsidiary, the Company or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities;
(ii)      purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests of the Company, including in connection with any merger or consolidation;
(iii)      make any principal payment on, or redeem, repurchase, defease or otherwise satisfy, acquire or retire for value, in each case, prior to any scheduled repayment, sinking fund payment or maturity, any
(x)    Subordinated Indebtedness, other than:
(A)      Indebtedness permitted under Section 4.09(b)(vii) hereof; or
(B)      the purchase, repurchase or other acquisition of Subordinated Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase or acquisition; or
(y)    Existing API Notes, other than:
(A)    in exchange for Equity Interests (other than Disqualified Stock) of the Company; or
(B)    the purchase, repurchase or other acquisition of Existing API Notes purchased in anticipation of satisfying a sinking fund

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obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase or acquisition; or
(iv)      make any Restricted Investment,
(all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as “ Restricted Payments ”), unless, at the time of and immediately after giving effect to such Restricted Payment:
(A)      no Default shall have occurred and be continuing or would occur as a consequence thereof;
(B)      immediately after giving effect to such transaction on a pro forma basis, the Company could incur $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a) hereof (the “ Fixed Charge Coverage Test ”); and
(C)      such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by API and its Restricted Subsidiaries after the Issue Date (including Restricted Payments permitted by Section 4.07(b)(i) hereof), but excluding all other Restricted Payments permitted by Section 4.07(b) hereof, is less than the sum of (without duplication):
(1)      50.0% of the Consolidated Net Income of API for the period (taken as one accounting period) beginning the first day of the fiscal quarter containing the Issue Date to the end of API’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment, or, in the case such Consolidated Net Income for such period is a deficit, minus 100.0% of such deficit; plus
(2)      100.0% of the aggregate net cash proceeds and the Fair Market Value of marketable securities or other property received by API after the Issue Date from the issue or sale of:
(I)      (a)    Equity Interests of API, including Treasury Capital Stock, but excluding cash proceeds and the Fair Market Value of marketable securities or other property received from the sale of Equity Interests to any future, present or former employees, directors, officers, managers or consultants (or their respective Immediate Family Members) of API or any of its Subsidiaries after the Issue Date to the extent such amounts have been applied to Restricted Payments made in accordance with Section 4.07(b)(iii) hereof; and

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(II)      debt of the Issuer, in each case, that have been converted into or exchanged for such Equity Interests of the Company;
provided that this clause (a) shall not include the proceeds from (W) Refunding Capital Stock applied in accordance with Section 4.07(b)(iii) hereof, (X) Equity Interests or convertible debt securities of API sold to a Restricted Subsidiary, or (Y) Disqualified Stock or debt securities that have been converted into Disqualified Stock; plus
(3)      100.0% of the aggregate amount of cash and the Fair Market Value of marketable securities or other property contributed to the common equity capital of API following the Issue Date (other than by a Restricted Subsidiary); plus
(4)      100.0% of the aggregate amount received in cash and the Fair Market Value of marketable securities or other property received by means of:
(I)      the sale or other disposition (other than to API or a Restricted Subsidiary) of Restricted Investments made by API or its Restricted Subsidiaries and repurchases and redemptions of such Restricted Investments from API or its Restricted Subsidiaries (other than by API or a Restricted Subsidiary) and repayments of loans or advances, and releases of guarantees, which constitute Restricted Investments made by API or its Restricted Subsidiaries, in each case after the Issue Date; or
(II)      the sale (other than to API or a Restricted Subsidiary) of the stock of an Unrestricted Subsidiary or a distribution from an Unrestricted Subsidiary (other than in each case to the extent the Investment in such Unrestricted Subsidiary constituted a Permitted Investment) or a dividend from an Unrestricted Subsidiary after the Issue Date; plus
(5)      in the case of the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary or the merger, amalgamation or consolidation of an Unrestricted Subsidiary into the Company or a Restricted Subsidiary or the transfer of all or substantially all of the assets of an Unrestricted Subsidiary to the Company or a Restricted Subsidiary after the Issue Date, the Fair Market Value of the Investment in such Unrestricted Subsidiary (or the assets transferred) at the time of the redesignation of such Unrestricted Subsidiary as a Restricted Subsidiary or at the time of such merger, amalgamation, consolidation or transfer of assets, other than to the extent the Investment in such Unrestricted Subsidiary constituted a Permitted Investment.

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(b)      The foregoing provisions of Section 4.07(a) hereof will not prohibit:
(i)      the payment of any dividend or other distribution or the consummation of any irrevocable redemption within 60 days after the date of declaration of the dividend or other distribution or giving of the redemption notice, as the case may be, if at the date of declaration or notice, the dividend or other distribution or redemption payment would have complied with the provisions of this Indenture;
(ii)      the repurchase, redemption or other acquisition or retirement for value of any Subordinated Indebtedness or Existing API Notes pursuant to provisions similar to Sections 4.10 and 4.14 hereof; provided that the Issuer shall have made a Change of Control Offer or Asset Sale Offer, as applicable, to purchase the Notes on the applicable terms provided in this Indenture, and all Notes validly tendered by Holders in such Change of Control Offer or Asset Sale Offer, as applicable, have been repurchased, redeemed, acquired or retired for value;
(iii)      (a) the redemption, repurchase, retirement or other acquisition of any Equity Interests (“ Treasury Capital Stock ”) or Indebtedness of API or any Restricted Subsidiary or any Equity Interests of API, in exchange for, or out of the proceeds of the substantially concurrent sale or issuance (other than to a Restricted Subsidiary) of, Equity Interests of API, in each case, other than any Disqualified Stock (“ Refunding Capital Stock ”), (b) the declaration and payment of dividends on Treasury Capital Stock out of the proceeds of the substantially concurrent sale or issuance (other than to a Restricted Subsidiary of API or to an employee stock ownership plan or any trust established by API or any of its Restricted Subsidiaries) of Refunding Capital Stock, and (c) if the declaration and payment of dividends on the Refunding Capital Stock (other than Refunding Capital Stock the proceeds of which were used to redeem, repurchase, retire or otherwise acquire any Equity Interests of API) in an aggregate amount per year no greater than the aggregate amount of dividends per annum that were declarable and payable on such Treasury Capital Stock immediately prior to such retirement;
(iv)      [reserved];
(v)      the defeasance, redemption, repurchase, exchange or other acquisition or retirement of (x) Subordinated Indebtedness made by exchange for, or out of the proceeds of the substantially concurrent sale of, new Subordinated Indebtedness or Disqualified Stock that is Refinancing Indebtedness incurred or issued, as applicable, in compliance with Section 4.09 hereof; or (y) Existing API Notes made by exchange for, or out of the proceeds of the substantially concurrent sale of, new Indebtedness of the Company or Disqualified Stock of the Company that is Refinancing Indebtedness incurred or issued, as applicable, in compliance with Section 4.09 hereof;
(vi)      a Restricted Payment to pay for the repurchase, retirement or other acquisition or retirement for value of Equity Interests (other than Disqualified Stock) of API held by any future, present or former employee, director, officer, manager or consultant (or their respective Immediate Family Members or administrators, heirs,

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legatees or distributees of an Immediate Family Member), any of API’s Subsidiaries or any of its direct or indirect parent companies upon the death, disability, retirement or termination of employment of any such Person or otherwise pursuant to any management equity plan or stock option plan or any other management or employee or director benefit plan or agreement (including, for the avoidance of doubt, any principal and interest payable on any notes issued by API in connection with any such repurchase, retirement or other acquisition), or any stock subscription or shareholder agreement with any employee, director, officer, manager or consultant of API or any of its Subsidiaries; provided that the aggregate amount of Restricted Payments made under this clause (vi) does not exceed $20.0 million in any calendar year following the Issue Date (with unused amounts in any calendar year being carried over to succeeding calendar years); provided , further , that each of the amounts in any calendar year under this clause (vi) may be increased by an amount not to exceed:
(A)      the cash proceeds from the sale of Equity Interests (other than Disqualified Stock) of API to any future, present or former employees, directors, officers, managers or consultants (or their respective Immediate Family Members) of API or any of API’s Subsidiaries that occurs after the Issue Date, to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of clause (v) above; plus
(B)      the cash proceeds of key man life insurance policies received by API or any Restricted Subsidiaries after the Issue Date;
and provided , further , that cancellation of Indebtedness owing to API from any future, present or former employees, directors, officers, managers or consultants (or their respective Immediate Family Members) or any Restricted Subsidiaries in connection with a repurchase of Equity Interests of API will not be deemed to constitute a Restricted Payment for purposes of this covenant or any other provision of this Indenture;
(vii)      other Restricted Payments; provided that, as of the time of such Restricted Payment, the API Leverage Ratio (determined on a pro forma basis) is less than or equal to 2.75 to 1.00;
(viii)      payment of cash in lieu of the issuance of fractional Equity Interests in connection with any dividend, split or combination thereof;
(ix)      the declaration and payment of dividends to holders of any class or series of Disqualified Stock of API or any Restricted Subsidiaries or any class or series of Preferred Stock of any Restricted Subsidiary issued in accordance with Section 4.09 hereof to the extent such dividends are included in the definition of “Fixed Charges”;
(x)      (a) payments or repurchases of Equity Interests made or expected to be made by API or any Restricted Subsidiary in respect of withholding or similar

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taxes payable by any future, present or former employee, director, officer, manager or consultant (or their respective Immediate Family Members or administrators, heirs, legatees or distributees of an Immediate Family Member), (b) any repurchases of Equity Interests deemed to occur upon exercise of stock options or warrants or similar rights if such Equity Interests represent a portion of the exercise price of such options or warrants or similar rights and (c) any repurchase of Equity Interests deemed to occur on the exercise of options by the delivery of Equity Interests in satisfaction of the exercise price of such option;
(xi)      other Restricted Payments in an aggregate amount taken together with all other Restricted Payments made pursuant to this clause (xi) at any one time outstanding not to exceed the greater of (a) $100.0 million and (b) 3.0% of Total Assets;
(xii)      the declaration and payment of dividends to holders of any class or series of Preferred Stock (other than Disqualified Stock) of the Company or any of its Restricted Subsidiaries in existence on the Issue Date at the rate and at the time provided for in the certificate of designation in existence on the Issue Date; provided that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the declaration of such dividends, after giving effect to such issuance or declaration on a pro forma basis, the Company would have had a Fixed Charge Coverage Ratio of at least 2.00 to 1.00;
(xiii)      Restricted Payments to pay for prepayments, redemptions, purchases, defeasances and other payments in respect of the Existing API Notes prior to their scheduled maturity; provided that, at the time of such prepayment, redemption, purchase, defeasance or other payment, the API Leverage Ratio (determined on a pro forma basis) is less than or equal to 3.50 to 1.00;
(xiv)      the refinancing of the Existing API Notes with the proceeds of, or in exchange for, any Permitted Pari Passu Secured Refinancing Debt or any Permitted Junior Secured Refinancing Debt or any other Indebtedness otherwise permitted under Section 4.09 hereof;
(xv)      the distribution, by dividend or otherwise, of shares of Capital Stock of, or Indebtedness owed to the Issuer or a Restricted Subsidiary by, Unrestricted Subsidiaries (other than Unrestricted Subsidiaries, the primary assets of which are Cash Equivalents); and
(xvi)      Restricted Payments to pay for prepayments, redemptions, purchases, defeasances and other payments in respect of the Existing API Notes in an aggregate principal amount equal to the sum of the aggregate principal amount of the Notes issued on the Issue Date plus $250.0 million;
provided that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (vii), (xi), (xii), (xiii) and (xiv) of this Section 4.07(b), no Default shall have occurred and be continuing or would occur as a consequence thereof.

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(c)      As of the Issue Date, all of API’s Subsidiaries are Restricted Subsidiaries, except Avon NA Holdings LLC and Avon NA IP LLC. API and the Issuer will not permit any Unrestricted Subsidiary to become a Restricted Subsidiary except pursuant to the next to the last sentence of the definition of “Unrestricted Subsidiary.” For purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by API, the Issuer and their Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so designated will be deemed to be Restricted Payments in an amount determined as set forth in the definition of “Investments.” Such designation will be permitted only if a Restricted Payment in such amount would be permitted at such time, whether pursuant to Section 4.07(a) hereof or pursuant to the definition of “Permitted Investments,” and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
SECTION 4.08      Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries .
(a)      The Company and the Issuer will not, and will not permit any Restricted Subsidiaries that is not a Guarantor to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any such Restricted Subsidiary to:
(i)      (A)     pay dividends or make any other distributions to API or any Restricted Subsidiary that is a Guarantor on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, or
(B)      pay any Indebtedness owed to API or any Restricted Subsidiary that is a Guarantor;
(ii)      make loans or advances to API or any Restricted Subsidiary that is a Guarantor; or
(iii)      sell, lease or transfer any of its properties or assets to API or any Restricted Subsidiary that is a Guarantor.
(b)      The restrictions in Section 4.08(a) hereof will not apply to encumbrances or restrictions existing under or by reason of:
(i)      contractual encumbrances or restrictions in effect on the Issue Date, including pursuant to the AIO Credit Agreement and the related documentation and Hedging Obligations and the related documentation;
(ii)      this Indenture, the Collateral Documents, the Notes and the Guarantees thereof;
(iii)      purchase money obligations for property acquired in the ordinary course of business and Capitalized Lease Obligations that impose restrictions of the nature discussed in clause (iii) of Section 4.08(a) hereof on the property so acquired;

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(iv)      contractual encumbrances or restrictions binding on a Restricted Subsidiary at the time such Restricted Subsidiary first becomes a Restricted Subsidiary, so long as such contractual encumbrances or restriction were not entered into in contemplation of such Person becoming a Restricted Subsidiary;
(v)      applicable law or any applicable rule, regulation or order;
(vi)      any agreement or other instrument of a Person acquired by API or any Restricted Subsidiaries in existence at the time of such acquisition or at the time it merges with or into API or any Restricted Subsidiaries or assumed in connection with the acquisition of assets from such Person (but, in any such case, not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person so acquired and its Subsidiaries, or the property or assets of the Person so acquired and its Subsidiaries;
(vii)      contracts for the sale of assets, including customary restrictions with respect to a Subsidiary of API pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary;
(viii)      Indebtedness, Disqualified Stock or Preferred Stock of any Restricted Subsidiary that is permitted under Section 4.09 hereof; provided that, in the good faith judgment of the Company, such incurrence will not materially impair the Issuer’s ability to make payments under the Notes when due;
(ix)      Liens permitted under Section 4.12 hereof;
(x)      restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;
(xi)      customary restrictions that arise in connection with any disposition permitted under Section 4.10 hereof and relate solely to the assets or Person subject to such disposition;
(xii)      customary provisions in joint venture agreements and other similar agreements relating solely to such joint venture;
(xiii)      customary provisions contained in leases, licenses or similar agreements, including with respect to intellectual property and other agreements, in each case, entered into in the ordinary course of business;
(xiv)      restrictions or conditions contained in any trading, netting, operating, construction, service, supply, purchase, sale or other agreement to which API or any Restricted Subsidiaries is a party entered into in the ordinary course of business; provided that such agreement prohibits the encumbrance of solely the property or assets of API or such Restricted Subsidiary that are the subject to such agreement, the payment

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rights arising thereunder or the proceeds thereof and does not extend to any other asset or property of API or such Restricted Subsidiary or the assets or property of another Restricted Subsidiary;
(xv)      customary provisions restricting subletting or assignment of any lease governing a leasehold interest of any Restricted Subsidiary;
(xvi)      customary provisions restricting assignment of any agreement entered into in the ordinary course of business;
(xvii)      restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business; and
(xviii)
     any encumbrances or restrictions of the type referred to in clauses (i), (ii) and (iii) of this Section 4.08(b) imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (i) through (xvii) of this Section 4.08(b); provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Company, no more restrictive in any material respect with respect to such encumbrance and other restrictions taken as a whole than those prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.
SECTION 4.09      Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock .
(a)      The Company will not, and will not permit any Restricted Subsidiary to, create, incur, issue, assume, guarantee or otherwise become liable (collectively, “ incur ” and collectively, an “ incurrence ”) with respect to any Indebtedness (including Acquired Indebtedness) and the Company will not issue any shares of Disqualified Stock and will not permit any Restricted Subsidiary to issue any shares of Disqualified Stock or Preferred Stock; provided that the Issuer and any Subsidiary Guarantor may incur Subordinated Indebtedness and API and the Restricted Subsidiaries (other than the Issuer and its Subsidiaries) may incur Indebtedness (including Acquired Indebtedness) and issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for API’s most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or Preferred Stock is issued would have been at least 2.00 to 1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be, and the application of proceeds therefrom had occurred at the beginning of such four-quarter period.
(b)      The provisions of Section 4.09(a) hereof shall not apply to:

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(i)      the incurrence of Indebtedness under the Credit Facilities and the issuance and creation of letters of credit and bankers’ acceptances thereunder (with letters of credit and bankers’ acceptances being deemed to have a principal amount equal to the face amount thereof) in aggregate principal amount not to exceed $500.0 million;
(ii)      the incurrence by the Issuer, and guarantees by any Guarantor, of Indebtedness represented by the Notes (excluding any Additional Notes);
(iii)      Indebtedness of API and the Restricted Subsidiaries in existence on the Issue Date (other than Indebtedness described in clauses (i) and (ii) above);
(iv)      (a) Indebtedness (including Capitalized Lease Obligations) and Disqualified Stock incurred or issued by API or any Restricted Subsidiary and Preferred Stock issued by any Restricted Subsidiary to finance the acquisition, construction, repair, replacement, lease or improvement of property (real or personal) or equipment, whether through the direct purchase of assets or the Capital Stock of any Person owning such assets in an aggregate principal amount and (b) Indebtedness arising out of sale and leaseback transactions, in each case, together with any Refinancing Indebtedness in respect thereof and all other Indebtedness, Disqualified Stock and/or Preferred Stock incurred or issued and outstanding under this clause (iv), not to exceed the greater of (x) $100.0 million and (y) 3.0% of Total Assets (in each case, determined at the date of incurrence) at any time outstanding, so long as such Indebtedness, Disqualified Stock or Preferred Stock is incurred or issued at the date of such acquisition, construction, repair, replacement, lease or improvement or within 360 days thereafter;
(v)      Indebtedness incurred by API or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including letters of credit in respect of workers’ compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to reimbursement type obligations regarding workers’ compensation claims;
(vi)      Indebtedness arising from agreements of API or any Restricted Subsidiary providing for indemnification, adjustment of purchase price, earnouts or similar obligations, in each case, incurred or assumed in connection with the acquisition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition;
(vii)      (a) Indebtedness of the Company to a Restricted Subsidiary; provided that any such Indebtedness owing to a Restricted Subsidiary that is not the Issuer or a Subsidiary Guarantor is expressly subordinated in right of payment to the Notes; provided , further , that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Company or another Restricted Subsidiary or any pledge of such Indebtedness

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constituting a Permitted Lien) shall be deemed, in each case, to be an incurrence of such Indebtedness not permitted by this clause (vii)(a); or (b) Indebtedness of a Restricted Subsidiary to the Company or another Restricted Subsidiary; provided that if a Subsidiary Guarantor incurs such Indebtedness from a Restricted Subsidiary that is not a Subsidiary Guarantor, such Indebtedness is expressly subordinated in right of payment to the Guarantee of the Notes of such Subsidiary Guarantor; provided , further , that any subsequent transfer of any such Indebtedness (except to the Company or another Restricted Subsidiary or any pledge of such Indebtedness constituting a Permitted Lien) shall be deemed, in each case, to be an incurrence of such Indebtedness not permitted by this clause (vii)(b);
(viii)      shares of Preferred Stock of a Restricted Subsidiary issued to API, the Issuer or another Restricted Subsidiary; provided that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such shares of Preferred Stock (except to API, the Issuer or any Restricted Subsidiaries or any pledge of such Capital Stock constituting a Permitted Lien) shall be deemed, in each case, to be an issuance of such shares of Preferred Stock not permitted by this clause (viii);
(ix)      Hedging Obligations (excluding Hedging Obligations entered into for speculative purposes) for the purpose of limiting interest rate risk with respect to any Indebtedness permitted to be incurred under this Indenture, exchange rate risk or commodity pricing risk;
(x)      obligations provided by API, the Issuer or any of Restricted Subsidiaries in respect of self-insurance and obligations in respect of performance, bid, appeal, customs and surety bonds and performance and completion guarantees and similar obligations or in connection with judgments that do not result in an Event of Default, in each case, in the ordinary course of business;
(xi)      Indebtedness or Disqualified Stock not otherwise permitted hereunder in an aggregate principal amount or liquidation preference which, when aggregated with the principal amount and liquidation preference of all other Indebtedness, Disqualified Stock and Preferred Stock then outstanding and incurred pursuant to this clause (xi), does not at any one time outstanding exceed the greater of (x) $200.0 million and (y) 4.5% of Total Assets;
(xii)      the incurrence by API or any Restricted Subsidiary of Refinancing Indebtedness of Indebtedness incurred under Section 4.09(a) and Sections 4.09(b)(ii), 4.09(b)(iii), 4.09(b)(iv), 4.09(b)(xiv), 4.09(b)(xvii) and 4.09(b)(xviii) hereof;
(xiii)      Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient

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funds in the ordinary course of business, provided that such Indebtedness is extinguished within 10 Business Days of its incurrence;
(xiv)      the incurrence of Indebtedness by the Issuer so long as (i) the AIO Leverage Ratio (determined on a pro forma basis) does not exceed 3:00 to 1:00 and (ii) such Indebtedness is not guaranteed by any Subsidiaries of API that are not Subsidiary Guarantors;
(xv)      Indebtedness representing deferred compensation or similar obligations to employees of the Company or any of its Restricted Subsidiaries incurred in the ordinary course of business;
(xvi)      any guarantee by the Company or a Restricted Subsidiary of Indebtedness or other obligations so long as the incurrence of such Indebtedness incurred by the Company or such Restricted Subsidiary is permitted under the terms of this Indenture; provided , however, that if the Indebtedness being guaranteed is contractually subordinated to or pari passu with the Notes or a Guarantee, then the guarantee incurred pursuant to this clause (xvi) shall be contractually subordinated or pari passu , as applicable, to the same extent as the Indebtedness being guaranteed;
(xvii)      (a) Subordinated Indebtedness of the Issuer and Indebtedness and Disqualified Stock of API and the Restricted Subsidiaries (other than the Issuer and its Restricted Subsidiaries) incurred or issued to finance an acquisition or (b) Indebtedness, Disqualified Stock or Preferred Stock of Persons that are acquired by API, the Issuer or any Restricted Subsidiary or merged into API, the Issuer or a Restricted Subsidiary in accordance with the terms of this Indenture; provided that after giving effect to such acquisition or merger, either (i) API would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Test, or (ii) the Fixed Charge Coverage Ratio for API is equal to or greater than immediately prior to such acquisition or merger;
(xviii)      Indebtedness of any Person outstanding on the date on which such Person becomes a Restricted Subsidiary, other than Indebtedness incurred in contemplation of such Person becoming a Restricted Subsidiary and is non-recourse to API, the Issuer or any other Restricted Subsidiary (other than any Subsidiary of such Person that is a Subsidiary on the date such Person becomes a Restricted Subsidiary) and is either (a) unsecured or (b) secured only by the assets of such Restricted Subsidiary by Liens permitted under Section 4.12 hereof, and in each case permitted refinancing thereof;
(xix)      Indebtedness consisting of obligations of API, the Issuer or any Restricted Subsidiary under deferred compensation or other similar arrangements incurred by such Person in connection with a Permitted Investment;

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(xx)      customer deposits and advance payments received in the ordinary course of business from customers for goods purchased in the ordinary course of business;
(xxi)      the incurrence of Indebtedness of a Foreign Subsidiary of API that is a Restricted Subsidiary in connection with a Permitted Intercompany Factoring Arrangement;
(xxii)      cash management Obligations and Indebtedness in respect cash pooling arrangements, netting services, automatic clearinghouse arrangements, overdraft protections, employee credit card programs and other cash management and similar arrangements in the ordinary course of business (and any guarantees thereof);
(xxiii)      Indebtedness evidenced by the IP Intercompany Note;
(xxiv)      Indebtedness consisting of promissory notes issued by Company or any of its Restricted Subsidiaries to current or former officers, managers, consultants, directors and employees, their respective estates, spouses or former spouses to finance the purchase or redemption of Equity Interests of the Company permitted by Section 4.07 hereof; provided that such Indebtedness shall be subordinated in right of payment to the Notes Obligations;
(xxv)      (i) Permitted Pari Passu Secured Refinancing Debt; provided, that the AIO First Lien Leverage Ratio (determined on a pro forma basis) as of the last day of the most recently ended Test Period is less than or equal to 2.00 to 1.00 and (ii) Permitted Junior Secured Refinancing Debt in an aggregate principal amount not to exceed $700 million; and
(xxvi)      all premiums (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (i) through (xxv) above.
(c)      For purposes of determining compliance with this Section 4.09:
(i)      in the event that an item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) meets the criteria of more than one of the categories of permitted Indebtedness, Disqualified Stock or Preferred Stock described in clauses (i) through (xxvi) above or is entitled to be incurred pursuant to Section 4.09(a) hereof, the Issuer, in its sole discretion, will classify or reclassify, at any time, such item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) and will only be required to include the amount and type of such Indebtedness, Disqualified Stock or Preferred Stock in one of the above clauses in Section 4.09(b) hereof or under Section 4.09(a) hereof; provided that all Indebtedness outstanding under the AIO Credit Agreement on the Issue Date or any refinancing thereof that is secured by a Lien will, at all times, be treated as incurred on the Issue Date under Section 4.09(b)(i) hereof; and

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(ii)      the Issuer will be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described in Section 4.09(a) and Section 4.09(b) hereof.
Accrual of interest or dividends, the accretion of accreted value, the accretion or amortization of original issue discount and the payment of interest or dividends in the form of additional Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, of the same class will not be deemed to be an incurrence of Indebtedness, Disqualified Stock or Preferred Stock for purposes of this Section 4.09.
For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed, in the case of revolving credit debt; provided that if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. 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 principal amount 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.
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. The principal amount of any non-interest bearing Indebtedness or other discount security constituting Indebtedness at any date shall be the principal amount thereof that would be shown on a balance sheet of the Issuer dated such date prepared in accordance with GAAP.
API and the Issuer will not, and will not permit any Guarantor to incur any Indebtedness (including Acquired Indebtedness) that is contractually subordinated or junior in right of payment to any Indebtedness of API, the Issuer or such Guarantor, as the case may be, unless such Indebtedness is expressly subordinated in right of payment to the Notes or such Guarantor’s Guarantee to the extent and in the same manner as such Indebtedness is subordinated to other Indebtedness of API, the Issuer or such Guarantor, as the case may be.
For purposes of this Indenture, (1) unsecured Indebtedness is not deemed to be subordinated or junior to Secured Indebtedness merely because it is unsecured or (2) secured Senior Indebtedness is not deemed to be subordinated or junior to any other secured Senior Indebtedness merely because it has a junior priority lien with respect to the same collateral.
SECTION 4.10      Asset Sales .

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(a)      The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale, unless:
(i)      the Company or such Restricted Subsidiary receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets sold or otherwise disposed of; and
(ii)      at least 75.0% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash and Cash Equivalents; provided that the amount of:
(A)      any liabilities (as shown on the Company’s or such Restricted Subsidiary’s most recent balance sheet or in the footnotes thereto) of the Company or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the Notes or any Guarantor’s Guarantee of the Notes, that are assumed by the transferee of any such assets and for which the Company and all Restricted Subsidiaries have been validly released by all creditors in writing;
(B)      any securities, notes or other obligations or assets received by the Company or such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents received) within 180 days following the closing of such Asset Sale;
(C)      any cash or Cash Equivalents to be received in the future by the Company or such Restricted Subsidiary from such transferee from a contingent portion of the purchase price pursuant to the terms of the agreement governing such Asset Sale; and
(D)      any Designated Non-cash Consideration received by the Company or such Restricted Subsidiary in such Asset Sale having an aggregate Fair Market Value, taken together with all other Designated Non-cash Consideration received pursuant to this clause (D) that is at that time outstanding, not to exceed the greater of (x) $75.0 million and (y) 2.5% of Total Assets at the time of the receipt of such Designated Non-cash Consideration, with the Fair Market Value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value,
shall be deemed to be Cash Equivalents for purposes of this provision and for no other purpose.
(b)      Within 365 days after the receipt of any Net Proceeds of any Asset Sale, the Company or such Restricted Subsidiary, at its option, may apply the Net Proceeds from such Asset Sale:
(i)      if the subject assets constitute Collateral:

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(1)      to repay Indebtedness constituting First Lien Obligations (and, if the Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto) provided that (x) to the extent that the terms of any First Lien Obligations other than Notes Obligations (as such agreements are in existence on the Issue Date or as such agreements are refinanced on similar or no more favorable terms with respect to payments to the lenders or creditors with respect thereto with respect to any Asset Sale), require that such First Lien Obligations are repaid with the Net Proceeds of Asset Sales prior to repayment of other Indebtedness, the Issuer and its Restricted Subsidiaries shall be entitled to repay such other First Lien Obligations prior to repaying the Notes Obligations; and (y) subject to the foregoing clause (x), if the Issuer shall so reduce First Lien Obligations, the Issuer will equally and ratably reduce Notes Obligations in any manner set forth in Section 4.10(b)(ii)(1)(iii) hereof to all holders to purchase at a purchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any; or
(2)      to make an Investment in any one or more businesses, assets, or property or capital expenditures, in each case (i) used or useful in a Similar Business or (ii) that replace the properties and assets that are the subject of such Asset Sale; provided that the assets acquired are pledged as additional Collateral to the Collateral Agent on behalf of the holders of First Lien Obligations, and
(ii)      if the subject assets do not constitute Collateral:
(1)      to repay (i) secured Indebtedness (and, if the Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto), (ii) Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor or (iii) Notes Obligations as provided in Section 3.07 hereof, through open-market purchases (provided that such purchases are at or above 100% of the principal amount thereof) or by making an offer (in accordance with the procedures set forth in Section 4.10(c) hereof for an Asset Sale Offer); or
(2)      to make an Investment in any one or more businesses (provided that if such Investment is in the form of the acquisition of Capital Stock of a Person, such acquisition results in such Person becoming a Restricted Subsidiary of the Issuer), assets, or property or capital expenditures, in each case (i) used or useful in a Similar Business or (ii) that replace the properties and assets that are the subject of such Asset Sale;
provided that, in the case of clauses (i)(2) and (ii)(2) of Section 4.10(b) hereof, a binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment so long as the Issuer or such other Restricted Subsidiary enters into such commitment with the good faith expectation that such Net Proceeds will be applied to satisfy

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such commitment within 180 days of such commitment (an “ Acceptable Commitment ”). If any Acceptable Commitment is later cancelled or terminated after the initial 365 days from such Asset Sale for any reason before such Net Proceeds are applied, then such Net Proceeds shall constitute Excess Proceeds.
(c)      Any Net Proceeds from the Asset Sale that are not invested or applied as provided and within the time period set forth in the preceding paragraph will be deemed to constitute “ Excess Proceeds .” When the aggregate amount of Excess Proceeds exceeds $50.0 million, the Issuer shall make an offer to all Holders of the Notes and, if required by the terms of any Indebtedness that is pari passu with the Notes (“ Pari Passu Indebtedness ”), to the holders of such Pari Passu Indebtedness (an “ Asset Sale Offer ”), to purchase the maximum aggregate principal amount of the Notes and such Pari Passu Indebtedness that is in an amount equal to at least $2,000, that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof (or accreted value thereof, if less), plus accrued and unpaid interest, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in this Indenture. The Issuer will commence an Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that Excess Proceeds exceed $50.0 million by delivering the notice required pursuant to the terms of this Indenture, with a copy to the Trustee. The Issuer may satisfy the foregoing obligations with respect to any Net Proceeds from an Asset Sale by making an Asset Sale Offer with respect to such Net Proceeds prior to the expiration of the relevant 365 days (or such longer period provided above) or with respect to Excess Proceeds of $50.0 million or less.
To the extent that the aggregate amount of Notes and such Pari Passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Issuer may use any remaining Excess Proceeds for general corporate purposes, subject to other covenants contained in this Indenture. If the aggregate principal amount of Notes or the Pari Passu Indebtedness surrendered by such holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and the Issuer shall select such Pari Passu Indebtedness to be purchased on a pro rata basis based on the accreted value or principal amount of the Notes or such Pari Passu Indebtedness tendered. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds that resulted in the Asset Sale Offer shall be reset to zero (regardless of whether there are any remaining Excess Proceeds upon such completion).
(d)      Pending the final application of any Net Proceeds pursuant to this Section 4.10, the holder of such Net Proceeds may apply such Net Proceeds temporarily to reduce Indebtedness outstanding under a revolving credit facility or otherwise invest such Net Proceeds in any manner not prohibited by this Indenture.
(e)      Notwithstanding any other provisions of this Section 4.10, (i) to the extent that any of or all the Net Proceeds of any Asset Sale by a Foreign Subsidiary (a “ Foreign Disposition ”) is (x) prohibited or delayed by applicable local law or (y) restricted by applicable organizational or constitutive documents or any agreement, from being repatriated to the United States, the portion of such Net Proceeds so affected will not be required to be applied in

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compliance with this covenant, and such amounts may be retained by the applicable Foreign Subsidiary (the Issuer hereby agreeing to use reasonable efforts (as determined in the Issuer’s reasonable business judgment) to otherwise cause the applicable Foreign Subsidiary to within one year following the date on which the respective payment would otherwise have been required, promptly take all actions reasonably required by the applicable local law or other impediment to permit such repatriation), and if within one year following the date on which the respective payment would otherwise have been required, such repatriation of any of such affected Net Proceeds is permitted under the applicable local law or other impediment, such repatriation will be promptly effected and such repatriated Net Proceeds will be promptly (and in any event not later than five Business Days after such repatriation could be made) applied (net of additional taxes, costs and expenses payable or reserved against as a result thereof) (whether or not repatriation actually occurs) in compliance with this covenant and (ii) to the extent that the Issuer has determined in good faith that repatriation of any of or all the Net Proceeds of any Foreign Disposition would have a material adverse tax cost consequence with respect to such Net Proceeds (which for the avoidance of doubt, includes, but is not limited to, any repatriation or prepayment whereby doing so the Issuer, any Restricted Subsidiary or any of their respective Affiliates and/or equity partners would incur a material tax liability, including a tax on a dividend, a tax on a deemed dividend pursuant to Section 956 of the Internal Revenue Code of 1986, as amended (the “ Code ”), or a withholding tax), the Net Proceeds so affected may be retained by the applicable Foreign Subsidiary. The non-application of any Net Proceeds as a consequence of the foregoing provisions will not, for the avoidance of doubt, constitute a Default or an Event of Default.
(f)      The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Issuer will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue thereof.
(g)      The Issuer’s obligation to make an offer to repurchase the Notes pursuant to this Section 4.10 may be waived or modified with the written consent of the Holders of a majority in principal amount of the then outstanding Notes.
SECTION 4.11      Transactions with Affiliates .
(a)      The Company will not, and will not permit any Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of API (each of the foregoing, an “ Affiliate Transaction ”) involving aggregate payments or consideration in excess of $10.0 million, unless:
(i)      such Affiliate Transaction is on terms that are not materially less favorable to API or its relevant Restricted Subsidiary than those that would have been

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obtained in a comparable transaction by API or such Restricted Subsidiary with an unrelated Person on an arm’s-length basis; and
(ii)      API delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate payments or consideration in excess of $30.0 million, a resolution adopted by the majority of the board of directors or the audit committee of API approving such Affiliate Transaction and set forth in an Officer’s Certificate certifying that such Affiliate Transaction complies with Section 4.11(a)(i).
(b)      The foregoing provisions will not apply to the following:
(i)      transactions between or among API and/or any Restricted Subsidiaries;
(ii)      Restricted Payments permitted by Section 4.07 hereof and Investments permitted by the definition of “Permitted Investments”;
(iii)      the payment of reasonable and customary fees and compensation paid to, and indemnities and reimbursements provided for the benefit of, current or former employees, directors, officers, managers or consultants of API or the Issuer or any Restricted Subsidiaries;
(iv)      transactions in which API, the Issuer or any Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to API, the Issuer or such Restricted Subsidiary from a financial point of view or stating that the terms are not materially less favorable to API, the Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by API, the Issuer or such Restricted Subsidiary with an unrelated Person on an arm’s-length basis;
(v)      any agreement as in effect as of the Issue Date, or any amendment thereto (so long as any such amendment is not disadvantageous in any material respect in the good faith judgment of API to the Holders when taken as a whole as compared to the applicable agreement as in effect on the Issue Date);
(vi)      the existence of, or the performance by API, the Issuer or any Restricted Subsidiaries of its obligations under the terms of, any stockholders agreement or investor rights agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which it may enter into thereafter; provided that the existence of, or the performance by API, the Issuer or any Restricted Subsidiaries of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause (vi) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous in any material respect in the good faith judgment of API to the

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Holders when taken as a whole as compared to the original agreement in effect on the Issue Date;
(vii)      transactions with customers, clients, suppliers, contractors, joint venture partners or purchasers or sellers of goods or services that are Affiliates, in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture which are fair to API, the Issuer and any Restricted Subsidiaries, in the reasonable determination of API or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party;
(viii)      the issuance of Equity Interests (other than Disqualified Stock) of API;
(ix)      payments and Indebtedness and Disqualified Stock (and cancellation of any thereof) of API and any Restricted Subsidiaries and Preferred Stock (and cancellation of any thereof) of any Restricted Subsidiary to any future, current or former employee, director, officer, manager or consultant (or their respective Immediate Family Members) of the Company, the Issuer or any of API’s Subsidiaries pursuant to any management equity plan or stock option plan or any other management or employee or director benefit plan or agreement or any stock subscription or shareholder agreement that are, in each case, approved by API in good faith; and any employment agreements, stock option plans and other compensatory arrangements (and any successor plans thereto) and any supplemental executive retirement benefit plans or arrangements with any such employees, directors, officers, managers or consultants (or their respective Immediate Family Members) that are, in each case, approved by API in good faith;
(x)      payments to or from, and transactions with, any joint venture in the ordinary course of business (including, without limitation, any cash management activities related thereto); and
(xi)      any lease entered into between API, the Issuer or any Restricted Subsidiary, as lessee and any Affiliate of API, as lessor, which is approved by a majority of the disinterested members of the board of directors of API or by the audit committee thereof.
SECTION 4.12      Liens . The Company and the Issuer will not, and will not permit any Subsidiary Guarantor to, create, incur or assume any Lien (except Permitted Liens) that secures Obligations under any Indebtedness or any related guarantee, on any asset or property of API, the Issuer or any Guarantor, or any income or profits therefrom, or assign or convey any right to receive income therefrom.
SECTION 4.13      Company Existence . Subject to Article V hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its company existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary;

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provided that the Company shall not be required to preserve the corporate, partnership or other existence of its Restricted Subsidiaries (other than the Issuer), if the Company in good faith shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole.
SECTION 4.14      Offer to Repurchase Upon Change of Control . (a) If a Change of Control occurs, unless the Issuer has previously or concurrently delivered a redemption notice with respect to all the outstanding Notes as described under Section 3.03 hereof, the Issuer shall make an offer to purchase all of the Notes pursuant to the offer described below (the “ Change of Control Offer ”) at a price in cash (the “ Change of Control Payment ”) equal to 101.0% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase, subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date. Within 30 days following any Change of Control, the Issuer shall deliver notice of such Change of Control Offer electronically or by first-class mail, with a copy to the Trustee, to each Holder to the address of such Holder appearing in the Note Register or otherwise in accordance with the Applicable Procedures with the following information:
(i)      that a Change of Control Offer is being made pursuant to this Section 4.14 and that all Notes properly tendered pursuant to such Change of Control Offer will be accepted for payment by the Issuer;
(ii)      the purchase price and the purchase date, which will be no earlier than 30 days nor later than 60 days from the date such notice is delivered (the “ Change of Control Payment Date ”);
(iii)      that any Note not properly tendered will remain outstanding and continue to accrue interest;
(iv)      that unless the Issuer defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on the Change of Control Payment Date;
(v)      that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender such Notes, with the form entitled “Option of Holder to Elect Purchase” attached to the Note completed, to the paying agent specified in the notice at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;
(vi)      that Holders will be entitled to withdraw their tendered Notes and their election to require the Issuer to purchase such Notes, provided that the paying agent receives, not later than the close of business on the second Business Day prior to the expiration date of the Change of Control Offer, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes tendered for

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purchase, and a statement that such Holder is withdrawing its tendered Notes and its election to have such Notes purchased;
(vii)      that Holders whose Notes are being purchased only in part will be issued new Notes and such new Notes will be equal in principal amount to the unpurchased portion of the Notes surrendered. The unpurchased portion of the Notes must be equal to at least $2,000 or any integral multiple of $1,000 thereof;
(viii)      if such notice is delivered prior to the occurrence of a Change of Control, stating that the Change of Control Offer is conditional on the occurrence of such Change of Control; and
(ix)      the other instructions, as determined by the Issuer, consistent with this Section 4.14, that a Holder must follow.
The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Indenture by virtue thereof.
(b)      On the Change of Control Payment Date, the Issuer shall, to the extent permitted by law:
(i)      accept for payment all Notes issued by it or portions thereof properly tendered pursuant to the Change of Control Offer;
(ii)      deposit with the Paying Agent an amount equal to the aggregate Change of Control Payment in respect of all Notes or portions thereof so tendered; and
(iii)      deliver, or cause to be delivered, to the Trustee for cancellation the Notes so accepted together with an Officer’s Certificate to the Trustee stating that such Notes or portions thereof have been tendered to and purchased by the Issuer.
(c)      The Issuer shall not be required to make a Change of Control Offer following 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 Issuer and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer.
(d)      Notwithstanding anything to the contrary herein, a Change of Control Offer may be made in advance of a Change of Control, conditional upon such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making of the Change of Control Offer.

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(e)      Other than as specifically provided in this Section 4.14, any purchase pursuant to this Section 4.14 shall be made pursuant to the provisions of Sections 3.02, 3.05 and 3.06 hereof, and references therein to “redeem,” “redemption,” “Redemption Date” and similar words shall be deemed to refer to “purchase,” “repurchase,” “Purchase Date” and similar words, as applicable.
(f)      In the event that Holders of not less than 90% in aggregate principal amount of the then outstanding Notes accept a Change of Control Offer and the Issuer purchases all of the Notes held by such Holders, the Issuer shall have the right, upon not less than 30 nor more than 60 days’ prior notice, given not more than 30 days following the Change of Control Payment Date relating to the Change of Control Offer described above, to redeem all of the Notes that remain outstanding following such Change of Control Payment Date at a redemption price equal to the Change of Control Payment, plus to the extent not included in the Change of Control Payment, accrued and unpaid interest on the Notes redeemed, to, but excluding, the date of repurchase.
SECTION 4.15      Limitation on Guarantees of Indebtedness by Restricted Subsidiaries .
The Company shall not permit any of its Subsidiaries to guarantee the payment of any Indebtedness under any Credit Facility, unless such Subsidiary within 45 days of the date of such guarantee, executes and delivers a supplemental indenture to this Indenture, the form of which is attached as Exhibit D hereto, providing for a Guarantee by such Subsidiary, provided that this Section 4.15 shall not be applicable to any guarantee of any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary. Notwithstanding anything to the contrary contained herein, neither the Company nor any of its Restricted Subsidiaries shall be required to provide any guarantee, pledge or asset support agreement that, in the reasonable judgment of the Company, would subject the Company or the respective Restricted Subsidiary to any adverse tax consequence (other than a de minimis adverse tax consequence) due to the application of Section 956 of the Code unless the applicable Subsidiary has guaranteed the AIO Credit Agreement, notwithstanding such tax consequences.
SECTION 4.16      Limitation on the Issuer Assets .
Subject to the provisions herein, at the end of each fiscal year, the Company will not permit the Adjusted AIO Total Assets to be less than 75% of the Adjusted API Total Assets (the “ Minimum AIO Asset Level ”); provided that (i) upon the Company’s determination (in its sole judgment) that the Minimum AIO Asset Level does not provide the Company sufficient flexibility to enter into a proposed new geographic market after the Issue Date, the Minimum AIO Asset Level shall be reduced to 70% of the Adjusted API Total Assets at all times after delivery of notice to the Trustee, (ii) the Minimum AIO Asset Level will be calculated at the time internal financial statements are available with respect to the applicable fiscal year (such date of calculation, the “ Asset Date of Determination ”) and (iii) if the Minimum AIO Asset Level requirement is not satisfied on the Asset Date of Determination, the Company will have

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90 days from the Asset Date of Determination to satisfy such requirement by transferring, conveying or otherwise moving additional assets to the Issuer or its Restricted Subsidiaries (such transfer, conveyance or movement of assets will be given pro forma effect as if it occurred immediately prior to the end of the applicable fiscal year).

SECTION 4.17      Suspension of Covenants .
(a)      During any period of time that (i) the Notes have an Investment Grade rating from both Rating Agencies and (ii) no Default has occurred and is continuing under this Indenture (the occurrence of the events described in the foregoing clauses (i) and (ii) being collectively referred to as a “ Covenant Suspension Event ” and the date thereof being referred to as the “ Suspension Date ”) then, Section 4.07, Section 4.08, Section 4.09, Section 4.10, Section 4.11, Section 4.15, Section 4.16, Section 4.19, Section 4.20, Section 4.21 and Section 5.01(a)(iv) hereof shall not be applicable to the Notes (collectively, the “ Suspended Covenants ”).
(b)      During any period that the foregoing covenants have been suspended, the Company may not designate any of its Subsidiaries as Unrestricted Subsidiaries.
(c)      In the event that API and the Restricted Subsidiaries are not subject to the Suspended Covenants under this Indenture for any period of time as a result of the foregoing, and on any subsequent date (the “ Reversion Date ”) one or both of the Rating Agencies withdraw their Investment Grade rating or downgrade the rating assigned to the Notes below an Investment Grade rating, then API and the Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants under this Indenture with respect to future events. The period of time between the Suspension Date and the Reversion Date is referred to as the “ Suspension Period .” At the Company’s discretion, the Guarantees of the Guarantors and the Liens securing the Notes and the Obligations may be suspended during the Suspension Period. Additionally, upon the occurrence of a Covenant Suspension Event, the amount of Excess Proceeds from Net Proceeds shall be reset to zero.
Notwithstanding the foregoing, in the event of any such reinstatement, no action taken or omitted to be taken by API or any of its Restricted Subsidiaries prior to such reinstatement will give rise to a Default or Event of Default under this Indenture with respect to the Notes; provided that (i) with respect to Restricted Payments made after such reinstatement, the amount available to be made as Restricted Payments will be calculated as though Section 4.07 hereof had been in effect prior to, but not during, the Suspension Period; (ii) all Indebtedness incurred, or Disqualified Stock issued, during the Suspension Period will be classified to have been incurred or issued pursuant to clause (iii) of Section 4.09(b) hereof; (iii) any Affiliate Transaction entered into after such reinstatement pursuant to an agreement entered into during any Suspension Period shall be deemed to be permitted pursuant to clause (v) of Section 4.11(b) here; and (iv) any encumbrance or restriction on the ability of any Restricted Subsidiary that is not a Guarantor to take any action described in clauses (i) through (iii) of Section 4.08(a) hereof that becomes effective during any Suspension Period shall be deemed to be permitted pursuant to clause (i) of Section 4.08(b) hereof.
SECTION 4.18      [Reserved].
SECTION 4.19      Impairment of Security Interest .
Subject to the First Lien Intercreditor Agreement and any Second Lien Intercreditor Agreement, neither the Company nor any of its Restricted Subsidiaries will take or omit to take any action which would adversely affect or impair in any material respect the Liens in favor of the Collateral Agent with respect to the Collateral, except as otherwise permitted or required by the Collateral Documents or this Indenture. The Issuer shall, and shall cause each Subsidiary Guarantor to, at its sole cost and expense, execute and deliver all such agreements and instruments as the Collateral Agent or the Trustee shall reasonably request to more fully or accurately describe the property intended to be Collateral or the obligations intended to be secured by the Collateral Documents (although neither the Collateral Agent nor the Trustee shall have any obligation to so request). The Issuer shall, and shall cause each Subsidiary Guarantor to, at its sole cost and expense, file any such notice filings or other agreements or instruments as may be reasonably necessary or desirable under applicable law to perfect the Liens created by

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the Collateral Documents, or at such other times and at such other places as the Collateral Agent or the Trustee may reasonably request (although neither the Collateral Agent nor the Trustee shall have any obligation to so request).
SECTION 4.20      Further Assurances .
The Issuer and the Subsidiary Guarantors shall execute any and all further documents, financing statements, agreements and instruments, and take all further action that may be required under applicable law, or that the Collateral Agent may reasonably request, in order to grant, preserve, protect and perfect the validity and priority of the security interests created or intended to be created by the Collateral Documents in the Collateral (although neither the Collateral Agent nor the Trustee shall have any obligation to so request). The Issuer shall deliver or cause to be delivered to the Collateral Agent all such instruments and documents as the Collateral Agent shall reasonably request to evidence compliance with this Section 4.20. The Collateral Agent shall not have any obligation to request the documents referred to in this Section 4.20.
SECTION 4.21      Covenant to Provide Mortgages .
If the Issuer or any Subsidiary Guarantor directly or indirectly acquires any Material Real Property after the Issue Date, within 120 days after the acquisition thereof, the Issuer or applicable Subsidiary Guarantor shall:
(i)      furnish to the Collateral Agent a description of each such Material Real Property;
(ii)      duly execute and deliver to the Collateral Agent a Mortgage with respect to each such Material Real Property;
(iii)      take whatever action (including the recording of Mortgages and the filing of UCC financing statements) may be necessary to vest in the Collateral Agent valid Liens in such Material Real Property, enforceable against all third parties in accordance with their terms, except as such enforceability may be limited by Bankruptcy Law and by general principles of equity (regardless of whether enforcement is sought in equity or at law); and
(iv)      deliver to the Collateral Agent a signed copy of an opinion, addressed to the Collateral Agent and the other Secured Parties (as defined in the Collateral Agreements), of counsel for the Issuer, in respect of such Mortgage.
ARTICLE V
    

SUCCESSORS
SECTION 5.01      Merger, Consolidation or Sale of All or Substantially All Assets .

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(a)      The Issuer may not consolidate or merge with or into (whether or not the Issuer is the surviving Person), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:
(i)      the Issuer is the surviving Person or the Person formed by or surviving any such consolidation or merger (if other than the Issuer) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made, is a Person organized or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such Person, as the case may be, being herein called the “ Successor Company ”);
(ii)      the Successor Company, if other than the Issuer, expressly assumes all the obligations of the Issuer under this Indenture;
(iii)      immediately after such transaction, no Default exists;
(iv)      immediately after giving pro forma effect to such transaction and any related financing transactions, as if such transactions had occurred at the beginning of the applicable four-quarter period,
(A)      the Successor Company or the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Test hereof, or
(B)      the Fixed Charge Coverage Ratio for the Issuer would be equal to or greater than the Fixed Charge Coverage Ratio for the Issuer immediately prior to such transaction; and
(v)      the Issuer shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with this Indenture.
(b)      The Successor Company will succeed to, and be substituted for, the Issuer under this Indenture. Notwithstanding clauses (iii) and (iv) of Section 5.01(a) hereof,
(i)      any Restricted Subsidiary may consolidate with or merge into or transfer all or part of its properties and assets to the Issuer, and
(ii)      the Issuer may merge with an Affiliate of the Issuer solely for the purpose of reincorporating the Issuer in the United States, any state thereof, the District of Columbia or any territory thereof so long as the amount of Indebtedness of the Issuer and its Restricted Subsidiaries is not increased thereby.
(c)      Subject to Section 12.06 hereof, no Guarantor will, and the Company will not permit any Subsidiary Guarantor to, consolidate or merge with or into or wind up into (whether or not such Guarantor is the surviving Person), or sell, assign, transfer, lease, convey

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or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:
(i)      (A)     such Guarantor is the surviving Person or the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a Person organized or existing under the laws of the jurisdiction of organization of such Guarantor, as applicable, or the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such Person being herein called the “ Successor Person ”);
(B)      the Successor Person, if other than such Guarantor, expressly assumes all the obligations of such Guarantor under this Indenture and such Guarantor’s related Guarantee pursuant to supplemental indentures or other documents or instruments;
(C)      immediately after such transaction, no Default exists; and
(D)      the Company shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with this Indenture.
(d)     S ubject to Section 12.06 hereof, the Successor Person will succeed to, and be substituted for, such Subsidiary Guarantor under this Indenture and such Subsidiary Guarantor’s Guarantee. Notwithstanding the foregoing, any Subsidiary Guarantor may (1) merge into or transfer all or part of its properties and assets to another Subsidiary Guarantor or the Issuer, (2) merge with an Affiliate of the Company solely for the purpose of reincorporating the Subsidiary Guarantor in the United States, any state thereof, the District of Columbia or any territory thereof or (3) convert into a corporation, partnership, limited partnership, limited liability corporation or trust organized or existing under the laws of the jurisdiction of organization of such Subsidiary Guarantor.
SECTION 5.02      Successor Person Substituted . Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Issuer or a Guarantor in accordance with Section 5.01 hereof, the successor Person formed by such consolidation or into or with which the Issuer or such Guarantor, as applicable, is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the Issuer or such Guarantor, as applicable, shall refer instead to the Successor Person and not to the Issuer or such Guarantor, as applicable), and may exercise every right and power of the Issuer or such Guarantor, as applicable, under this Indenture with the same effect as if such Successor Person had been named as the Issuer or a Guarantor, as applicable, herein; provided that the predecessor Issuer shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale,

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assignment, transfer, lease, conveyance or other disposition of all of the Issuer’s assets that meets the requirements of Section 5.01 hereof.
ARTICLE VI
    

DEFAULTS AND REMEDIES
SECTION 6.01      Events of Default .
An “ Event of Default ,” wherever used herein, means any one of the following events:
(a)      default in payment when due and payable, upon redemption, acceleration or otherwise, of principal of, or premium, if any, on the Notes;
(b)      default for 30 days or more in the payment when due of interest on or with respect to the Notes;
(c)      failure by API, the Issuer or any Guarantor for 60 days after receipt of written notice given by the Trustee or the Holders of not less than 25.0% in principal amount of the then outstanding Notes to comply with any of its obligations, covenants or agreements (other than a default referred to in clause (a) or (b) of this Section 6.01) contained in this Indenture or the Notes;
(d)      a default under any bond, debenture, note or other evidence of Indebtedness for money borrowed by API, the Issuer or any Significant Subsidiary (or any group of Restricted Subsidiaries that together (as of the latest audited consolidated financial statements of the Company) would constitute a Significant Subsidiary), whether such Indebtedness now exists or shall hereafter be created, which default shall constitute a failure to pay the principal of Indebtedness having an aggregate principal amount outstanding of at least $75.0 million when due and payable after the expiration of any applicable grace period with respect thereto or shall have resulted in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such Indebtedness having been discharged, or such acceleration having been rescinded or annulled, within a period of 60 days after there shall have been given, by registered or certified mail, to the Issuer by the Trustee or to the Issuer and the Trustee by the Holders of at least 25% in principal amount of the then outstanding Notes a written notice specifying such default and requiring the Issuer to cause such Indebtedness to be discharged or cause such acceleration to be rescinded or annulled and stating that such notice is a “Notice of Default” hereunder;
(e)      failure by API, the Issuer or any Significant Subsidiary (or any group of Restricted Subsidiaries that together (as of the latest audited consolidated financial statements of the Company) would constitute a Significant Subsidiary) to pay final

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judgments aggregating in excess of $75.0 million (net of amounts covered by insurance policies issued by reputable and creditworthy insurance companies), which final judgments remain unpaid, undischarged and unstayed for a period of more than 60 days after such judgment becomes final, and in the event such judgment is covered by insurance, an enforcement proceeding has been commenced by any creditor upon such judgment or decree which is not promptly stayed;
(f)      API, the Issuer or any of its Significant Subsidiaries (or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements of the Company), would constitute a Significant Subsidiary), pursuant to or within the meaning of any Bankruptcy Law:
(i)      commences a voluntary case;
(ii)      consents to the entry of an order for relief against it in an involuntary case;
(iii)      consents to the appointment of a custodian of it or for all or substantially all of its property;
(iv)      makes a general assignment for the benefit of its creditors; or
(v)      generally is not paying its debts as they become due;
(g)      a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
(i)      is for relief against API, the Issuer or any of its Significant Subsidiaries (or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements of the Company), would constitute a Significant Subsidiary), in an involuntary case;
(ii)      appoints a custodian of API, the Issuer or any of its Significant Subsidiaries (or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements of the Company), would constitute a Significant Subsidiary), or for all or substantially all of the property of API, the Issuer or any of its Significant Subsidiaries (or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements of the Company), would constitute a Significant Subsidiary); or
(iii)      orders the liquidation of API, the Issuer or any of its Significant Subsidiaries (or any group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements of the Company), would constitute a Significant Subsidiary);
and the order or decree remains unstayed and in effect for 60 consecutive days; or

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(h)      with respect to any Collateral having a Fair Market Value in excess of $75.0 million, individually or in the aggregate, (i) the security interest under the Collateral Documents, at any time, ceases to be in full force and effect for any reason other than in accordance with the terms of this Indenture, the Collateral Documents and the First Lien Intercreditor Agreement, except to the extent that any lack of perfection or priority results from any act or omission by the Collateral Agent or the Applicable Authorized Representative (so long as the act or omission does not result from the breach or non-compliance by API, the Issuer or any Subsidiary Guarantor with this Indenture or any Collateral Document), and such cessation continues for 60 days, (ii) any security interest created thereunder or under this Indenture is declared (in writing) invalid or unenforceable by a court of competent jurisdiction or (iii) API, the Issuer or any Subsidiary Guarantor asserts in writing, in any pleading in any court of competent jurisdiction, that any such security interest is invalid or unenforceable; or
(i)      the Guarantee of any Significant Subsidiary (or any group of Restricted Subsidiaries that together (as of the latest audited consolidated financial statements of the Company) would constitute a Significant Subsidiary) shall for any reason cease to be in full force and effect or be declared null and void in a final non-appealable judgment of a court of competent jurisdiction or any responsible officer of any Guarantor that is a Significant Subsidiary (or the responsible officers of any group of Restricted Subsidiaries that together (as of the latest audited consolidated financial statements of the Company) would constitute a Significant Subsidiary), as the case may be, denies that it has any further liability under its Guarantee or gives notice to such effect, other than by reason of the termination of this Indenture or the release of any such Guarantee in accordance with this Indenture.
SECTION 6.02      Acceleration . If any Event of Default (other than an Event of Default specified in clause (f) or (g) of Section 6.01 hereof) occurs and is continuing under this Indenture, the Trustee or the Holders of at least 25.0% in principal amount of the then total outstanding Notes may declare the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes to be due and payable immediately. Upon the effectiveness of such declaration, such principal of and premium, if any, and interest shall be due and payable immediately. The Trustee may withhold from the Holders notice of any continuing Default, except a Default relating to the payment of principal, premium, if any, or interest, if it determines that withholding notice is in the Holders’ interest. The Trustee shall have no obligation to accelerate the Notes if the Trustee in good faith determines that acceleration is not in the best interests of the Holders.
Notwithstanding the foregoing, in the case of an Event of Default arising under clause (f) or (g) of Section 6.01 hereof, all outstanding Notes shall be due and payable immediately without further action or notice.
The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default and its consequences under this Indenture (except nonpayment of interest

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on, premium, if any, or the principal of any Note held by a non-consenting Holder that has become due solely because of the acceleration) and rescind any acceleration with respect to the Notes and its consequences if such rescission would not conflict with any judgment of a court of competent jurisdiction.
In the event of any Event of Default specified in clause (d) of Section 6.01 hereof, such Event of Default and all consequences thereof (excluding any resulting payment default, other than as a result of acceleration of the Notes) shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders, if within 20 days after such Event of Default arose:
(a)      the Indebtedness or guarantee that is the basis for such Event of Default has been discharged; or
(b)      holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default; or
(c)      the default that is the basis for such Event of Default has been cured.
SECTION 6.03      Other Remedies . If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.
SECTION 6.04      Waiver of Past Defaults . Subject to Section 6.02 hereof, Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default and its consequences hereunder (except a continuing Default in the payment of the principal of, premium, if any, or interest on, any Note held by a non-consenting Holder) (including in connection with an Asset Sale Offer or a Change of Control Offer). 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 impair any right consequent thereon.
SECTION 6.05      Control by Majority . Holders of a majority in principal amount of the then total outstanding Notes may 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. The Trustee, however, may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder of a Note (it being understood that the Trustee does not have an

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affirmative duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders) or that would involve the Trustee in personal liability.
SECTION 6.06      Limitation on Suits . Subject to Section 6.07 hereof, no Holder of a Note may pursue any remedy with respect to this Indenture or the Notes unless:
(a)      such Holder has previously given the Trustee notice that an Event of Default is continuing;
(b)      Holders of at least 25.0% in principal amount of the total outstanding Notes have requested the Trustee to pursue the remedy;
(c)      Holders have offered the Trustee security or indemnity satisfactory to it against any loss, liability or expense;
(d)      the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and
(e)      Holders of a majority in principal amount of the total outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period.
A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note.
SECTION 6.07      Rights of Holders to Receive Payment . Notwithstanding any other provision of this Indenture, the contractual right of any Holder of a Note to receive payment of principal of, premium, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an Asset Sale Offer or a Change of Control Offer), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08      Collection Suit by Trustee . If an Event of Default specified in Section 6.01(a) or (b) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Issuer for the whole amount of principal of, premium, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09      Restoration of Rights and Remedies . If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture 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, subject to any determination in such proceedings, the Issuer, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and

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remedies of the Trustee and the Holders shall continue as though no such proceeding has been instituted.
SECTION 6.10      Rights and Remedies Cumulative . Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in Section 2.07 hereof, 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 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 6.11      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 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 6.12      Trustee May File Proofs of Claim . The Trustee is authorized to 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 (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Issuer (or any other obligor upon the Notes including the Guarantors), its creditors or its property and shall be entitled and empowered to participate as a member in any official committee of creditors appointed in such matter and to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such 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 to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained 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, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.13      Priorities . If the Trustee or any Agent collects any money or property pursuant to this Article VI or pursuant to the Collateral Documents (subject to the First

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Lien Intercreditor Agreement and any Second Lien Intercreditor Agreement), it shall pay out the money in the following order:
(a)      to the Trustee, such Agent, their agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expenses and liabilities incurred, and all advances made, by the Trustee or such Agent and the costs and expenses of collection;
(b)      to Holders for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, and interest, respectively; and
(c)      to the Issuer or to such party as a court of competent jurisdiction shall direct including a Guarantor, if applicable.
The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 6.13.
SECTION 6.14      Undertaking for Costs . In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.14 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10.0% in principal amount of the then outstanding Notes.
ARTICLE VII
    

TRUSTEE
SECTION 7.01      Duties of Trustee .
(a)      If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.
(b)      Except during the continuance of an Event of Default:
(i)      the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are

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specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(ii)      in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).
(c)      The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(i)      this paragraph (c) does not limit the effect of paragraph (b) of this Section 7.01;
(ii)      the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved in a court of competent jurisdiction that the Trustee was negligent in ascertaining the pertinent facts; and
(iii)      the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.02, 6.04 or 6.05 hereof: and
(iv)      none of the provisions of this Indenture shall require the Trustee to expend or risk its own funds or otherwise to incur any liability, financial or otherwise, in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or indemnity satisfactory to it against such risk or liability is not assured to it.
(d)      Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.
(e)      The Trustee shall be under no obligation to exercise any of its rights or powers under this Indenture at the request or direction of any of the Holders unless the Holders have offered to the Trustee indemnity or security satisfactory to it against any loss, liability or expense.
(f)      The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.
SECTION 7.02      Rights of Trustee .

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(a)      The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer and its Restricted Subsidiaries, personally or by agent or attorney at the sole cost of the Issuer and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.
(b)      Before the Trustee acts or refrains from acting, it may require an Officer’s Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer’s Certificate or Opinion of Counsel. 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 from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c)      The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care.
(d)      The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture.
(e)      Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Issuer shall be sufficient if signed by an Officer of the Issuer.
(f)      The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible 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.
(g)      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.
(h)      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 hereunder.
(i)      Delivery of 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,

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including the Issuer’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officer’s Certificates).
(j)      The permissive rights of the Trustee to take certain actions under this Indenture shall not be construed as a duty unless so specified herein.
(k)      The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.
(l)      The Trustee may request that the Issuer 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.
SECTION 7.03      Individual Rights of Trustee . The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or any of its Affiliates with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Section 7.10 hereof.
SECTION 7.04      Trustee’s Disclaimer . The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuer’s use of the proceeds from the Notes or any money paid to the Issuer or upon the Issuer’s direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication.
SECTION 7.05      Notice of Defaults . If a Default occurs and is continuing and if it is actually known to the Trustee, the Trustee shall deliver to Holders a notice of the Default within 90 days after it occurs. Except in the case of a Default relating to the payment of principal, premium, if any, or interest on any Note, the Trustee may withhold from the Holders notice of any continuing Default if and so long as it in good faith determines that withholding the notice is in the interests of the Holders.
SECTION 7.06      [Reserved].
SECTION 7.07      Compensation and Indemnity . The Issuer shall pay to the Trustee from time to time such compensation for its acceptance of this Indenture and services hereunder as the parties shall agree in writing from time to time. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee’s agents and counsel.

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The Issuer and the Guarantors, jointly and severally, shall indemnify the Trustee and its officers, directors, employees, agents and any predecessor trustee and its officers, directors, employees and agents for, and hold the Trustee harmless against, any and all loss, damage, claims, liability or expense (including attorneys’ fees and expenses) incurred by it in connection with the acceptance or administration of this trust and the performance of its duties hereunder (including the costs and expenses of enforcing this Indenture against the Issuer or any of the Guarantors (including this Section 7.07) or defending itself against any claim whether asserted by any Holder, the Issuer or any Guarantor, or liability in connection with the acceptance, exercise or performance of any of its powers or duties hereunder). The Trustee shall notify the Issuer promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Issuer shall not relieve the Issuer of its obligations hereunder, unless the Issuer is materially prejudiced by the failure to provide notice. The Issuer shall defend the claim and the Trustee may have separate counsel and the Issuer shall pay the fees and expenses of such counsel. The Issuer need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee’s own willful misconduct or negligence.
The obligations of the Issuer under this Section 7.07 shall survive the satisfaction and discharge of this Indenture or the earlier resignation or removal of the Trustee.
To secure the payment obligations of the Issuer and the Guarantors in this Section 7.07, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except for money or property held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(f) or (g) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.
SECTION 7.08      Replacement of Trustee . A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee’s acceptance of appointment as provided in this Section 7.08. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Issuer. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Issuer in writing. The Issuer may remove the Trustee if:
(a)      the Trustee fails to comply with Section 7.10 hereof;
(b)      the Trustee is adjudged bankrupt or insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c)      a custodian or public officer takes charge of the Trustee or its property; or
(d)      the Trustee becomes incapable of acting.

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If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Issuer shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Issuer.
If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee (at the Issuer’s expense), the Issuer or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10 hereof, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Issuer’s obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.09      Successor Trustee by Merger, etc . If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee.
SECTION 7.10      Eligibility; Disqualification . There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has, together with its parent, a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition.
ARTICLE VIII
    

LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01      Option to Effect Legal Defeasance or Covenant Defeasance . The Issuer may, at its option and at any time, elect to have either Section 8.02 or 8.03 hereof

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applied to all outstanding Notes and all obligations of the Guarantors with respect to the Guarantees upon compliance with the conditions set forth below in this Article VIII.
SECTION 8.02      Legal Defeasance and Discharge . Upon the Issuer’s exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Issuer and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their obligations with respect to all outstanding Notes and Guarantees on the date the conditions set forth below are satisfied (“ Legal Defeasance ”). For this purpose, Legal Defeasance means that the Issuer and the Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be “outstanding” only for the purposes of Section 8.05 hereof, and to have satisfied all its other obligations under such Notes and this Indenture including that of the Guarantors (and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder:
(a)      the rights of Holders to receive payments in respect of the principal of, premium, if any, and interest on the Notes when such payments are due solely out of the trust created pursuant to this Indenture referred to in Section 8.05 hereof;
(b)      the Issuer’s obligations with respect to Notes concerning issuing temporary Notes, registration of such Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust;
(c)      the rights, powers, trusts, duties and immunities of the Trustee, and the Issuer’s obligations in connection therewith; and
(d)      this Section 8.02.
Subject to compliance with this Article VIII, the Issuer may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.
SECTION 8.03      Covenant Defeasance . Upon the Issuer’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Issuer and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from their obligations under the covenants contained in Sections 4.03, 4.04, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.14, 4.15, 4.16, 4.17, 4.19, 4.20 and 4.21 hereof and clauses (iv) and (v) of Section 5.01(a), and Sections 5.01(c) and 5.01(d) hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied (“ Covenant Defeasance ”), and the Notes shall thereafter be deemed not “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, but shall continue to be deemed “outstanding” for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant

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Defeasance means that, with respect to the outstanding Notes and the Guarantees, the Issuer and the Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant 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 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes and the Guarantees shall be unaffected thereby. In addition, upon the Issuer’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(c) (solely with respect to the covenants that are released upon a Covenant Defeasance), 6.01(d), 6.01(e), 6.01(h) and 6.01(i) hereof shall not constitute Events of Default.
SECTION 8.04      Conditions to Legal or Covenant Defeasance . The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes:
(a)      the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, U.S. dollar-denominated Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest due on the Notes on the stated maturity date or on the Redemption Date, as the case may be, of such principal, premium, if any, or interest on such Notes and the Issuer must specify whether such Notes are being defeased to maturity or to a particular Redemption Date; provided , that upon any redemption that requires the payment of the Applicable Premium, the amount deposited shall be sufficient for purposes of this Indenture to the extent that an amount is deposited with the Trustee equal to the Applicable Premium calculated as of the date of the notice of redemption, with any deficit as of the Redemption Date (any such amount, the “ Applicable Premium Deficit ”) only required to be deposited with the Trustee on or prior to the Redemption Date. Any Applicable Premium Deficit shall be set forth in an Officer’s Certificate delivered to the Trustee simultaneously with the deposit of such Applicable Premium Deficit that confirms that such Applicable Premium Deficit shall be applied toward such redemption;
(b)      in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions
(i)      the Issuer has received from, or there has been published by, the U.S. Internal Revenue Service a ruling or
(ii)      since the issuance of the Notes, there has been a change in the applicable U.S. federal income tax law,

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in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, subject to customary assumptions and exclusions, the Holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes, as applicable, as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;
(c)      in the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, the Holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to such 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;
(d)      no Default (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness and, in each case, the granting of Liens in connection therewith) shall have occurred and be continuing on the date of such deposit;
(e)      the Issuer shall have delivered to the Trustee an Officer’s Certificate stating that the deposit was not made by the Issuer with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuer or any Guarantor or others; and
(f)      the Issuer shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel (which Opinion of Counsel may be subject to customary assumptions and exclusions) each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with.
SECTION 8.05      Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions . Subject to Section 8.06 hereof, all money and Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the “Trustee”) pursuant to Section 8.04 hereof in respect of the outstanding 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 (including the Issuer or a Guarantor acting as 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 and interest, but such money need not be segregated from other funds except to the extent required by law.
The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or Government Securities deposited pursuant to

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Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article VIII to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuer from time to time upon the request of the Issuer any money or Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06      Repayment to Issuer . Subject to any applicable abandoned property law, any money deposited with the Trustee or any Paying Agent, or then held by the Issuer, in trust for the payment of the principal of, 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 Issuer on its request or (if then held by the Issuer) shall be discharged from such trust; and the Holder of such Note shall thereafter look only to the Issuer for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuer as trustee thereof, shall thereupon cease.
SECTION 8.07      Reinstatement . If the Trustee or Paying Agent is unable to apply any United States dollars or Government Securities in accordance with Section 8.02 or 8.03 hereof, 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 Issuer’s and the Guarantors’ obligations under this Indenture and the Notes and the Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided that, if the Issuer makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE IX
    

AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01      Without Consent of Holders . Notwithstanding Section 9.02 hereof, the Issuer and the Trustee may amend or supplement this Indenture, any Guarantee or the Notes or any Collateral Document without the consent of any Holder:
(a)      to cure any ambiguity, omission, mistake, defect or inconsistency;
(b)      to provide for uncertificated Notes in addition to or in place of certificated Notes;

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(c)      to comply with Section 5.01 hereof;
(d)      to provide the assumption of the Company’s, the Issuer’s or other Guarantor’s obligations to the Holders;
(e)      to make any change that would provide any additional rights or benefits to the Holders or that does not materially adversely affect the legal rights under this Indenture of any such Holder;
(f)      to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Issuer or any Guarantor;
(g)      to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act;
(h)      to evidence and provide for the acceptance and appointment under this Indenture of a successor Trustee hereunder pursuant to the requirements hereof;
(i)      to add a Guarantor under this Indenture;
(j)      to conform the text of this Indenture, Guarantees, Collateral Documents or the Notes to any provision of the “Description of Notes” section of the Offering Memorandum to the extent that such provision in such “Description of Notes” section was intended to be a verbatim recitation of a provision of this Indenture, Guarantee, Collateral Documents or Notes, as provided in an Officer’s Certificate; or
(k)      to make any amendment to the provisions of this Indenture relating to the transfer and legending of Notes as permitted by this Indenture, including, without limitation, to facilitate the issuance and administration of the Notes; provided that (a) compliance with this Indenture as so amended would not result in Notes being transferred in violation of the Securities Act or any applicable securities law and (b) such amendment does not materially and adversely affect the rights of Holders to transfer Notes.
Upon the request of the Issuer and receipt by the Trustee of the documents described in Section 7.02 hereof (to the extent requested by the Trustee), the Trustee shall join with the Issuer and the Guarantors in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall have the right, but not be obligated to, enter into such amended or supplemental indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Notwithstanding the foregoing, neither an Opinion of Counsel nor an Officer’s Certificate shall be required in connection with the addition of a Guarantor under this Indenture upon execution and delivery by such Guarantor and the Trustee of a supplemental indenture to this Indenture, the form of which is attached as Exhibit D hereto.

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SECTION 9.02      With Consent of Holders . Except as provided below in this Section 9.02, the Issuer, the Guarantors and the Trustee may amend or supplement this Indenture, the Notes, the Collateral Documents and the Guarantees with the consent of the Holders of at least a majority in principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Guarantees, the Collateral Documents or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes); Section 2.08 hereof and Section 2.09 hereof shall determine which Notes are considered to be “outstanding” for the purposes of this Section 9.02.
Upon the request of the Issuer and the delivery to the Trustee of evidence satisfactory to the Trustee of the consent of the Holders as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof (to the extent requested by the Trustee), the Trustee shall join with the Issuer and the Guarantors in the execution of such amended or supplemental indenture unless such amended or supplemental indenture directly affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Issuer shall deliver to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Issuer to deliver such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental indenture or waiver.
Without the consent of each affected Holder of Notes, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder):
(a)      reduce the principal amount of such Notes whose Holders must consent to an amendment, supplement or waiver;
(b)      reduce the principal of or change the fixed final maturity of any such Note or alter or waive the provisions with respect to the redemption of such Note (other than provisions relating to Section 4.10 and Section 4.14 hereof);
(c)      reduce the rate of or change the time for payment of interest on any Note;

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(d)      waive a Default in the payment of principal of or premium, if any, or interest on the Notes, except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration, or in respect of a covenant or provision contained in this Indenture or any Guarantee which cannot be amended or modified without the consent of all affected Holders;
(e)      make any Note payable in money other than that stated therein;
(f)      make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders to receive payments of principal of or premium, if any, or interest on the Notes;
(g)      make any change in these amendment and waiver provisions;
(h)      impair the contractual right of any Holder to receive payment of principal of, or premium, if any, or interest on such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes;
(i)      make any change to or modify the ranking of the Notes that would adversely affect the Holders; or
(j)      except as expressly permitted by this Indenture, modify the Guarantees of any Significant Subsidiary in any manner adverse to the Holders.
In addition, without the consent of at least two-thirds in aggregate principal amount of Notes then outstanding, an amendment, supplement or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder) modify any Collateral Document or the provisions of this Indenture dealing with the Collateral Documents, or application of trust money in any manner, in each case, that would subordinate the Lien of the Collateral Agent to the Liens securing any other Obligations or otherwise release all or substantially all of the Collateral, in each case other than in accordance with this Indenture, the Collateral Documents and the First Lien Intercreditor Agreement.
SECTION 9.03      [Reserved].
SECTION 9.04      Revocation and Effect of Consents . Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the amendment, supplement or waiver becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.

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The Issuer 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. If a record date is fixed, then, notwithstanding the preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only such Persons, shall be entitled to consent to such amendment, supplement, or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date unless the consent of the requisite number of Holders has been obtained.
SECTION 9.05      Notation on or Exchange of Notes . The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Issuer in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06      Trustee to Sign Amendments, etc . The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article IX if the amendment, supplement or waiver does not adversely affect the rights, duties, liabilities or immunities of the Trustee. In executing any amendment, supplement or waiver, the Trustee shall receive, and shall be fully protected in relying conclusively upon, in addition to the documents required by Section 14.04 hereof, an Officer’s Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture and that such amendment, supplement or waiver is the legal, valid and binding obligation of the Issuer and any Guarantors party thereto, enforceable against them in accordance with its terms, subject to customary exceptions, and complies with the provisions hereof. Notwithstanding the foregoing, except as required by Section 4.15 hereof, an Opinion of Counsel will not be required for the Trustee to execute any amendment or supplement adding a new Guarantor under this Indenture.
ARTICLE X
    

INTERCREDITOR AGREEMENT
SECTION 10.01      Intercreditor Agreement .
Each Holder, by accepting a Note, has authorized the Trustee and the Collateral Agent to enter into (i) the First Lien Intercreditor Agreement on behalf of the Holders and (ii) an intercreditor agreement governing any Indebtedness or other obligations secured by Liens that are junior to the Liens securing the Notes (including Permitted Junior Secured Refinancing Debt, “ Junior Lien Debt ”) substantially in the form of Exhibit E attached hereto (the “ Second Lien Intercreditor Agreement ” and together with the First Lien Intercreditor Agreement, the “ Intercreditor Agreements ”), and agrees that the Holders shall comply with the provisions of the

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Intercreditor Agreements applicable to them in their capacities as such to the same extent as if the Holders were parties thereto.
Neither the Trustee nor the Collateral Agent shall have any liability to any Person for complying with the terms of this Article X.
ARTICLE XI
    

COLLATERAL
SECTION 11.01      Collateral Documents .
The Notes Obligations are secured as provided in the Collateral Documents and will be secured by Collateral Documents hereafter. The Issuer shall, and shall cause each Subsidiary Guarantor to, and each Subsidiary Guarantor shall, make all filings (including filings of continuation statements and amendments to UCC financing statements that may be necessary to continue the effectiveness of such UCC financing statements) necessary to maintain or establish (at the sole cost and expense of the Issuer and the Subsidiary Guarantors) the security interest created by the Collateral Documents in the Collateral as a perfected security interest to the extent perfection is required by the Collateral Documents, subject only to Permitted Liens.
SECTION 11.02      Collateral Agent .
(a)      The Collateral Agent shall have all the rights and protections provided in the Collateral Documents and, additionally, shall have all the rights and protections provided to the “Trustee” under Article VII.
(b)      Subject to Section 7.01, none of the Collateral Agent, Trustee, Paying Agent, Registrar or Transfer Agent nor any of their respective officers, directors, employees, attorneys or agents will be responsible or liable for the existence, genuineness, value or protection of any Collateral, for the legality, enforceability, effectiveness or sufficiency of the Collateral Documents, for the creation, perfection, priority, sufficiency or protection of any Liens on the Collateral securing the Notes, or any defect or deficiency as to any such matters.
(c)      Except as required or permitted by the Collateral Documents, the Holders, by accepting a Note, acknowledge that the Collateral Agent will not be obligated:
(i)      to act upon directions purported to be delivered to it by any Person, except in accordance with the Collateral Documents;
(ii)      to foreclose upon or otherwise enforce any Liens on the Collateral securing the Notes; or
(iii)      to take any other action whatsoever with regard to any or all of the Liens on the Collateral securing the Notes, Collateral Documents or Collateral.

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SECTION 11.03      Authorization of Actions to Be Taken .
(a)      Each Holder of Notes, by its acceptance thereof, consents and agrees to the terms of each Collateral Document, as originally in effect and as amended, supplemented or replaced from time to time in accordance with its terms or the terms of this Indenture, authorizes and directs the Trustee and the Collateral Agent to enter into the Collateral Documents to which it is a party, authorizes and empowers the Collateral Agent to execute and deliver the Intercreditor Agreements and authorizes and empowers the Collateral Agent to bind the Holders of Notes as set forth in the Collateral Documents to which the Collateral Agent is a party and the Intercreditor Agreements and to perform its obligations and exercise its rights and powers thereunder.
(b)      The Trustee is authorized and empowered to receive for the benefit of the Holders of Notes any funds collected or distributed to the Collateral Agent under the Collateral Documents to which the Trustee is a party and, subject to the terms of the Collateral Documents, to make further distributions of such funds to the Holders of Notes according to the provisions of this Indenture.
(c)      Subject to the provisions of Section 7.01, Section 7.02, and the Collateral Documents, the Trustee may, in its sole discretion and without the consent of the Holders (but subject to the Intercreditor Agreements), direct, on behalf of the Holders, the Collateral Agent to take all actions it deems necessary or appropriate in order to:
(i)      foreclose upon or otherwise enforce any or all of the Liens on the Collateral securing the Notes;
(ii)      enforce any of the terms of the Collateral Documents to which the Collateral Agent is a party; or
(iii)      collect and receive payment of any and all Obligations.
Subject to the First Lien Intercreditor Agreement and at the Company’s sole cost and expense, the Trustee is hereby authorized and empowered by each Holder of Notes (by its acceptance thereof) to institute and maintain, or direct the Collateral Agent to institute and maintain, such suits and proceedings as it may deem reasonably expedient to protect or enforce the Liens on the Collateral securing the Notes or the Collateral Documents to which the Collateral Agent or Trustee is a party or to prevent any impairment of Collateral by any acts that may be unlawful or in violation of the Collateral Documents or this Indenture, and such suits and proceedings as the Trustee may deem reasonably expedient, at the Company’s sole cost and xpense, to preserve or protect its interests and the interests of the Holders of Notes in the Collateral, including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the Liens on the Collateral securing the Notes or be prejudicial to the interests of the Holders or the Trustee.

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SECTION 11.04      Release or Modification of Collateral .
(a)
     The property and other assets constituting Collateral will automatically be released and discharged (or modified, to the extent applicable) from the Liens securing the Notes and the Obligations under any one or more of the following circumstances:
(i)      to enable the Issuer and the Subsidiary Guarantors to consummate the sale, transfer, exchange or other disposition of such property or assets to a person that is not the Issuer or a Subsidiary Guarantor to the extent not prohibited under Section 4.10 hereof or permitted under Section 5.01 hereof;
(ii)      upon the release or discharge (or modification, to the extent applicable) of the security interest granted by the Issuer or such Subsidiary Guarantor to secure the obligations under the AIO Credit Agreement other than in connection with a release or discharge of the Liens securing all Credit Facilities (including the AIO Credit Agreement);
(iii)      in accordance with the terms of the First Lien Intercreditor Agreement;
(iv)      in respect of the property and assets of a Subsidiary Guarantor, upon the designation by the Company of any Restricted Subsidiary that is a Subsidiary Guarantor as an Unrestricted Subsidiary;
(v)      upon (i) payment in full of the principal of, together with accrued and unpaid interest on, the Notes and all other Obligations under this Indenture, the Guarantees and the Collateral Documents that are due and payable at or prior to the time such principal, together with accrued and unpaid interest, is due or (ii) a Legal Defeasance or Covenant Defeasance in accordance with Article VIII hereof or satisfaction and discharge of this Indenture in accordance with Article XIII hereof; and
(vi)      pursuant to Section 9.02 hereof.
(b)      Upon the request of the Issuer pursuant to an Officers’ Certificate and an Opinion of Counsel certifying that all conditions precedent hereunder have been met and stating whether or not such release is in connection with a sale or disposition of assets and (at the sole cost and expense of the Issuer), the Collateral Agent will release Collateral that is sold, conveyed or disposed of in compliance with the provisions of this Indenture.
(c)      Notwithstanding anything to the contrary contained herein, at any time the Trustee or Collateral Agent is requested to acknowledge or execute a release of Collateral, the Trustee and/or the Collateral Agent shall be entitled to receive an Officers’ Certificate and an Opinion of Counsel that all conditions precedent in this Indenture, the Intercreditor Agreements and the Collateral Documents to such release have been complied with. The Trustee may, to the extent permitted by Sections 7.01 and 7.02 hereof, accept as conclusive

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evidence of compliance with the foregoing provisions the appropriate statements contained in such documents. Upon receipt of such documents the Collateral Agent shall execute, deliver or acknowledge any instruments of termination, satisfaction or release reasonably requested of it to evidence the release of any Collateral permitted to be released pursuant to this Indenture or the Collateral Documents.
SECTION 11.05      [Reserved].
SECTION 11.06      Powers Exercisable by Receiver or Trustee . In case the Collateral shall be in the possession of a receiver or trustee, lawfully appointed, the powers conferred in this Article XI upon the Issuer or a Subsidiary Guarantor with respect to the release, sale or other disposition of such property may be exercised by such receiver or trustee, and an instrument signed by such receiver or trustee shall be deemed the equivalent of any similar instrument of the Issuer or a Subsidiary Guarantor or of any officer or officers thereof required by the provisions of this Article XI, and if the Trustee or the Collateral Agent shall be in the possession of the Collateral under any provision of this Indenture, then such powers may be exercised by the Trustee or the Collateral Agent, as the case may be.
SECTION 11.07      Authorization of Receipt of Funds by the Trustee Under the Collateral Documents . The Trustee is authorized to receive any funds for the benefit of Holders distributed under the Collateral Documents, and, subject to the Intercreditor Agreements, to make further distributions of such funds to the Holders of Notes according to the provisions of this Indenture.
SECTION 11.08      Release upon Termination of the Issuer’s Obligations .
In the event (i) that the Issuer delivers to the Trustee, in form and substance acceptable to it, an Officers’ Certificate and Opinion of Counsel certifying that all the obligations under this Indenture and the Notes have been satisfied and discharged by the payment in full of the Issuer’s Notes Obligations and this Indenture, and all such Notes Obligations have been so satisfied, or (ii) a discharge, legal defeasance or covenant defeasance of this Indenture occurs under Articles VIII or XIII, the Trustee shall deliver to the Issuer and the Collateral Agent a notice stating that the Trustee, on behalf of the Holders, disclaims and gives up any and all rights it has in or to the Collateral, and any rights it has under the Collateral Documents, and upon receipt by the Collateral Agent of such notice, the Collateral Agent shall be deemed not to hold a Lien in the Collateral on behalf of the Trustee and each of the Trustee and the Collateral Agent shall do or cause to be done all acts reasonably necessary to release such Lien as soon as is reasonably practicable.
SECTION 11.09      Trustee’s Duties with Respect to Collateral .
(a)      Beyond the exercise of reasonable care in the custody thereof, neither the Trustee nor the Collateral Agent shall have any duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to preservation of rights against prior parties or any other rights pertaining thereto. Neither the Trustee nor the Collateral Agent shall be responsible for filing any financing or continuation

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statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any security interest in the Collateral. The Trustee and/or the Collateral Agent shall be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property and shall not be liable or responsible for any loss or diminution in the value of any of the Collateral, by reason of the act or omission of any carrier, forwarding agency or other agent or bailee selected by the Trustee or the Collateral Agent in good faith.
(b)      Neither the Trustee nor the Collateral Agent shall be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Liens in any of the Collateral, whether impaired by operation of law or by reason of any action or omission to act on its part hereunder, except to the extent such action or omission constitutes negligence or willful misconduct on the part of the Trustee or gross negligence or willful misconduct on the part of the Collateral Agent, for the validity or sufficiency of the Collateral or any agreement or assignment contained therein, for the validity of the title of the Issuer to the Collateral, for insuring the Collateral or for the payment of taxes, charges, assessments or Liens upon the Collateral or otherwise as to the maintenance of the Collateral. Neither the Trustee nor the Collateral Agent shall have any duty to ascertain or inquire as to the performance or observance of any of the terms of this Indenture or the Collateral Documents by the Issuer or the Subsidiary Guarantors.
SECTION 11.10      Intercreditor Agreements . Notwithstanding anything herein to the contrary, the security interests granted pursuant to the Collateral Documents in connection with this Indenture or the terms of any other Collateral Document, certain other rights and privileges, and the exercise of any right or remedy by the Trustee hereunder or by the Collateral Agent under the Collateral Documents are subject to the provisions of the First Lien Intercreditor Agreement and the Second Lien Intercreditor Agreement. In the event of any conflict between the terms of the Intercreditor Agreements and this Indenture or any other Collateral Document, the terms of the Intercreditor Agreements shall control.
ARTICLE XII
    

GUARANTEES
SECTION 12.01      Guarantee . Subject to this Article XII, each of the Guarantors hereby, jointly and severally, irrevocably and unconditionally guarantees, on a senior secured basis (or, in the case of the Company, a senior unsecured basis), to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Issuer hereunder or thereunder, that: (a) the principal of and interest and premium, if any, on the Notes shall be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Issuer to the Holders or the Trustee hereunder or thereunder shall be promptly paid in full, all in accordance with the terms hereof and thereof;

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and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same shall be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof, the recovery of any judgment against the Issuer, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor (other than payment in full of all of the Obligations of the Issuer hereunder and under the Notes). Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest, notice and all demands whatsoever and covenants that this Guarantee shall not be discharged except by full payment of the obligations contained in the Notes and this Indenture or by release in accordance with the provisions of this Indenture.
Each Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys’ fees) incurred by the Trustee or any Holder in enforcing any rights under this Section 12.01.
If any Holder or the Trustee is required by any court or otherwise to return to the Issuer, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Issuer or the Guarantors, any amount paid either to the Trustee or such Holder, then this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article VI hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article VI hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. The Guarantors shall have the right to seek contribution from any nonpaying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantees.
Each Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Issuer for liquidation, reorganization, should the Issuer become insolvent or make an assignment for the benefit of creditors or should a receiver

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or trustee be appointed for all or any significant part of the Issuer’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 of the Notes are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Notes or Guarantees, whether as a “voidable preference,” “fraudulent transfer” or otherwise, all as though such payment 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.
In case any provision of any Guarantee 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.
The Guarantee issued by any Guarantor shall be a secured (or, in the case of the Company, an unsecured) senior obligation of such Guarantor and shall be pari passu in right of payment with all existing and future Senior Indebtedness of such Guarantor, if any.
Each payment to be made by a Guarantor in respect of its Guarantee shall be made without set-off, counterclaim, reduction or diminution of any kind or nature.
SECTION 12.02      Limitation on Guarantor Liability . Each Guarantor, and by its acceptance of the Notes, each Holder, hereby confirms that it is the intention of all such parties that the Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of each Guarantor shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article XII, result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent conveyance or fraudulent transfer under applicable law. Each Guarantor that makes a payment under its Guarantee shall be entitled upon payment in full of all guaranteed obligations under this Indenture to a contribution from each other Guarantor in an amount equal to such other Guarantor’s pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with GAAP.
SECTION 12.03      Execution and Delivery .
Each Guarantor hereby agrees that its Guarantee set forth in Section 12.01 hereof shall remain in full force and effect notwithstanding the absence of the endorsement of any notation of such Guarantee on the Notes.
If an Officer whose signature is on this Indenture no longer holds that office at the time the Trustee authenticates the Note, the Guarantee shall be valid nevertheless.

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The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this Indenture on behalf of the Guarantors.
If required by Section 4.15 hereof, the Issuer shall cause any newly created or acquired Restricted Subsidiary to comply with the provisions of Section 4.15 hereof and this Article XII, to the extent applicable.
SECTION 12.04      Subrogation . Each Guarantor shall be subrogated to all rights of Holders against the Issuer in respect of any amounts paid by any Guarantor pursuant to the provisions of Section 12.01 hereof; provided that, if an Event of Default has occurred and is continuing, no Guarantor shall be entitled to enforce or receive any payments arising out of, or based upon, such right of subrogation until all amounts then due and payable by the Issuer under this Indenture or the Notes shall have been paid in full.
SECTION 12.05      Benefits Acknowledged . Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the guarantee and waivers made by it pursuant to its Guarantee are knowingly made in contemplation of such benefits.
SECTION 12.06      Release of Guarantees . (a) The Guarantee of API will automatically and unconditionally be released without the need for any further action by any party upon written notice from the Issuer to the Trustee (i) if API merges or consolidates with the Issuer or a Subsidiary Guarantor, (ii) upon Legal Defeasance or Covenant Defeasance of the Notes or (iii) upon satisfaction and discharge of the Notes in accordance with Article XIII.
(b)      The Guarantee of a Subsidiary Guarantor shall be automatically and unconditionally released and discharged, and such Subsidiary Guarantor’s obligations under the Guarantee, this Indenture, the Collateral Documents and the First Lien Intercreditor Agreement will be automatically and unconditionally released and discharged, without the need for any action by any party:
(i)      (A)     in connection with any sale, exchange, transfer or other disposition of Capital Stock of the applicable Subsidiary Guarantor (including by way of consolidation or merger or otherwise) after which such Subsidiary Guarantor is no longer a Restricted Subsidiary of API or the sale, exchange, transfer or other disposition of all or substantially all the assets (other than by lease) of such Subsidiary Guarantor, whether or not such Subsidiary Guarantor is the surviving corporation in such transaction, to a Person which is not the Issuer or a Restricted Subsidiary of API, provided that such sale, exchange, transfer or other disposition complies with Sections 4.07 and 4.10 hereof;
(B)      in connection with the merger or consolidation of a Subsidiary Guarantor with API, the Issuer or any other Subsidiary Guarantor;

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(C)      the release or discharge of the guarantee by such Subsidiary Guarantor of Indebtedness under the AIO Credit Agreement, or the release or discharge of such other guarantee that resulted in the creation of such Guarantee, except a discharge or release by or as a result of payment under such guarantee (it being understood that a release subject to a contingent reinstatement is still a release, and that if any such guarantee is so reinstated, such Guarantee shall also be reinstated to the extent that such Subsidiary Guarantor would then be required to provide a Guarantee pursuant to Section 4.15);
(D)      if the Issuer designates any Restricted Subsidiary that is a Subsidiary Guarantor as an Unrestricted Subsidiary;
(E)      upon the Legal Defeasance or Covenant Defeasance or the satisfaction and discharge of the Company’s obligations under this Indenture; or
(F)      upon a liquidation or dissolution of a Subsidiary Guarantor permitted under this Indenture; and
(ii)      the Company delivering to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in this Indenture relating to release and discharge of such Subsidiary Guarantor’s Guarantee have been complied with.
(c)      Notwithstanding any other provision in this Indenture, any Subsidiary Guarantor may be liquidated at any time, so long as all assets owned by such entity which constitute Collateral remain Collateral owned by the Issuer or a Subsidiary Guarantor following any such liquidation. Upon the release of a Guarantee in accordance with the terms of this Indenture, all Collateral owned by the related Guarantor will also be automatically released.
ARTICLE XIII
    

SATISFACTION AND DISCHARGE
SECTION 13.01      Satisfaction and Discharge . This Indenture shall be discharged and shall cease to be of further effect as to all Notes, when either:
(a)      all Notes theretofore authenticated and delivered, except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has heretofore been deposited in trust, have been delivered to the Trustee for cancellation; or
(b)      (i)     all Notes not theretofore delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise, will become due and payable within one year 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

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the Issuer, and the Issuer or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, U.S. dollar-denominated Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest to pay and discharge the entire indebtedness on the Notes not theretofore delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to the date of maturity or redemption; provided that upon any redemption that requires the payment of the Applicable Premium, the amount deposited shall be sufficient for purposes of this Indenture to the extent that an amount is deposited with the Trustee equal to the Applicable Premium calculated as of the date of the notice of redemption, with any Applicable Premium Deficit only required to be deposited with the Trustee on or prior to the Redemption Date. Any Applicable Premium Deficit shall be set forth in an Officer’s Certificate delivered to the Trustee simultaneously with the deposit of such Applicable Premium Deficit that confirms that such Applicable Premium Deficit shall be applied toward such redemption;
(ii)      the Issuer has paid or caused to be paid all sums payable by it under this Indenture; and
(iii)      the Issuer has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or the Redemption Date, as the case may be.
In addition, the Issuer must deliver an Officer’s Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.
Notwithstanding the satisfaction and discharge of this Indenture, if money shall have been deposited with the Trustee pursuant to subclause (i) of clause (b) of this Section 13.01, the provisions of Section 13.02 and Section 8.06 hereof shall survive such satisfaction and discharge.
SECTION 13.02      Application of Trust Money . Subject to the provisions of Section 8.06 hereof, all money deposited with the Trustee pursuant to Section 13.01 hereof 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 (including the Issuer or a Guarantor acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law.
If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 13.01 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuer’s and any Guarantor’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred

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pursuant to Section 13.01 hereof; provided that if the Issuer has made any payment of principal of, premium, if any, or interest on any Notes because of the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent.
ARTICLE XIV
    

MISCELLANEOUS
SECTION 14.01      [Reserved]
SECTION 14.02      Notices . Any notice or communication by the Issuer, any Guarantor or the Trustee to the others is duly given if in writing and delivered in person or mailed by first-class mail (registered or certified, return receipt requested), facsimile transmission, other electronic transmission or overnight air courier guaranteeing next day delivery, to the others’ address:
If to the Issuer and/or any Guarantor:

Avon Products, Inc.
777 Third Avenue
New York, NY 10017
Attention: James S. Scully
Fax No.: 646-867-0041
with a copy to:

White & Case LLP
1155 Avenue of the Americas
New York, NY 10036-2787
Attention: Daniel Nam
Fax No.: 212-354-8113
If to the Trustee:

Deutsche Bank Trust Company Americas
Trust & Agency Services
60 Wall Street, 16th Floor
Mail Stop: NYC60-1630
New York, New York 10005
Attn: Corporates Team Deal Manager – Avon International
Fax: 732-578-4635
With a copy to:

Deutsche Bank Trust Company Americas

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c/o Deutsche Bank National Trust Company
Trust & Agency Services
100 Plaza One, Mailstop JCY03-0699
Jersey City, New Jersey 07311
Attn: Corporates Team Deal Manager – Avon International
Fax: 732-578-4635
The Company, the Issuer, any Subsidiary Guarantor or the Trustee, by notice to the others, may designate additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five calendar days after being deposited in the mail, postage prepaid, if mailed by first-class mail; when receipt acknowledged, if faxed or delivered by other electronic submission; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery; provided that any notice or communication delivered to the Trustee shall be deemed effective upon actual receipt thereof.
Any notice or communication to a Holder shall be electronically delivered, mailed by first-class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the Note Register kept by the Registrar. Failure to deliver a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is delivered in the manner provided above within the time prescribed, such notice or communication shall be deemed duly given, whether or not the addressee receives it.
If the Issuer delivers a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time.
SECTION 14.03      [Reserved].
SECTION 14.04      Certificate and Opinion as to Conditions Precedent . Upon any request or application by the Issuer or any of the Guarantors to the Trustee to take any action under this Indenture, the Issuer or such Guarantor, as the case may be, shall furnish to the Trustee:
(a)      An Officer’s Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 14.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and
(b)      An Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 14.05 hereof) stating

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that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied.
SECTION 14.05      Statements Required in Certificate or Opinion . Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to Section 4.04 hereof) shall include:
(a)     a statement that the Person making such certificate or opinion has read such covenant or condition;
(b)      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;
(c)      a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with (and, in the case of an Opinion of Counsel, may be limited to reliance on an Officer’s Certificate as to matters of fact); and
(d)      a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with.
SECTION 14.06      Rules by Trustee and Agents . The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.
SECTION 14.07      No Personal Liability of Directors, Officers, Employees and Stockholders . No past, present or future director, officer, employee, incorporator or stockholder of API, the Issuer or any other Guarantor or any of their parent companies (other than the Issuer and the Guarantors) shall have any liability for any obligations of API, the Issuer or the other Guarantors under the Notes, the Guarantees, this Indenture or the Collateral Documents or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder by accepting Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.
SECTION 14.08      Governing Law . THIS INDENTURE, THE NOTES AND ANY GUARANTEE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 14.09      Waiver of Jury Trial . EACH OF THE ISSUER, THE GUARANTORS, AND THE TRUSTEE 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 INDENTURE, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY.

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SECTION 14.10      Force Majeure . In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations under this Indenture arising out of or caused by, directly or indirectly, forces beyond its reasonable 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 or hardware) services.
SECTION 14.11      No Adverse Interpretation of Other Agreements . This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Issuer or its Restricted Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 14.12      Successors . All agreements of the Issuer in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. All agreements of each Guarantor in this Indenture shall bind its successors, except as otherwise provided in Section 12.06 hereof.
SECTION 14.13      Severability . 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 14.14      Counterpart Originals . The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. The exchange of copies of this Indenture and of signature pages by facsimile or PDF transmissions 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 14.15      Table of Contents, Headings, etc. The Table of Contents and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof.
SECTION14.16      U.S.A. Patriot Act . In order to comply with the laws, rules, regulations and executive orders in effect from time to time applicable to banking institutions, including, without limitation, those relating to the funding of terrorist activities and money laundering, including Section 326 of the USA PATRIOT Act of the United States (“ Applicable Law ”), the Trustee and Agents are required to obtain, verify, record and update certain information relating to individuals and entities which maintain a business relationship with the Trustee and Agents. Accordingly, each of the parties agree to provide to the Trustee and Agents, upon their request from time to time, such identifying information and documentation as may be available for such party in order to enable the Trustee and Agents to comply with Applicable Law.
[Signatures on following page]

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AVON INTERNATIONAL OPERATIONS, INC. ,
as Issuer
By:
    
Name: Robert Loughran
Title: President

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AVON PRODUCTS, INC. ,
as Guarantor
By:
    
Name: James S. Scully
Title: Executive Vice President, Chief Operating Officer and Chief Financial Officer
AVON CAPITAL CORPORATION ,
as Guarantor
By:
    
Name: Robert Loughran
Title: President

Signature Page to Indenture (Senior Secured Notes)


DEUTSCHE BANK TRUST COMPANY AMERICAS ,
as Trustee
By: Deutsche Bank National Trust Company
By:
    
Name:
Title:
By:
    
Name:
Title:



Signature Page to Indenture (Senior Secured Notes)



DEUTSCHE BANK TRUST COMPANY AMERICAS ,
as Collateral Agent
By: Deutsche Bank National Trust Company
By:
    
Name:
Title:
By:
    
Name:
Title:




Signature Page to Indenture (Senior Secured Notes)


EXHIBIT A
CUSIP/ISIN_________
[RULE 144A][REGULATION S] GLOBAL NOTE
[legend]
7.875% Senior Secured Notes due 2022
No. ___    $[US$ ]
AVON INTERNATIONAL OPERATIONS, INC.
promises to _____ pay to or registered assigns,
the principal sum of ___________ DOLLARS on August 15, 2022.
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
Dated: _________, 20__
AVON INTERNATIONAL OPERATIONS, INC.
By:
    
Name:
Title:
This is one of the Notes referred to
in the within-mentioned Indenture:
DEUTSCHE BANK TRUST COMPANY AMERICAS,
as Trustee
By: Deutsche Bank National Trust Company
By:
        
Authorized Signatory

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[Back of Note]
7.875% Senior Secured Note due 2022
[Insert placeholders for the various legends]
Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.
1.    INTEREST. Avon International Operations, Inc. (the “ Issuer ”) promises to pay interest on the principal amount of this Note at a rate per annum of 7.875% from August 15, 2016 until maturity. The Issuer will pay interest on this Note semi-annually in arrears on February 15 and August 15 of each year or, if any such day is not a Business Day, on the next succeeding Business Day (each, an “ Interest Payment Date ”). The Issuer will make each interest payment to the Holder of record of this Note on the immediately preceding February 1 and August 1 (each, a “ Record Date ”). Interest on this Note will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that the first Interest Payment Date shall be February 15, 2017. The Issuer will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at the rate borne by this Note; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the rate borne by this Note. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.
2.    METHOD OF PAYMENT. The Issuer will pay interest on this Note to the Person who is the registered Holder of this Note at the close of business on the Record Date (whether or not a Business Day) next preceding the Interest Payment Date, even if this Note is cancelled after such Record Date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. Payment of interest may be made by check mailed to the Holders at their addresses set forth in the Note Register, provided that (a) all payments of principal, premium, if any, and interest on, Notes represented by Global Notes registered in the name of or held by DTC or its nominee will be made by wire transfer of immediately available funds to the accounts specified by the Holder or Holders thereof and (b) all payments of principal, premium, if any, and interest with respect to certificated Notes will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.
3.    PAYING AGENT AND REGISTRAR. Initially, Deutsche Bank Trust Company Americas, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Issuer may change any Paying Agent or Registrar without notice to the Holders. The Issuer or any of its Subsidiaries may act in any such capacity.

A-2


4.    INDENTURE. The Issuer issued the Notes under a Senior Secured Notes Indenture, dated as of August 15, 2016 (the “ Indenture ”), among the Issuer, the Guarantors party thereto, the Trustee and the Collateral Agent. The Issuer shall be entitled to issue Additional Notes pursuant to Sections 2.01, 4.09 and 4.12 of the Indenture. The terms of the Notes include those stated in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.
5.    OPTIONAL REDEMPTION.
(a)    At any time prior to August 15, 2019, the Issuer may on one or more occasions redeem all or a part of the Notes, upon notice as described under Section 3.03 of the Indenture at a redemption price equal to the sum of (i) 100.0% of the principal amount of the Notes redeemed, plus (ii) the Applicable Premium as of the date of redemption plus (iii) accrued and unpaid interest, if any, to the date of redemption (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.
(b)    At any time prior to August 15, 2019, the Issuer may, at its option and on one or more occasions, redeem up to 35.0% of the aggregate principal amount of Notes and Additional Notes issued under the Indenture at a redemption price equal to 107.875% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the Redemption Date, subject to the right of Holders of Notes of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date, with the net cash proceeds received by it from one or more Equity Offerings; provided that (a) at least 65.0% of the aggregate principal amount of Notes originally issued under the Indenture on the Issue Date and any Additional Notes issued under the Indenture after the Issue Date (excluding notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of each such redemption; and (b) each such redemption occurs within 90 days of the date of closing of each such Equity Offering.
(c)    Except pursuant to clause (a) or (b) of Section 3.07 of the Indenture, the Notes will not be redeemable at the Issuer’s option prior to August 15, 2019.
(d)    On and after August 15, 2019, the Issuer may redeem the Notes, in whole or in part, upon notice in accordance with Section 3.03 of the Indenture at the redemption prices (expressed as percentages of principal amount of the Notes to be redeemed) set forth below, 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, if redeemed during the twelve-month period beginning on August 15 of each of the years indicated below:

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Year
Percentage
2019
103.938
%
2020
101.969
%
2021 and thereafter
100.000
%

(e)    Any redemption pursuant to Section 3.07 of the Indenture shall be made pursuant to the provisions of Sections 3.01 through 3.06 of the Indenture.
6.    MANDATORY REDEMPTION. The Issuer will not be required to make any mandatory redemption or sinking fund payments with respect to the Notes. However, under certain circumstances, the Issuer may be required to offer to purchase Notes as described under Sections 4.10 and 4.14 of the Indenture.
7.    NOTICE OF REDEMPTION. Subject to Section 3.03 of the Indenture, the Issuer shall deliver electronically, mail or cause to be mailed by first-class mail notices of redemption at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at such Holder’s registered address or otherwise in accordance with Applicable Procedures, except that redemption notices may be delivered more than 60 days prior to a Redemption Date if the notice is issued in connection with Article VIII or Article XIII of the Indenture.
8.    OFFERS TO REPURCHASE. Upon the occurrence of a Change of Control, the Issuer shall make a Change of Control Offer in accordance with Section 4.14 of the Indenture. In connection with certain Asset Sales, the Issuer shall make an Asset Sale Offer as and when provided in accordance with Sections 3.09 and 4.10 of the Indenture.
9.    DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $2,000 and any integral multiple of $1,000 in excess of $2,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Issuer may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuer need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Issuer need not exchange or register the transfer of any Notes for a period of 15 days before the mailing of a notice of redemption of Notes to be redeemed.
10.    PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes.
11.    AMENDMENT, SUPPLEMENT AND WAIVER. The Indenture, the Guarantees, the Notes or the Collateral Documents may be amended or supplemented as provided in the Indenture.

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12.    DEFAULTS AND REMEDIES. The Events of Default relating to the Notes are defined in Section 6.01 of the Indenture. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25.0% in principal amount of the then outstanding Notes may declare the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable immediately without further action or notice. Holders may not enforce the Indenture, the Notes or the Guarantees except as provided in the Indenture. Subject to certain limitations, Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default (except a Default relating to the payment of principal, premium, if any, or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or and its consequences under the Indenture except a continuing Default in payment of the principal of, premium, if any, or interest on, any of the Notes held by a non-consenting Holder. The Issuer is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Issuer is required within five Business Days after becoming aware of any Default, to deliver to the Trustee a statement specifying such Default and what action the Issuer proposes to take with respect thereto.
13.    AUTHENTICATION. This Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose until authenticated by the manual signature of the Trustee.
14.    GOVERNING LAW. THE INDENTURE, THIS NOTE AND ANY GUARANTEE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
15.    CUSIP AND ISIN NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuer has caused CUSIP and ISIN numbers to be printed on the Notes and the Trustee may use CUSIP and ISIN numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

A-5


The Issuer will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to the Issuer at the following address:
Avon Products, Inc.
777 Third Avenue
New York, NY 10017
Attention: James S. Scully
Fax No.: 646-867-0041

A-6


ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:         
(Insert assignee’s legal name)

(Insert assignee’s soc. sec. or tax I.D. no.)







(Print or type assignee’s name, address and zip code)
and irrevocably appoint     
to transfer this Note on the books of the Issuer. The agent may substitute another to act for him.
Date: ___________
Your Signature:
    
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*:     
*
Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

A-7


OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuer pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box below:
[  ] Section 4.10    [  ] Section 4.14
If you want to elect to have only part of this Note purchased by the Issuer pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased:
$__________
Date: ________
Your Signature:
    
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.:         
Signature Guarantee*:     
*
Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

A-8


SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The initial outstanding principal amount of this Global Note is $____. The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global or Definitive Note for an interest in this Global Note, have been made:
Date of Exchange
Amount of decrease in Principal Amount of this Global Note
Amount of increase in Principal Amount of this Global Note
Principal Amount of this Global Note following such decrease or increase
Signature of authorized signatory of Trustee or Custodian
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

___________________________
*
This schedule should be included only if the Note is issued in global form.




A-9


EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Avon International Operations, Inc.
777 Third Avenue
New York, NY 10017
Attention: Jim S. Scully
Fax No.: 646-867-0041
DB Services Americas. Inc.
5022 Gate Parkway, Suite 200.
Jacksonville, FL, 32256 USA
Attention: Transfer Dept.
Email: dwac.processing@db.com

With copy:

Deutsche Bank Trust Company Americas
c/o Deutsche Bank National Trust Company
100 Plaza One – 6 th Floor
MS: JCY03-0699
Jersey City, New Jersey 07311
Fax: 732-578-4635

Re:    7.875% Senior Secured Notes due 2022
Reference is hereby made to the Senior Secured Notes Indenture, dated as of August 15, 2016 (the “ Indenture ”), between Avon International Operations, Inc., the Guarantors party thereto, the Trustee and the Collateral Agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
_____________ (the “ Transferor ”) owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $_____ in such Note[s] or interests (the “ Transfer ”), to (the “ Transferee ”), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1.    [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE RELEVANT 144A GLOBAL NOTE OR RELEVANT DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the “ Securities Act ”), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believes

B-1


is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States.
2.    [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE RELEVANT REGULATION S GLOBAL NOTE OR RELEVANT DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the applicable Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Indenture and the Securities Act.
3.    [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE RELEVANT DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one):
(a)    [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or
(b)    [ ] such Transfer is being effected to the Issuer or a subsidiary thereof; or
(c)    [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act.

B-2


4.    [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a)    [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.
(b)    [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.
(c)    [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer.
[Insert Name of Transferor]

B-3


By:
    
Name:
Title:
Dated: __________

B-4


ANNEX A TO CERTIFICATE OF TRANSFER
1.    The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a)    [ ] a beneficial interest in the:
(i)    [ ] 144A Global Note ([CUSIP: ]), or
(ii)    [ ] Regulation S Global Note ([CUSIP: ]), or
(iii)    [ ] a Restricted Definitive Note.
2.    After the Transfer the Transferee will hold:
[CHECK ONE]
(a)    [ ] a beneficial interest in the:
(i)    [ ] 144A Global Note ([CUSIP: ]), or
(ii)    [ ] Regulation S Global Note ([CUSIP: ])or
(iii)    [ ] Unrestricted Global Note ([ ] [ ]); or
(b)    [ ] a Restricted Definitive Note; or
(c)    [ ] an Unrestricted Definitive Note, in accordance with the terms of the Indenture.




B-5


EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Avon International Operations, Inc.
777 Third Avenue
New York, NY 10017
Attention: Jim S. Scully
Fax No.: 646-867-0041
DB Services Americas. Inc.
5022 Gate Parkway, Suite 200.
Jacksonville, FL, 32256 USA
Attention: Transfer Dept.
Email: dwac.processing@db.com

With copy:

Deutsche Bank Trust Company Americas
c/o Deutsche Bank National Trust Company
100 Plaza One – 6 th Floor
MS: JCY03-0699
Jersey City, New Jersey 07311
Fax: 732-578-4635

Re:    7.875% Senior Secured Notes due 2022
Reference is hereby made to the Senior Secured Notes Indenture, dated as of August 15, 2016 (the “ Indenture ”), among Avon International Operations Inc., the Guarantors party thereto, the Trustee and the Collateral Agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
_________ (the “ Owner ”) owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $ in such Note[s] or interests (the “ Exchange ”). In connection with the Exchange, the Owner hereby certifies that:
(1)    EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE
(a)    [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted

C-1


Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the “ Securities Act ”), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
(b)    [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
(c)    [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner’s Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
(d)    [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner’s Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner’s own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

C-2


(2)    EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES
(a)    [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner’s beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner’s own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act.
(b)    [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner’s Restricted Definitive Note for a beneficial interest in the [CHECK ONE] [ ] 144A Global Note [ ] Regulation S Global Note, with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner’s own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and are dated         .
[Insert Name of Transferor]
By:
    
Name:
Title:
Dated: __________




C-3


EXHIBIT D
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
Supplemental Indenture (this “ Supplemental Indenture ”), dated as of ______, among _______ (the “ Guaranteeing Subsidiary ”), a subsidiary of Avon Products, Inc., a New York corporation, Avon International Operations, Inc. (the “ Issuer ”) and Deutsche Bank Trust Company Americas, as trustee (the “ Trustee ”).
W I T N E S S E T H
WHEREAS, the Issuer has heretofore executed and delivered to the Trustee a Senior Secured Notes Indenture (the “ Indenture ”), dated as of August 15, 2016, providing for the issuance of an unlimited aggregate principal amount of 7.875% Senior Secured Notes due 2022 (the “ Notes ”);
WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Issuer’s Obligations under the Notes and the Indenture on the terms and conditions set forth herein and under the Indenture (the “ Guarantee ”); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders as follows:
(1)     Capitalized Terms . Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.
(2)     Agreement to Guarantee . The Guaranteeing Subsidiary hereby agrees to provide an unconditional Guarantee on the terms and subject to the conditions set forth in the Indenture including, but not limited to, Article XII thereof.
(3)     No Recourse Against Others . No past, present or future director, officer, employee, incorporator or stockholder of the Issuer or any Guarantor or any of their parent companies (other than the Issuer and the Guarantors) shall have any liability for any obligations of the Issuer or the Guarantors under the Notes, any Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.

D-1


(4)     Governing Law . THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(5)     Counterparts . The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. The exchange of copies of this Supplemental Indenture and of signature pages by facsimile or PDF transmissions 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.
(6)     Effect of Headings . The Section headings herein are for convenience only and shall not affect the construction hereof.
(7)     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 Guaranteeing Subsidiary.
(8)     Successors . All agreements of the Guaranteeing Subsidiary in this Supplemental Indenture shall bind its Successors, except as otherwise provided in this Supplemental Indenture. All agreements of the Trustee in this Supplemental Indenture shall bind its successors.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.
[ GUARANTEEING SUBSIDIARY ]
By:
    
Name:
Title:
AVON INTERNATIONAL OPERATIONS, INC.
By:
    
Name:
Title:
DEUTSCHE BANK TRUST COMPANY AMERICAS , as Trustee

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By:
    
Name:
Title:



EXHIBIT E
[FORM OF]

SECOND LIEN INTERCREDITOR AGREEMENT
dated as of [____], 20[__]

among

AVON INTERNATIONAL OPERATIONS, INC.,

the other Grantors party hereto,
CITIBANK, N.A.,
as Representative for the Credit Agreement Secured Parties,

DEUTSCHE BANK TRUST COMPANY AMERICAS,
as Trustee under the 2016 Notes Indenture,
[________],
as the Initial Second Priority Representative,
and
each additional Representative from time to time party hereto


SECOND LIEN INTERCREDITOR AGREEMENT dated as of [_________], 20[__] (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, this “ Agreement ”), among AVON INTERNATIONAL OPERATIONS, INC., a Delaware corporation (the “ Company ”), the other Grantors (as defined below) from time to time party hereto, CITIBANK, N.A., as Representative for the Credit Agreement Secured Parties (in such capacity, the “ Administrative Agent ”), DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee for the Additional Senior Debt Parties under the 2016 Notes Indenture (the “ 2016 Trustee ”), [INSERT NAME], as Representative for the Initial Second Priority Debt Parties (in such capacity and together with its successors in such capacity, the “ Initial Second Priority Representative ”), and each additional Second Priority Representative and Senior Representative that from time to time becomes a party hereto pursuant to Section 8.09.
In consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Administrative Agent (for itself and on behalf of the Credit Agreement Secured Parties), the 2016 Trustee (for itself and on behalf of the Additional Senior Debt Parties under the 2016 Notes Indenture), the Initial Second Priority Representative (for itself and on behalf of the Initial Second Priority Debt Parties) and each additional Senior Representative (for itself and on behalf of the Additional Senior Debt Parties under the applicable Additional Senior Debt Facility) and each additional Second Priority Representative (for itself and on behalf of the Second Priority Debt Parties under the applicable Second Priority Debt Facility) agree as follows:
ARTICLE I

Definitions
SECTION 1.01.     Certain Defined Terms . Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Credit Agreement or, if defined in the New York UCC, the meanings specified therein. As used in this Agreement, the following terms have the meanings specified below:
“ 2016 Notes ” means the Company’s 7.875% Senior Secured Notes due 2022 issued under the 2016 Notes Indenture.
“ 2016 Notes Indenture ” means that certain Indenture, dated as of August 15, 2016, as amended, restated, amended and restated, supplemented or otherwise modified, Refinanced or replaced from time to time, among the Company, the guarantors party thereto from time to time and Deutsche Bank Trust Company Americas, as trustee and as collateral agent.
“ 2016 Notes Obligations ” means the due and punctual payment by the Company and the Guarantors of (i) the unpaid principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the 2016 Notes, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, and (ii) all other monetary obligations of the Company and the Guarantors to any of the Additional Senior Debt Parties under the 2016 Notes Indenture, the 2016 Notes and the Collateral Documents (as defined in the 2016 Notes Indenture), including obligations to pay fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding).
“ 2016 Trustee ” has the meaning assigned to such term in the introductory paragraph of this Agreement.
“ Additional Senior Debt ” means (1) the 2016 Notes Obligations and (2) any Indebtedness that is issued or guaranteed by the Company and/or any Subsidiary Guarantor (other than Indebtedness constituting Credit Agreement Obligations and 2016 Notes Obligations), which Indebtedness and guarantees are secured by the Senior Collateral (or a portion thereof) on a basis that is senior to Second Priority Debt; provided , however , that (i) such Indebtedness is permitted to be incurred, secured and guaranteed on such basis by each Senior Debt Document and Second Priority Debt Document and (ii) the Representative for the holders of such Indebtedness shall have become party to (i) this Agreement pursuant to, and by satisfying the conditions set forth in, Section 8.09 hereof and (ii) the First-Lien Intercreditor Agreement pursuant to, and by satisfying the conditions set forth in, Section 5.13 thereof.
“ Additional Senior Debt Documents ” means, with respect to any Series, issue or class of Additional Senior Debt, the promissory notes, credit agreements, indentures, Collateral Documents or other operative agreements evidencing, governing or securing such Indebtedness, including the Senior Collateral Documents, the 2016 Notes Indenture and the 2016 Notes.
“ Additional Senior Debt Facility ” means each credit agreement, indenture or other governing agreement with respect to any Additional Senior Debt, including, but not limited to, the 2016 Notes Indenture.
“ Additional Senior Obligations ” means, with respect to any Series, issue or class of Additional Senior Debt, all amounts owing to any Additional Senior Debt Party pursuant to the terms of any Additional Senior Debt Document, including, without limitation, all amounts in respect of any principal, premium, interest (including any interest accruing subsequent to the commencement of a Bankruptcy Case at the rate provided for in the applicable Additional Senior Debt Document, whether or not such interest is an allowed claim under any such proceeding or under applicable state, federal or foreign law), penalties, fees, expenses, indemnifications, reimbursements, damages and other liabilities, and guarantees of the foregoing amounts, including the 2016 Notes Obligations.
“ Additional Senior Debt Parties ” means, with respect to any Series, issue or class of Additional Senior Debt, the holders of such Indebtedness, the Representative with respect thereto, any trustee or agent therefor under any related Additional Senior Debt Documents and the beneficiaries of each indemnification obligation undertaken by the Company or any Subsidiary Guarantor under any related Additional Senior Debt Documents, including, but not limited to, each “Holder” (as defined in the 2016 Notes Indenture).
“ Administrative Agent ” has the meaning assigned to such term in the introductory paragraph of this Agreement and shall include any successor administrative agent as provided in Article 9 of the Credit Agreement.
“ Affiliate ” means, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
“ Agreement ” has the meaning assigned to such term in the introductory paragraph of this Agreement.
“ Bankruptcy Case ” means a case under the Bankruptcy Code or any other Bankruptcy Law.
“ Bankruptcy Code ” means Title 11 of the United States Code, as amended.
“ Bankruptcy Law ” means the Bankruptcy Code and any similar federal, state or foreign law for the relief of debtors.
“ Borrower ” has the meaning assigned to such term in the definition of Credit Agreement.
“ Business Day ” means any day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close.
“ Cash Collateral ” has the meaning assigned to such term in Section 3.04(c).
“ Class Debt ” has the meaning assigned to such term in Section 8.09.
“ Class Debt Parties ” has the meaning assigned to such term in Section 8.09.
“ Class Debt Representatives ” has the meaning assigned to such term in Section 8.09.
“ Collateral ” means the Senior Collateral and the Second Priority Collateral.
“ Collateral Documents ” means the Senior Collateral Documents and the Second Priority Collateral Documents.
“ Company ” has the meaning assigned to such term in the introductory paragraph to this Agreement.
“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting power, by contract or otherwise. “ Controlling ” and “ Controlled ” have meanings correlative thereto.
“ Credit Agreement ” means that certain Revolving Credit Agreement dated as of June 5, 2015 (as amended prior to the date hereof and as further amended, restated, amended and restated, supplemented or otherwise modified, Refinanced or replaced from time to time), among the Company, Avon Products, Inc., the lenders from time to time party thereto, the Administrative Agent and the other parties thereto.
“ Credit Agreement Loan Documents ” means the Credit Agreement and the other “Credit Documents” as defined in the Credit Agreement.
“ Credit Agreement General Security Agreement ” means the “General Security Agreement” as defined in the Credit Agreement.
“ Credit Agreement Obligations ” means the “Secured Obligations” as defined in the Credit Agreement General Security Agreement.
“ Credit Agreement Secured Parties ” means the “Secured Parties” as defined in the Credit Agreement.
“ Debt Facility ” means any Senior Facility and any Second Priority Debt Facility.
“ Designated Second Priority Representative ” means (i) the Initial Second Priority Representative, until such time as the Second Priority Debt Facility under the Initial Second Priority Debt Documents ceases to be the only Second Priority Debt Facility under this Agreement and (ii) thereafter, the Second Priority Representative designated from time to time by the Second Priority Instructing Group, in a notice to each Senior Representative and the Company hereunder, as the “Designated Second Priority Representative” for purposes hereof.
“ Designated Senior Representative ” means (i) if at any time there is only one Senior Representative for a Senior Facility with respect to which the Discharge of Senior Obligations has not occurred, such Senior Representative and (ii) at any time when clause (i) does not apply, the Applicable Authorized Representative (as defined in the First-Lien Intercreditor Agreement) at such time.
“ DIP Financing ” has the meaning assigned to such term in Section 6.01.
“ Discharge ” means, with respect to any Shared Collateral and any Debt Facility, the date on which such Debt Facility and the Senior Obligations or Second Priority Debt Obligations thereunder, as the case may be, are no longer secured by such Shared Collateral pursuant to the terms of the documentation governing such Debt Facility. The term “ Discharged ” shall have a corresponding meaning.
“ Discharge of Credit Agreement Obligations ” means, with respect to any Shared Collateral, the Discharge of the Credit Agreement Obligations with respect to such Shared Collateral; provided that the Discharge of Credit Agreement Obligations shall not be deemed to have occurred in connection with a Refinancing of such Credit Agreement Obligations with an Additional Senior Debt Facility secured by such Shared Collateral under one or more Additional Senior Debt Documents which Additional Senior Debt Documents have been designated in writing by the Administrative Agent (under the Credit Agreement so Refinanced) to each other Representative as the “Credit Agreement” for purposes of this Agreement.
“ Discharge of Senior Obligations ” means the date on which the Discharge of Credit Agreement Obligations and the Discharge of each Additional Senior Debt Facility occurs.
“ Enforcement Action ” means, with respect to the Senior Obligations or the Second Priority Debt Obligations, the exercise of any rights and remedies with respect to any Shared Collateral securing such obligations or the commencement or prosecution of enforcement of any of the rights and remedies with respect to the Shared Collateral under, as applicable, the Senior Debt Documents or the Second Priority Debt Documents, or applicable law, including without limitation the exercise of any rights of set-off or recoupment, and the exercise of any rights or remedies of a secured creditor under the Uniform Commercial Code of any applicable jurisdiction or under the Bankruptcy Code.
“ Enforcement Notice ” has the meaning assigned to such term in Section 3.04(a).
“ Event of Default ” means an “Event of Default” (or similarly defined term) as defined in any Secured Credit Document.
“ Existing Indentures ” means (a) that certain Indenture dated as of February 27, 2008, between Avon Products, Inc. and Deutsche Bank Trust Company Americas, as trustee, and (b) that certain Indenture dated as of May 13, 2003, between Avon Products, Inc. and JPMorgan Chase Bank, as trustee, in each case as amended, modified, and/or supplemented from time to time.
“ First-Lien Intercreditor Agreement ” means that certain first-lien intercreditor agreement, dated as of August 15, 2016, among the Company, the other Grantors from time to time party thereto, Citibank, N.A., as authorized representative for the Credit Agreement Secured Parties, Deutsche Bank Trust Company Americas, as authorized representative for the Notes Secured Parties (as defined therein) and each additional authorized representative from time to time party thereto, as amended, restated, amended and restated, supplemented and/or otherwise modified from time to time.
“ Initial Second Priority Debt ” means the Second Priority Debt incurred pursuant to the Initial Second Priority Debt Documents.
“ Initial Second Priority Debt Documents ” means that certain [[          ] dated as of [__________], 20[__], among the Company, [the guarantors identified therein,] [____], as [          ], and [____], as [           agent]] and any notes, security documents and other operative agreements evidencing or governing such Indebtedness, including any agreement entered into for the purpose of securing the Initial Second Priority Debt Obligations.
“ Initial Second Priority Debt Obligations ” means the Second Priority Debt Obligations arising pursuant to the Initial Second Priority Debt Documents.
“ Initial Second Priority Debt Parties ” means the holders of any Initial Second Priority Debt Obligations and the Initial Second Priority Representative.
“ Initial Second Priority Representative ” has the meaning assigned to such term in the introductory paragraph to this Agreement.
“ Insolvency or Liquidation Proceeding ” means:
(1)    any case commenced by or against the Company or any other Grantor under any Bankruptcy Law, any other proceeding for the reorganization, recapitalization or adjustment or marshalling of the assets or liabilities of the Company or any other Grantor, any receivership or assignment for the benefit of creditors relating to the Company or any other Grantor or any similar case or proceeding relative to the Company or any other Grantor or its creditors, as such, in each case whether or not voluntary;
(2)    any liquidation, dissolution, marshalling of assets or liabilities or other winding up of or relating to the Company or any other Grantor, in each case whether or not voluntary and whether or not involving bankruptcy or insolvency (and, in each case, other than in a transaction expressly permitted by the terms of each Senior Debt Document and Second Priority Debt Document); or
(3)    any other proceeding of any type or nature in which substantially all claims of creditors of the Company or any other Grantor are determined and any payment or distribution is or may be made on account of such claims.
“ Intellectual Property ” means trademarks, service marks, trade names, domain names, copyrights, patents, patent rights, technology, software, know-how, database rights, design rights, license rights with respect to the foregoing and other intellectual property rights.
“ Joinder Agreement ” means a supplement to this Agreement in the form of Annex III or Annex IV hereof required to be delivered by a Representative to the Designated Senior Representative and the Designated Second Priority Representative pursuant to Section 8.09 hereof in order to include an additional Debt Facility hereunder and to become the Representative hereunder for the Senior Secured Parties or Second Priority Debt Parties, as the case may be, under such Debt Facility.
“ Lien ” means any mortgage, pledge, security interest, hypothecation, assignment, lien (statutory or other) or similar encumbrance (including any agreement to give any of the foregoing), any conditional sale or other title retention agreement or any lease in the nature thereof.
“ Major Second Priority Representative ” means, with respect to any Shared Collateral, the Second Priority Representative of the Series of Second Priority Debt that constitutes the largest outstanding principal amount of any then outstanding Series of Second Priority Debt with respect to such Shared Collateral.
“ New York UCC ” means the Uniform Commercial Code as from time to time in effect in the State of New York.
“ Officer’s Certificate ” has the meaning assigned to such term in Section 8.08.
“ Other Credit Support ” means (i) funds deposited for the satisfaction, discharge, redemption or defeasance of any Series of First-Lien Obligations (as defined in the First-Lien Intercreditor Agreement) in accordance with the terms of the applicable Secured Credit Documents, (ii) cash collateral deposited with (or pledged to) any First Lien Secured Party (as defined in the First-Lien Intercreditor Agreement) in accordance with the terms of the applicable Secured Credit Documents, and (iii) cash collateral deposited with any First Lien Secured Party in respect of any swap obligations or cash management obligations which are secured under the applicable Secured Credit Documents.
“ Permitted Restricted Collateral Liens ” shall mean Permitted Liens as defined in each Existing Indenture.
“ Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, governmental authority or other entity.
“ Pledged or Controlled Collateral ” has the meaning assigned to such term in Section 5.05(a).
“ Proceeds ” means the proceeds of any sale, collection or other liquidation of Shared Collateral, any payment or distribution made in respect of Shared Collateral in a Bankruptcy Case and any amounts received by any Senior Representative or any Senior Secured Party from a Second Priority Debt Party in respect of Shared Collateral pursuant to this Agreement or any other intercreditor agreement.
“ Purchase ” has the meaning assigned to such term in Section 3.04(b).
“ Purchase Notice ” has the meaning assigned to such term in Section 3.04(a).
“ Purchase Price ” has the meaning assigned to such term in Section 3.04(c).
“ Purchasing Parties ” has the meaning assigned to such term in Section 3.04(b).
“ Recovery ” has the meaning assigned to such term in Section 6.04.
“ Refinance ” means, in respect of any indebtedness, to refinance, extend, renew, defease, amend, increase, modify, supplement, restructure, refund, replace or repay such indebtedness, or to issue other indebtedness or enter alternative financing arrangements, in exchange or replacement for such indebtedness (in whole or in part), including by adding or replacing lenders, creditors, agents, borrowers and/or guarantors, and including in each case, but not limited to, after the original instrument giving rise to such indebtedness has been terminated and including, in each case, through any credit agreement, indenture or other agreement. “ Refinanced ” and “ Refinancing ” have correlative meanings.
“ Representatives ” means the Senior Representatives and the Second Priority Representatives.
“ Residual Second Priority Restricted Collateral Amount ” means an amount equal to the Restricted Collateral Cap minus the aggregate amount of Senior Obligations.
“ Restricted Collateral ” means Principal Properties and the shares of Capital Stock of any Subsidiary of API (as each such capitalized term is defined in the Existing Indentures).
“ Restricted Collateral Cap ” means 20% of Consolidated Net Tangible Assets (as defined in the Existing Indentures and determined as of the date of the most recent incurrence of Restricted Collateral Secured Obligations or Restricted Sale/Leaseback Attributable Debt) less all Restricted Sale/Leaseback Attributable Debt (as defined in the Existing Indentures).
“ Restricted Collateral Secured Obligations ” shall mean any Indebtedness (as defined in the Existing Indentures) issued, assumed, incurred or guaranteed by API or any of its Significant Subsidiaries (as defined in the Existing Indentures) secured by a Lien (as defined in the Existing Indentures) (other than Permitted Restricted Collateral Liens) on any Restricted Collateral.
“ Restricted Sale/Leaseback Attributable Debt ” shall mean Attributable Debt of API and its Subsidiaries in respect of any Restricted Sale/Leaseback Transaction (as each such capitalized term is defined in the Existing Indentures).
“ SEC ” means the United States Securities and Exchange Commission and any successor agency thereto.
“ Second Priority Class Debt ” has the meaning assigned to such term in Section 8.09.
“ Second Priority Class Debt Parties ” has the meaning assigned to such term in Section 8.09.
“ Second Priority Class Debt Representative ” has the meaning assigned to such term in Section 8.09.
“Second Priority Collateral” means any “Collateral,” as defined in any Second Priority Debt Document, or any other assets of the Company or any other Grantor with respect to which a Lien is granted or purported to be granted pursuant to a Second Priority Collateral Document as security for any Second Priority Debt Obligation.
“ Second Priority Collateral Documents ” means the Initial Second Priority Collateral Documents and each of the collateral agreements, security agreements and other instruments and documents executed and delivered by the Company or any Grantor for purposes of providing collateral security for any Second Priority Debt Obligation.
“ Second Priority Debt ” means any Indebtedness that is issued or guaranteed by the Company and/or any Subsidiary Guarantor, including the Initial Second Priority Debt, which Indebtedness and guarantees are secured by the Second Priority Collateral (or a portion thereof) on a subordinate basis (and which are not secured by Liens on any assets of the Company or any Subsidiary other than the Second Priority Collateral or which are not included in the Senior Collateral) to the Senior Obligations; provided , however , that (i) such Indebtedness is permitted to be incurred, secured and guaranteed on such basis by each Senior Debt Document and each Second Priority Debt Document and (ii) except in the case of the Initial Second Priority Debt hereunder, the Representative for the holders of such Indebtedness shall have become party to this Agreement pursuant to, and by satisfying the conditions set forth in, Section 8.09 hereof. Second Priority Debt shall include any registered equivalent notes and guarantees thereof by the Subsidiary Guarantors issued in exchange therefor.
“ Second Priority Debt Documents ” means the Initial Second Priority Debt Documents and, with respect to any Series, issue or class of Second Priority Debt, the promissory notes, credit agreements, indentures, Collateral Documents or other operative agreements evidencing, governing or securing such Indebtedness, including the Second Priority Collateral Documents.
“ Second Priority Debt Facility ” means each credit agreement, indenture or other governing agreement with respect to any Second Priority Debt.
“ Second Priority Debt Obligations ” means the Initial Second Priority Debt Obligations and with respect to any Series, issue or class of Second Priority Debt, all amounts owing to any Second Priority Debt Party pursuant to the terms of any Second Priority Debt Document, including, without limitation, all amounts in respect of any principal, premium, interest (including any interest and accruing subsequent to the commencement of a Bankruptcy Case at the rate provided for in the applicable Second Priority Debt Document, whether or not such interest is an allowed claim under any such proceeding or under applicable federal, state or foreign law), penalties, fees, expenses, indemnifications, reimbursements, damages and other liabilities, and guarantees of the foregoing amounts.
“ Second Priority Debt Parties ” means the Initial Second Priority Debt Parties and, with respect to any Series, issue or class of Second Priority Debt, the holders of such Indebtedness, the Representative with respect thereto, any trustee or agent therefor under any related Second Priority Debt Documents and the beneficiaries of each indemnification obligation undertaken by the Company or any Subsidiary Guarantor under any related Second Priority Debt Documents.
“ Second Priority Enforcement Date ” means, with respect to any Second Priority Representative, the date that is 180 days after the occurrence of both (i) an Event of Default (under and as defined in the Second Priority Debt Documents for which such Second Priority Representative has been named as Representative) as a result of which the applicable Second Priority Debt Obligations represented by such Second Priority Representative are currently due and payable (whether as a result of acceleration thereof or otherwise) in accordance with the terms of the applicable Second Priority Debt Document and (ii) the Designated Senior Representative and each other Representative’s receipt of written notice from such Second Priority Representative that (x) such Second Priority Representative is the Major Second Priority Representative and that an Event of Default (under and as defined in the Second Priority Debt Documents for which such Second Priority Representative has been named as Representative) has occurred and is continuing and (y) the Second Priority Debt Obligations of the Series represented by such Second Priority Representative are currently due and payable in full (whether as a result of acceleration thereof or otherwise) in accordance with the terms of the applicable Second Priority Debt Document; provided that the Second Priority Enforcement Date shall be stayed and shall not occur and shall be deemed not to have occurred with respect to any Shared Collateral (1) at any time the Designated Senior Representative has commenced and is diligently pursuing any enforcement action with respect to such Shared Collateral or (2) at any time the Grantor which has granted a security interest in such Shared Collateral is then a debtor under or with respect to (or otherwise subject to) any Insolvency or Liquidation Proceeding.
“ Second Priority Instructing Group ” means Second Priority Representatives with respect to Second Priority Debt Facilities under which at least a majority of the then aggregate amount of Second Priority Debt Obligations are outstanding.
“ Second Priority Lien ” means the Liens on the Second Priority Collateral in favor of Second Priority Debt Parties under Second Priority Collateral Documents.
“ Second Priority Representative ” means (i) in the case of the Initial Second Priority Debt Obligations covered hereby, the Initial Second Priority Representative and (ii) in the case of any other Second Priority Debt Facility and the Second Priority Debt Parties thereunder, the trustee, administrative agent, collateral agent, security agent or similar agent under such Second Priority Debt Facility that is named as the Representative in respect of such Second Priority Debt Facility in the applicable Joinder Agreement.
“ Secured Credit Documents ” means the Credit Agreement Loan Documents, Additional Senior Debt Documents and Second Priority Debt Documents.
“ Secured Obligations ” means the Senior Obligations and the Second Priority Debt Obligations.
“ Secured Parties ” means the Senior Secured Parties and the Second Priority Debt Parties.
“ Senior Class Debt ” has the meaning assigned to such term in Section 8.09.
“ Senior Class Debt Parties ” has the meaning assigned to such term in Section 8.09.
“ Senior Class Debt Representative ” has the meaning assigned to such term in Section 8.09.
“ Senior Collateral ” means any “Collateral” as defined in any Credit Agreement Loan Document or any other Senior Debt Document or any other assets of the Company or any other Grantor with respect to which a Lien is granted or purported to be granted pursuant to a Senior Collateral Document as security for any Senior Obligation.
“ Senior Collateral Documents ” means the “First-Lien Security Documents” as defined in the First-Lien Intercreditor Agreement.
“ Senior Debt Documents ” means (a) the Credit Agreement Loan Documents and (b) any Additional Senior Debt Documents.
“ Senior Facilities ” means the Credit Agreement and any Additional Senior Debt Facilities.
“ Senior Lien ” means a Lien on the Senior Collateral in favor of the Senior Secured Parties under the Senior Collateral Documents.
“ Senior Obligations ” means the Credit Agreement Obligations and any Additional Senior Obligations.
“ Senior Representative ” means (i) in the case of any Credit Agreement Obligations or the Credit Agreement Secured Parties, the Administrative Agent and (ii) in the case of the 2016 Notes Obligations, the 2016 Trustee and (iii) in the case of any other Additional Senior Debt Facility and the other Additional Senior Debt Parties thereunder (including with respect to any other Additional Senior Debt Facility initially covered hereby on the date of this Agreement), the trustee, administrative agent, collateral agent, security agent or similar agent under such Additional Senior Debt Facility that is named as the Representative in respect of such Additional Senior Debt Facility in the applicable Joinder Agreement.
“ Senior Secured Parties ” means the Credit Agreement Secured Parties and any Additional Senior Debt Parties.
“ Series ” means (a)(i) with respect to the Senior Secured Parties, each of (1) the Credit Agreement Secured Parties (in their capacities as such), (2) the Additional Senior Debt Parties under the 2016 Notes Indenture (in their capacities as such), and (3) any other Additional Senior Debt Parties that become subject to this Agreement after the date hereof that are represented by a common Senior Representative (in its capacity as such for such other Additional Senior Debt Parties) and (ii) with respect to any Senior Obligations, each of (1) the Credit Agreement Obligations, (2) the 2016 Notes Obligations, and (3) the other Additional Senior Obligations incurred pursuant to any Additional Senior Debt Document, the holders of which, pursuant to any Joinder Agreement, are to be represented hereunder by a common Senior Representative (in its capacity as such for such other Additional Senior Obligations) and (b)(i) with respect to the Second Priority Debt Parties, each of (1) the Initial Second Priority Debt Parties (in their capacities as such) and (2) any other holders of Second Priority Debt that become subject to this Agreement after the date hereof that are represented by a common Second Priority Representative (in its capacity as such for such other Second Priority Debt Parties) and (ii) with respect to any Second Priority Debt Obligations, each of (1) the Initial Second Priority Debt Obligations and (2) the other Second Priority Debt incurred pursuant to any Second Priority Debt Document, the holders of which, pursuant to any Joinder Agreement, are to be represented hereunder by a common Second Priority Representative (in its capacity as such for such other Second Priority Debt Obligations).
“ Shared Collateral ” means, at any time, Collateral in which the holders of Senior Obligations under at least one Senior Facility and the holders of Second Priority Debt Obligations under at least one Second Priority Debt Facility (or their Representatives) hold a security interest at such time (or, in the case of the Senior Facilities, are deemed to hold a security interest pursuant to Section 2.04). If, at any time, any portion of the Senior Collateral under one or more Senior Facilities does not constitute Second Priority Collateral under one or more Second Priority Debt Facilities, then such portion of such Senior Collateral shall constitute Shared Collateral only with respect to the Second Priority Debt Facilities for which it constitutes Second Priority Collateral and shall not constitute Shared Collateral for any Second Priority Debt Facility which does not have a security interest in such Collateral at such time.
“ Subsidiary ” means, with respect to any Person:
(1)    any corporation, association or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50% of the total voting power of shares of capital stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof; and
(2)    any partnership, joint venture, limited liability company or similar entity of which
(x)    more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof whether in the form of membership, general, special or limited partnership or otherwise, and
(y)    such Person or any Subsidiary of such Person is a controlling general partner or otherwise controls such entity.
“Subsidiary Grantors ” means the Company and each Subsidiary of the Company which has granted a security interest pursuant to any Collateral Document to secure any Secured Obligations.
“ Surviving Obligations ” has the meaning assigned to such term in Section 3.04(b).
“ Uniform Commercial Code ” or “ UCC ” means, unless otherwise specified, the Uniform Commercial Code as from time to time in effect in the State of New York.
SECTION 1.02.     Terms Generally . The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument, other document, statute or regulation herein shall be construed as referring to such agreement, instrument, other document, statute or regulation as from time to time amended, supplemented or otherwise modified, (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, but shall not be deemed to include the subsidiaries of such Person unless express reference is made to such subsidiaries, (iii) the words “herein,” “hereof and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (iv) all references herein to Articles, Sections and Annexes shall be construed to refer to Articles, Sections and Annexes of this Agreement, (v) unless otherwise expressly qualified herein, the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights and (vi) the term “or” is not exclusive.
SECTION 1.03.     Limit on Amount of Second Priority Debt Obligations Secured by Restricted Collateral . Notwithstanding anything to the contrary set forth herein, if and so long as the Existing Indentures (as in effect on the date hereof) are in effect, to the extent that any portion of the Shared Collateral consists of Restricted Collateral, (a) the aggregate amount of Second Priority Debt Obligations secured by Liens on Restricted Collateral at any time shall be limited, automatically and without further action by any Person, so that such amount does not exceed the Residual Second Priority Restricted Collateral Amount and (b) to the extent there is a positive Residual Second Priority Restricted Collateral Amount, the aggregate amount of Second Priority Debt Obligations secured by Liens on Restricted Collateral at such time shall be limited, automatically and without further action by any Person, so that such amount does not exceed the lesser of (x) the amount of Second Priority Debt Obligations at such time and (y) the Residual Second Priority Restricted Collateral Amount at such time.
ARTICLE II

Priorities and Agreements with Respect to Shared Collateral
SECTION 2.01.     Subordination . Notwithstanding the date, time, manner or order of filing or recordation of any document or instrument or grant, attachment or perfection of any Liens granted to any Second Priority Representative or any Second Priority Debt Parties on the Shared Collateral or of any Liens granted to any Senior Secured Party on the Shared Collateral (or any actual or alleged defect in any of the foregoing) and notwithstanding any provision of the UCC, any applicable law, any Second Priority Debt Document or any Senior Debt Document or any other circumstance whatsoever (including any non-perfection of any Lien purporting to secure the Senior Obligations and/or the Second Priority Debt Obligations), each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, hereby agrees that (a) any Lien on the Shared Collateral securing any Senior Obligations now or hereafter held by or on behalf of any Senior Secured Party or any Senior Representative or other agent or trustee therefor, regardless of how acquired, whether by grant, statute, operation of law, subrogation or otherwise, shall have priority over and be senior in all respects and prior to any Lien on the Shared Collateral securing any Second Priority Debt Obligations and (b) any Lien on the Shared Collateral securing any Second Priority Debt Obligations now or hereafter held by or on behalf of any Second Priority Representative, any Second Priority Debt Party or any Second Priority Representative or other agent or trustee therefor, regardless of how acquired, whether by grant, statute, operation of law, subrogation or otherwise, shall be junior and subordinate in all respects to all Liens on the Shared Collateral securing any Senior Obligations. All Liens on the Shared Collateral securing any Senior Obligations shall be and remain senior in all respects and prior to all Liens on the Shared Collateral securing any Second Priority Debt Obligations for all purposes, whether or not such Liens securing any Senior Obligations are subordinated to any Lien securing any other obligation of the Company, any Grantor or any other Person or otherwise subordinated, voided, avoided, invalidated or lapsed.
SECTION 2.02.     Nature of Senior Lender Claims . Each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, acknowledges that (a) a portion of the Senior Obligations is revolving in nature and that the amount thereof that may be outstanding at any time or from time to time may be increased or reduced and subsequently reborrowed, (b) the terms of the Senior Debt Documents and the Senior Obligations may be amended, restated, amended and restated, supplemented or otherwise modified, and the Senior Obligations, or a portion thereof, may be Refinanced from time to time and (c) the aggregate amount of the Senior Obligations may be increased, in each case, without notice to or consent by the Second Priority Representatives or the Second Priority Debt Parties and without affecting the provisions hereof. The Lien priorities provided for in Section 2.01 shall not be altered or otherwise affected by any amendment, restatement, amendment and restatement, supplement or other modification, or any Refinancing, of either the Senior Obligations or the Second Priority Debt Obligations, or any portion thereof. As between the Company and the other Grantors and the Second Priority Debt Parties, the foregoing provisions will not limit or otherwise affect the obligations of the Company and the Grantors contained in any Second Priority Debt Document with respect to the incurrence of additional Senior Obligations.
SECTION 2.03.     Prohibition on Contesting Liens . Each of the Second Priority Representatives, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, agrees that it shall not (and hereby waives any right to) contest or support any other Person in contesting, in any proceeding (including any Insolvency or Liquidation Proceeding), (i) the validity, extent, perfection, priority or enforceability of any Lien securing any Senior Obligations held (or purported to be held) by or on behalf of any of the Senior Secured Parties or any Senior Representative or other agent or trustee therefor in any Senior Collateral or (ii) the relative rights and duties of the holders of the Senior Obligations and the Second Priority Debt Obligations granted and/or established in this Agreement or any other Collateral Document with respect to such Lien, and each Senior Representative, for itself and on behalf of each Senior Secured Party under its Senior Facility, agrees that it shall not (and hereby waives any right to) contest or support any other Person in contesting, in any proceeding (including any Insolvency or Liquidation Proceeding) (i), the validity, extent, perfection, priority or enforceability of any Lien securing any Second Priority Debt Obligations held (or purported to be held) by or on behalf of any of any Second Priority Representative or any of the Second Priority Debt Parties in the Second Priority Collateral or (ii) the relative rights and duties of the holders of the Senior Obligations and the Second Priority Debt Obligations granted and/or established in this Agreement or any other Collateral Document with respect to such Lien. Notwithstanding the foregoing, no provision in this Agreement shall be construed to prevent or impair the rights of any Senior Representative or any Senior Secured Party to enforce this Agreement (including the priority of the Liens securing the Senior Obligations as provided in Section 2.01) or any of the Senior Debt Documents.
SECTION 2.04.     No New Liens . The parties hereto agree that, so long as the Discharge of Senior Obligations has not occurred, (a) none of the Grantors shall grant or permit any additional Liens on any asset or property of any Grantor to secure any Second Priority Debt Obligation unless it has granted, or concurrently therewith grants, a Lien on such asset or property of such Grantor to secure the Senior Obligations; and (b) if any Second Priority Representative or any Second Priority Debt Party shall hold any Lien on any assets or property of any Grantor securing any Second Priority Obligations that are not also subject to the first-priority Liens securing all Senior Obligations under the Senior Collateral Documents, such Second Priority Representative or Second Priority Debt Party (i) shall notify each Senior Representative promptly upon becoming aware thereof and the Grantors shall promptly grant a similar Lien on such assets or property to each Senior Representative as security for each Series of Senior Obligations and (ii) until such assignment or such grant of a similar Lien to each Senior Representative, shall be deemed to hold and have held such Lien for the benefit of each Senior Representative and the other Senior Secured Parties as security for the Senior Obligations. To the extent that the foregoing provisions are not complied with for any reason, without limiting any other rights and remedies available to the Designated Senior Representative and/or the Senior Secured Parties, each Second Priority Representative, on behalf of the applicable Second Priority Debt Parties, agrees that any amounts received by or distributed to any of them pursuant to or as a result of Liens granted in contravention of this Section 2.04 shall be subject to Section 4.02.
SECTION 2.05.     Perfection of Liens . Except for the agreements of the Administrative Agent pursuant to Section 5.05 hereof, none of the Senior Representatives or the Senior Secured Parties shall be responsible for perfecting and maintaining the perfection of Liens with respect to the Shared Collateral for the benefit of the Second Priority Representatives or the Second Priority Debt Parties. The provisions of this Agreement are intended solely to govern the respective Lien priorities as between the Senior Secured Parties and the Second Priority Debt Parties and shall not impose on the Senior Representatives, the Senior Secured Parties, the Second Priority Representatives, the Second Priority Debt Parties or any agent or trustee therefor any obligations in respect of the disposition of Proceeds of any Shared Collateral which would conflict with prior perfected claims therein in favor of any other Person or any order or decree of any court or governmental authority or any applicable law.
SECTION 2.06.     Non- Shared Collateral. Notwithstanding anything in this Agreement or any other Secured Credit Document to the contrary, the Shared Collateral shall not include Other Credit Support.
ARTICLE III

Enforcement
SECTION 3.01.     Exercise of Remedies .
(a)    So long as the Discharge of Senior Obligations has not occurred, whether or not any Insolvency or Liquidation Proceeding has been commenced by or against the Company or any other Grantor, (i) neither any Second Priority Representative nor any Second Priority Debt Party will (x) exercise or seek to exercise any rights or remedies (including setoff or recoupment) with respect to any Shared Collateral in respect of any Second Priority Debt Obligations, or institute any action or proceeding with respect to such rights or remedies (including any action of foreclosure), (y) contest, protest or object to any foreclosure proceeding or action brought with respect to the Shared Collateral or any other Senior Collateral by any Senior Representative or any Senior Secured Party in respect of the Senior Obligations, the exercise of any right by any Senior Representative or any Senior Secured Party (or any agent or sub-agent on their behalf) in respect of the Senior Obligations under any lockbox agreement, control agreement, landlord waiver or bailee’s letter or similar agreement or arrangement to which any Senior Representative or any Senior Secured Party either is a party or may have rights as a third-party beneficiary, or any other exercise by any such party of any rights and remedies relating to the Shared Collateral under the Senior Debt Documents or otherwise in respect of the Senior Collateral or the Senior Obligations, or (z) object to the forbearance by the Senior Secured Parties from bringing or pursuing any foreclosure proceeding or action or any other exercise of any rights or remedies relating to the Shared Collateral in respect of Senior Obligations and (ii) except as otherwise expressly provided herein, the Senior Representatives and the Senior Secured Parties shall have the exclusive right to enforce rights, exercise remedies (including setoff, recoupment and the right to credit bid their debt) and make determinations regarding the release, disposition or restrictions with respect to the Shared Collateral without any consultation with or the consent of any Second Priority Representative or any Second Priority Debt Party; provided , however , that (A) in any Insolvency or Liquidation Proceeding commenced by or against the Company or any other Grantor, any Second Priority Representative may file a claim or statement of interest with respect to the Second Priority Debt Obligations under its Second Priority Debt Facility, (B) any Second Priority Representative may take any action (not adverse to the prior Liens on the Shared Collateral securing the Senior Obligations or the rights of the Senior Representatives or the Senior Secured Parties to exercise remedies in respect thereof) in order to create, prove, perfect, preserve or protect (but not enforce) its rights in, and perfection and priority of its Lien on, the Shared Collateral, (C) any Second Priority Representative may exercise the rights and remedies provided for in Section 6.03, (D) any Second Priority Representative may file any necessary responsive or defensive pleadings in opposition to any motion, claim, adversary proceeding or other pleading made by any Person objecting to or otherwise seeking the disallowance of the claims of the Second Priority Debt Parties under the applicable Second Priority Debt Facility, including any claims secured by the Shared Collateral, if any, in each case in accordance with the terms of this Agreement, (E) any Second Priority Representative may vote on any plan of reorganization, file any proof of claim, make other filings and make any arguments and motions that are, in each case, in accordance with the terms of this Agreement, with respect to the Second Priority Debt Obligations under the applicable Second Priority Debt Facility and the Shared Collateral, (F) any Second Priority Representative may present a cash or credit bid at any sale hearing pursuant to Section 363 of the Bankruptcy Code or with respect to any other Shared Collateral disposition (so long as in the case of a credit bid, such bid provides for payment in full, in cash, of the Senior Obligations upon the consummation of sale) and (G) from and after the Second Priority Enforcement Date, the Major Second Priority Representative may exercise or seek to exercise any rights or remedies (including setoff and recoupment) with respect to any Shared Collateral in respect of any Second Priority Debt Obligations, or institute any action or proceeding with respect to such rights or remedies (including any action of foreclosure), but only so long as (1) the Designated Senior Representative has not commenced and is not diligently pursuing any Enforcement Action with respect to such Shared Collateral or (2) the Grantor which has granted a security interest in such Shared Collateral is not then a debtor under or with respect to (or otherwise subject to) any Insolvency or Liquidation Proceeding. In exercising rights and remedies with respect to the Senior Collateral, the Senior Representatives and the Senior Secured Parties may enforce the provisions of the Senior Debt Documents and exercise remedies thereunder, all in such order and in such manner as they may determine in the exercise of their sole discretion. Such exercise and enforcement shall include the rights of an agent appointed by them to sell or otherwise dispose of Shared Collateral upon foreclosure, to incur expenses in connection with such sale or disposition and to exercise all the rights and remedies of a secured lender under the Uniform Commercial Code of any applicable jurisdiction and of a secured creditor under Bankruptcy Laws of any applicable jurisdiction.
(b)    So long as the Discharge of Senior Obligations has not occurred, each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, agrees that it will not, in the context of its role as secured creditor, take or receive any Shared Collateral or any Proceeds of Shared Collateral in connection with the exercise of any right or remedy (including setoff) with respect to any Shared Collateral in respect of Second Priority Debt Obligations. Without limiting the generality of the foregoing, unless and until the Discharge of Senior Obligations has occurred, except as expressly provided in the proviso appearing in the first sentence of Section 3.01(a), the sole right of the Second Priority Representatives and the Second Priority Debt Parties with respect to the Shared Collateral is to hold a Lien on the Shared Collateral in respect of Second Priority Debt Obligations pursuant to the Second Priority Debt Documents for the period and to the extent granted therein and to receive a share of the Proceeds thereof, if any, after the Discharge of Senior Obligations has occurred.
(c)    Subject to the proviso appearing in the first sentence of Section 3.01(a), (i) each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, agrees that neither such Second Priority Representative nor any such Second Priority Debt Party will take any action that would hinder any exercise of remedies undertaken by any Senior Representative or any Senior Secured Party with respect to the Shared Collateral under the Senior Debt Documents, including any sale, lease, exchange, transfer or other disposition of the Shared Collateral, whether by foreclosure or otherwise, and (ii) each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, hereby waives any and all rights it or any such Second Priority Debt Party may have as a junior lien creditor or otherwise to object to the manner in which the Senior Representatives or the Senior Secured Parties seek to enforce or collect the Senior Obligations or the Liens granted on any of the Senior Collateral, regardless of whether any action or failure to act by or on behalf of any Senior Representative or any other Senior Secured Party is adverse to the interests of the Second Priority Debt Parties.
(d)    Each Second Priority Representative hereby acknowledges and agrees that no covenant, agreement or restriction contained in any Second Priority Debt Document shall be deemed to restrict in any way the rights and remedies of the Senior Representatives or the Senior Secured Parties with respect to the Senior Collateral as set forth in this Agreement and the Senior Debt Documents.
(e)    Subject to the proviso appearing in the first sentence of Section 3.01(a), until the Discharge of Senior Obligations, the Designated Senior Representative shall have the exclusive right to exercise any right or remedy with respect to the Shared Collateral and shall have the exclusive right to determine and direct the time, method and place for exercising such right or remedy or conducting any proceeding with respect thereto. Following the Discharge of Senior Obligations, the Second Priority Instructing Group and the Designated Second Priority Representative shall have the exclusive right to exercise any right or remedy with respect to the Collateral, and the Second Priority Instructing Group and Designated Second Priority Representative shall have the exclusive right to direct the time, method and place of exercising or conducting any proceeding for the exercise of any right or remedy available to the Second Priority Debt Parties with respect to the Collateral, or of exercising or directing the exercise of any trust or power conferred on the Second Priority Representatives, or for the taking of any other action authorized by the Second Priority Collateral Documents; provided , however , that nothing in this Section shall impair the right of (i) any Second Priority Representative or other agent or trustee acting on behalf of the Second Priority Debt Parties to take such actions with respect to the Collateral after the Discharge of Senior Obligations as may be otherwise required or authorized pursuant to any intercreditor agreement governing the Second Priority Debt Parties or the Second Priority Debt Obligations or (ii) any Major Second Priority Representative acting pursuant to Section 3.01(a).
SECTION 3.02.     Cooperation . Subject to the proviso appearing in the first sentence of Section 3.01(a), each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, agrees that, unless and until the Discharge of Senior Obligations has occurred, it will not commence, or join with any Person (other than the Senior Secured Parties upon the request thereof) in commencing, any enforcement, collection, execution, levy or foreclosure action or proceeding with respect to any Lien held by it in the Shared Collateral under any of the Second Priority Debt Documents or otherwise in respect of the Second Priority Debt Obligations.
SECTION 3.03.     Actions upon Breach . Should any Second Priority Representative or any Second Priority Debt Party, contrary to this Agreement, in any way take, attempt to take or threaten to take any action with respect to the Shared Collateral (including any attempt to realize upon or enforce any remedy with respect to this Agreement) or fail to take any action required by this Agreement, any Senior Representative or other Senior Secured Party (in its or their own name or in the name of the Company or any other Grantor) or the Company may obtain relief against such Second Priority Representative or such Second Priority Debt Party by injunction, specific performance or other appropriate equitable relief. Each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Facility, hereby (i) agrees that the Senior Secured Parties’ damages from the actions of the Second Party Representatives or any Second Priority Debt Party may at that time be difficult to ascertain and may be irreparable and waives any defense that the Company, any other Grantor or the Senior Secured Parties cannot demonstrate damage or be made whole by the awarding of damages and (ii) irrevocably waives any defense based on the adequacy of a remedy at law and any other defense that might be asserted to bar the remedy of specific performance in any action that may be brought by any Senior Representative or any other Senior Secured Party.
SECTION 3.04.     Option to Purchase .
(a)    The Designated Senior Representative agrees that it will give the Designated Second Priority Representative written notice (the “ Enforcement Notice ”) within five Business Days after the commencement by the Designated Senior Representative of (i) any Enforcement Action with respect to Shared Collateral or (ii) any Insolvency or Liquidation Proceeding (which notice shall be effective for all Enforcement Actions taken after the date of such notice so long as the Designated Senior Representative is diligently pursuing in good faith the exercise of its default or enforcement rights or remedies against, or diligently attempting in good faith to vacate any stay of enforcement rights (other than any stay imposed under Section 362 of the Bankruptcy Code or any similar stay under any similar Bankruptcy Law) of its Senior Liens on a material portion of the Shared Collateral, including, without limitation, all Enforcement Actions identified in such notice). Following the commencement of an Enforcement Action or the institution of any Insolvency Proceeding by the Designated Senior Representative, any Second Priority Debt Party shall have the option, by irrevocable written notice (the “ Purchase Notice ”) delivered by the Designated Second Priority Representative to the Designated Senior Representative no later than ten Business Days after receipt by the Designated Second Priority Representative of the Enforcement Notice, to purchase all, but not less than all, of the Senior Obligations from the Senior Secured Parties, and the Senior Secured Parties, if directed by the Senior Secured Parties, shall have the right, and be authorized, to assign the Senior Obligations. In the case of a voluntary Insolvency or Liquidation Proceeding commenced by any Grantor, or an involuntary Insolvency or Liquidation Proceeding commenced by any party other than the Designated Senior Representative, no Enforcement Notice need be provided and the Designated Second Priority Representative shall have the option to deliver the Purchase Notice within ten Business Days from the commencement of such Insolvency or Liquidation Proceeding. If the Designated Second Priority Representative so delivers the Purchase Notice, the Designated Senior Representative shall terminate any existing Enforcement Actions and shall not take any further Enforcement Actions; provided that the Purchase (as defined below) shall have been consummated on the Business Day specified in the Purchase Notice in accordance with Section 3.04(b).
(b)    On the date specified by the Designated Second Priority Representative in the Purchase Notice (which shall be a Business Day not less than five Business Days, nor more than ten Business Days, after receipt by the Designated Senior Representative of the Purchase Notice), the Senior Secured Parties shall, subject to any required approval of any court or other governmental authority then in effect, sell to the Second Priority Debt Parties electing to purchase pursuant to Section 3.04(a) (the “ Purchasing Parties ”), and the Purchasing Parties shall purchase (the “ Purchase ”) from the Senior Secured Parties, all of the Senior Obligations; provided that the Senior Obligations purchased shall not include any rights of Senior Secured Parties with respect to indemnification and other obligations of the Company and the Grantors under the Senior Debt Documents that are expressly stated to survive the termination of the Senior Debt Documents (the “ Surviving Obligations ”).
(c)    Without limiting the obligations of the Company and the Grantors under the Senior Debt Documents to the Senior Secured Parties with respect to the Surviving Obligations (which shall not be transferred in connection with the Purchase), on the date of the Purchase, the Purchasing Parties shall (i) pay to the Senior Secured Parties as the purchase price (the “ Purchase Price ”) therefor the full amount of all Senior Obligations then outstanding and unpaid (including principal, interest, fees, breakage costs, attorneys’ fees and expenses, and, in the case of any hedging obligations owed to a Senior Secured Party, the amount that would be payable by the relevant Loan Party thereunder if it were to terminate such hedging obligations on the date of the Purchase or, if not terminated, an amount determined by the relevant Senior Secured Party to be necessary to collateralize its credit risk arising out of such hedging obligations), (ii) furnish cash collateral (the “ Cash Collateral ”) to the Senior Secured Parties in such amounts as the relevant Senior Secured Parties determine is reasonably necessary to secure such Senior Secured Parties in connection with any outstanding letters of credit (not to exceed 103% of the aggregate undrawn face amount of such letters of credit), (iii) agree to reimburse the Senior Secured Parties for any loss, cost, damage or expense (including attorneys’ fees and expenses) in connection with any fees, costs or expenses related to any checks or other payments provisionally credited to the Senior Obligations and/or as to which the Senior Secured Parties have not yet received final payment and (iv) agree, after written request from the Designated Senior Representative, to reimburse the Senior Secured Parties in respect of indemnification obligations of the Loan Parties under the Senior Debt Documents as to matters or circumstances known to the Purchasing Parties at the time of the Purchase which could reasonably be expected to result in any loss, cost, damage or expense to any of the Senior Secured Parties; provided that in no event shall any Purchasing Party be liable to reimburse the Senior Secured Parties in respect of indemnification obligations in excess of proceeds of Collateral received by the Purchasing Parties.
(d)    The Purchase Price and Cash Collateral shall be remitted by wire transfer in immediately available funds to such account of the Designated Senior Representative as it shall designate to the Purchasing Parties. The Designated Senior Representative shall, promptly following its receipt thereof, distribute the amounts received by it in respect of the Purchase Price to the Senior Secured Parties in accordance with the Senior Debt Documents. Interest shall be calculated to but excluding the day on which the Purchase occurs if the amounts so paid by the Purchasing Parties to the account designated by the Designated Senior Representative are received in such account prior to 3:00 p.m., New York City time, and interest shall be calculated to and including such day if the amounts so paid by the Purchasing Parties to the account designated by the Designated Senior Representative are received in such account later than 3:00 p.m., New York City time.
(e)    The Purchase shall be made without representation or warranty of any kind by the Senior Secured Parties as to the Senior Obligations, the Senior Collateral or otherwise and without recourse to the Senior Secured Parties, except that the Senior Secured Parties shall represent and warrant (i) the amount of the Senior Obligations being purchased, (ii) that the Senior Secured Parties own the Senior Obligations free and clear of any liens or encumbrances and (iii) that the Senior Secured Parties have the right to assign the Senior Obligations and the assignment is duly authorized.
ARTICLE IV

Payments
SECTION 4.01.     Application of Proceeds . After an Event of Default under any Senior Debt Document has occurred and until such Event of Default is cured or waived, so long as the Discharge of Senior Obligations has not occurred, the Shared Collateral or Proceeds thereof received in connection with the sale or other disposition of, or collection on, such Shared Collateral upon the exercise of remedies shall be applied by the Designated Senior Representative to the Senior Obligations in such order as specified in the relevant Senior Debt Documents until the Discharge of Senior Obligations has occurred. Upon the Discharge of Senior Obligations, the Designated Senior Representative and each applicable Senior Representative shall deliver promptly to the Designated Second Priority Representative any Shared Collateral or Proceeds thereof held by it in the same form as received, with any necessary endorsements, or as a court of competent jurisdiction may otherwise direct, to be applied by the Designated Second Priority Representative to the Second Priority Debt Obligations in such order as specified in the relevant Second Priority Debt Documents.
SECTION 4.02.     Payments Over . Unless and until the Discharge of Senior Obligations has occurred, any Shared Collateral or Proceeds thereof (together with assets or proceeds subject to Liens referred to in the final sentence of Section 2.04 hereof) received by any Second Priority Representative or any Second Priority Debt Party in connection with the exercise of any right or remedy (including setoff or recoupment) relating to the Shared Collateral (or any distribution in respect of the Shared Collateral, whether or not expressly characterized as such) shall be segregated and held in trust for the benefit of and forthwith paid over to the Designated Senior Representative for the benefit of the Senior Secured Parties in the same form as received, with any necessary endorsements, or as a court of competent jurisdiction may otherwise direct. The Designated Senior Representative is hereby authorized to make any such endorsements as agent for each of the Second Priority Representatives or any such Second Priority Debt Party. This authorization is coupled with an interest and is irrevocable.
ARTICLE V

Other Agreements
SECTION 5.01.     Releases .
(a)    Each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, agrees that, in the event of a sale, transfer or other disposition of any specified item of Shared Collateral permitted under the terms of the Senior Debt Documents (whether or not an Event of Default thereunder or under any Second Priority Debt Document has occurred and is continuing) or in connection with the exercise of remedies with respect to the Shared Collateral by the Designated Senior Representative (including all or substantially all of the equity interests of any subsidiary of the Company), the Liens granted to the Second Priority Representatives and the Second Priority Debt Parties upon such Shared Collateral to secure Second Priority Debt Obligations shall terminate and be released, automatically and without any further action, concurrently with the termination and release of all Liens granted upon such Shared Collateral to secure Senior Obligations. Upon delivery to a Second Priority Representative of an Officer’s Certificate stating that any such termination and release of Liens securing the Senior Obligations has become effective (or shall become effective concurrently with such termination and release of the Liens granted to the Second Priority Debt Parties and the Second Priority Representatives) and any necessary or proper instruments of termination or release prepared by the Company or any other Grantor, such Second Priority Representative will promptly execute, deliver or acknowledge, at the Company’s or the other Grantor’s sole cost and expense, such instruments to evidence such termination and release of the Liens. Nothing in this Section 5.01(a) will be deemed to affect any agreement of a Second Priority Representative, for itself and on behalf of the Second Priority Debt Parties under its Second Priority Debt Facility, to release the Liens on the Second Priority Collateral as set forth in the relevant Second Priority Debt Documents.
(b)    Each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, hereby irrevocably constitutes and appoints the Designated Senior Representative and any officer or agent of the Designated Senior Representative, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Second Priority Representative or such Second Priority Debt Party or in the Designated Senior Representative’s own name, from time to time in the Designated Senior Representative’s discretion, for the purpose of carrying out the terms of Section 5.01(a), to take any and all appropriate action and to execute any and all documents and instruments that may be necessary or desirable to accomplish the purposes of Section 5.01(a), including any termination statements, endorsements or other instruments of transfer or release.
(c)    Unless and until the Discharge of Senior Obligations has occurred, each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, hereby consents to the application, whether prior to or after an Event of Default under any Senior Debt Document, of proceeds of Shared Collateral to the repayment of Senior Obligations pursuant to the Senior Debt Documents, provided that nothing in this Section 5.01(c) shall be construed to prevent or impair the rights of the Second Priority Representatives or the Second Priority Debt Parties to receive proceeds in connection with the Second Priority Debt Obligations not otherwise in contravention of this Agreement.
(d)    Notwithstanding anything to the contrary in any Second Priority Collateral Document, in the event the terms of a Senior Collateral Document and a Second Priority Collateral Document each require any Grantor to (i) make payment in respect of any item of Shared Collateral, (ii) deliver or afford control over any item of Shared Collateral to, or deposit any item of Shared Collateral with, (iii) register ownership of any item of Shared Collateral in the name of or make an assignment of ownership of any Shared Collateral or the rights thereunder to, (iv) cause any securities intermediary, commodity intermediary or other Person acting in a similar capacity to agree to comply, in respect of any item of Shared Collateral, with instructions or orders from, or to treat, in respect of any item of Shared Collateral, as the entitlement holder, (v) hold any item of Shared Collateral in trust for (to the extent such item of Shared Collateral cannot be held in trust for multiple parties under applicable law), (vi) obtain the agreement of a bailee or other third party to hold any item of Shared Collateral for the benefit of or subject to the control of or, in respect of any item of Shared Collateral, to follow the instructions of or (vii) obtain the agreement of a landlord with respect to access to leased premises where any item of Shared Collateral is located or waivers or subordination of rights with respect to any item of Shared Collateral in favor of, in any case, both the Designated Senior Representative and any Second Priority Representative or Second Priority Debt Party, such Grantor may, until the applicable Discharge of Senior Obligations has occurred, comply with such requirement under the Second Priority Collateral Document as it relates to such Shared Collateral by taking any of the actions set forth above only with respect to, or in favor of, the Designated Senior Representative.
SECTION 5.02.     Insurance and Condemnation Awards . Unless and until the Discharge of Senior Obligations has occurred, the Designated Senior Representative and the Senior Secured Parties shall have the sole and exclusive right, subject to the rights of the Grantors under the Senior Debt Documents, (a) to adjust settlement for any insurance policy covering the Shared Collateral in the event of any loss thereunder and (b) to approve any award granted in any condemnation or similar proceeding affecting the Shared Collateral. Unless and until the Discharge of Senior Obligations has occurred, all proceeds of any such policy and any such award, if in respect of the Shared Collateral, shall be paid (i)  first , prior to the occurrence of the Discharge of Senior Obligations, to the Designated Senior Representative for the benefit of Senior Secured Parties pursuant to the terms of the Senior Debt Documents, (ii)  second , after the occurrence of the Discharge of Senior Obligations, to the Designated Second Priority Representative for the benefit of the Second Priority Debt Parties pursuant to the terms of the applicable Second Priority Debt Documents and (iii)  third , if no Second Priority Debt Obligations are outstanding, to the owner of the subject property, such other Person as may be entitled thereto or as a court of competent jurisdiction may otherwise direct. If any Second Priority Representative or any Second Priority Debt Party shall, at any time, receive any proceeds of any such insurance policy or any such award in contravention of this Agreement, it shall pay such proceeds over to the Designated Senior Representative in accordance with the terms of Section 4.02.
SECTION 5.03.     Amendments to Second Priority Collateral Documents .
(a)    No Second Priority Collateral Document may be amended, supplemented or otherwise modified or entered into to the extent such amendment, supplement or modification, or the terms of any new Second Priority Collateral Document, would be prohibited by or inconsistent with any of the terms of this Agreement or any Senior Debt Document. The Company agrees to deliver to the Designated Senior Representative copies of (i) any amendments, supplements or other modifications to the Second Priority Collateral Documents and (ii) any new Second Priority Collateral Documents promptly after effectiveness thereof. Each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, agrees that each Second Priority Collateral Document under its Second Priority Debt Facility (other than any account control or similar agreement with third parties) shall include the following language (or language to similar effect reasonably approved by the Designated Senior Representative):
“Notwithstanding anything herein to the contrary, (i) the liens and security interests granted to the [Second Priority Representative] pursuant to this Agreement are expressly subject and subordinate to the liens and security interests granted in favor of the Senior Secured Parties (as defined in the Intercreditor Agreement referred to below), including (A) liens and security interests granted to Citibank, N.A., as administrative agent, pursuant to or in connection with the Revolving Credit Agreement, dated as of June 5, 2015 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time), among Avon International Operations, Inc., Avon Products, Inc., Citibank, N.A., as administrative agent and collateral agent, the lenders party thereto and the other parties party thereto and (B) liens and security interests granted to Deutsche Bank Trust Company Americas, as collateral agent in connection with that certain Indenture, dated as of August 15, 2016, among Avon International Operations, Inc., the guarantors party thereto from time to time and Deutsche Bank Trust Company Americas, as trustee and collateral agent, and (ii) the exercise of any right or remedy by the [Second Priority Representative] hereunder is subject to the limitations and provisions of the Second Lien Intercreditor Agreement dated as of [          ], 20[ ] (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Intercreditor Agreement ”), among Avon International Operations, Inc., Citibank, N.A., as Representative for the Credit Agreement Secured Parties, Deutsche Bank Trust Company Americas, as Representative under the 2016 Notes Indenture and the other parties thereto, and its subsidiaries and affiliated entities party thereto. In the event of any conflict between the terms of the Intercreditor Agreement and the terms of this Agreement, the terms of the Intercreditor Agreement shall govern.”
(b)    In the event that the Senior Secured Parties enter into any amendment, waiver or consent in respect of any of the Senior Collateral Documents for the purpose of adding to or deleting from, or waiving or consenting to any departures from any provisions of, any Senior Collateral Document or changing in any manner the rights of the Senior Secured Parties, the Company or any other Grantor thereunder (including the release of any Liens in Senior Collateral) in a manner that is applicable to all Senior Facilities, then such amendment, waiver or consent shall apply automatically to any comparable provision of the comparable Second Priority Collateral Documents without the consent of any Second Priority Representative or any Second Priority Debt Party and without any action by any Second Priority Representative, the Company or any other Grantor; provided , however , that written notice of such amendment, waiver or consent shall have been given to each Second Priority Representative.
SECTION 5.04.     Rights as Unsecured Creditors . The Second Priority Representatives and the Second Priority Debt Parties may exercise rights and remedies as unsecured creditors against the Company and any other Grantor in accordance with the terms of the Second Priority Debt Documents and applicable law, so long as such rights and remedies do not violate (or are not otherwise prohibited by) an express provision of this Agreement. Except as otherwise set forth in this Agreement, nothing in this Agreement shall prohibit the receipt by any Second Priority Representative or any Second Priority Debt Party of the required payments of principal, premium, interest, fees and other amounts due under the Second Priority Debt Documents so long as such receipt is not the direct or indirect result of the exercise by a Second Priority Representative or any Second Priority Debt Party of rights or remedies as a secured creditor in respect of Shared Collateral. In the event any Second Priority Representative or any Second Priority Debt Party becomes a judgment lien creditor in respect of Shared Collateral as a result of its enforcement of its rights as an unsecured creditor in respect of Second Priority Debt Obligations, such judgment lien shall be subordinated to the Liens securing Senior Obligations on the same basis as the other Liens securing the Second Priority Debt Obligations are so subordinated to such Liens securing Senior Obligations under this Agreement. Nothing in this Agreement shall impair or otherwise adversely affect any rights or remedies of the Senior Representatives or the Senior Secured Parties may have with respect to the Senior Collateral.
SECTION 5.05.     Gratuitous Bailee for Perfection .
(a)    The Administrative Agent acknowledges and agrees that if it shall at any time hold a Lien securing any Senior Obligations on any Shared Collateral that can be perfected by the possession or control of such Shared Collateral or of any account in which such Shared Collateral is held, and if such Shared Collateral or any such account is in fact in the possession or under the control of the Administrative Agent, or of agents or bailees of the Administrative Agent (such Shared Collateral being referred to herein as the “ Pledged or Controlled Collateral ”), or if it shall any time obtain any landlord waiver or bailee’s letter or any similar agreement or arrangement granting it rights or access to Shared Collateral, the Administrative Agent shall also hold such Pledged or Controlled Collateral, or take such actions with respect to such landlord waiver, bailee’s letter or similar agreement or arrangement, as sub-agent or gratuitous bailee for the relevant Second Priority Representatives, in each case solely for the purpose of perfecting the Liens granted under the relevant Second Priority Collateral Documents and subject to the terms and conditions of this Section 5.05.
(b)    [Reserved].
(c)    Except as otherwise specifically provided herein, until the Discharge of Senior Obligations has occurred, the Administrative Agent shall be entitled to deal with the Pledged or Controlled Collateral in accordance with the terms of the Senior Debt Documents as if the Liens under the Second Priority Collateral Documents did not exist. The rights of the Second Priority Representatives and the Second Priority Debt Parties with respect to the Pledged or Controlled Collateral shall at all times be subject to the terms of this Agreement.
(d)    The Administrative Agent shall have no obligation whatsoever to the Second Priority Representatives or any Second Priority Debt Party to assure that any of the Pledged or Controlled Collateral is genuine or owned by the Grantors or to protect or preserve rights or benefits of any Person or any rights pertaining to the Shared Collateral, except as expressly set forth in this Section 5.05. The duties or responsibilities of the Administrative Agent under this Section 5.05 shall be limited solely to holding or controlling the Shared Collateral and the related Liens referred to in paragraph (a) of this Section 5.05 as subagent and gratuitous bailee for the relevant Second Priority Representative for purposes of perfecting the Lien held by such Second Priority Representative.
(e)    The Administrative Agent shall not have by reason of the Second Priority Collateral Documents or this Agreement, or any other document, a fiduciary relationship in respect of any Second Priority Representative or any Second Priority Debt Party, and each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, hereby waives and releases the Administrative Agent from all claims and liabilities arising pursuant to the Administrative Agent’s role under this Section 5.05 as sub-agent and gratuitous bailee with respect to the Shared Collateral.
(f)    Upon the Discharge of Senior Obligations, the Administrative Agent shall, at the Grantors’ sole cost and expense, (i) (A) deliver to the Designated Second Priority Representative, to the extent that it is legally permitted to do so, all Shared Collateral, including all proceeds thereof, held or controlled by the Administrative Agent or any of its agents or bailees, including the transfer of possession and control, as applicable, of the Pledged or Controlled Collateral, together with any necessary endorsements and notices to depositary banks, securities intermediaries and commodities intermediaries, and assign its rights under any landlord waiver or bailee’s letter or any similar agreement or arrangement granting it rights or access to Shared Collateral (including pursuant to the delivery of change of agent notices under deposit account control agreements and similar agreements), or (B) direct and deliver such Shared Collateral as a court of competent jurisdiction may otherwise direct, (ii) notify any applicable insurance carrier that it is no longer entitled to be a loss payee or additional insured under the insurance policies of any Grantor issued by such insurance carrier and (iii) notify any governmental authority involved in any condemnation or similar proceeding involving any Grantor that the Designated Second Party Representative is entitled to approve any awards granted in such proceeding. The Company and the other Grantors shall take such further action as is required to effectuate the transfer contemplated hereby and shall indemnify the Administrative Agent for loss or damage suffered by the Administrative Agent as a result of such transfer in accordance with the terms and provisions of the Senior Debt Documents. The Administrative Agent has no obligation to follow instructions from the Designated Second Priority Representative in contravention of this Agreement.
(g)    None of the Administrative Agent, any of the Senior Representatives or any of the Senior Secured Parties shall be required to marshal any present or future collateral security for any obligations of the Company or any Subsidiary to the Administrative Agent, any Senior Representative or any Senior Secured Party under the Senior Debt Documents or any assurance of payment in respect thereof, or to resort to such collateral security or other assurances of payment in any particular order, and all of their rights in respect of such collateral security or any assurance of payment in respect thereof shall be cumulative and in addition to all other rights, however existing or arising.
SECTION 5.06.     When Discharge of Senior Obligations Deemed to Not Have Occurred . If, at any time after the Discharge of Senior Obligations has occurred, the Company or any Subsidiary incurs any Senior Obligations (other than in respect of the payment of indemnities surviving the Discharge of Senior Obligations), then such Discharge of Senior Obligations shall automatically be deemed not to have occurred for all purposes of this Agreement (other than with respect to any actions taken prior to the date of such designation as a result of the occurrence of such first Discharge of Senior Obligations) and the applicable agreement governing such Senior Obligations shall automatically be treated as a Senior Debt Document for all purposes of this Agreement, including for purposes of the Lien priorities and rights in respect of Shared Collateral set forth herein and the granting of amendments, waivers and consents hereunder and the agent, representative or trustee for the holders of such Senior Obligations shall be the respective Senior Representative for such Senior Obligations for all purposes of this Agreement. Upon receipt of notice of such incurrence (including the identity of the new Designated Senior Representative), each Second Priority Representatives (including the Designated Second Priority Representative) shall promptly (a) enter into such documents and agreements (at the expense of the Company), including amendments or supplements to this Agreement, as the Company or such new Designated Senior Representative and/or such new Senior Representative shall reasonably request in writing in order to provide the new Designated Senior Representative and the new Senior Representative the rights of the new Designated Senior Representative or the new Senior Representative, as the case may be, contemplated hereby, (b) deliver to the Designated Senior Representative, to the extent that it is legally permitted to do so, all Shared Collateral, including all proceeds thereof, held or controlled by such Second Priority Representative or any of its agents or bailees, including the transfer of possession and control, as applicable, of the Pledged or Controlled Collateral, together with any necessary endorsements and notices to depositary banks, securities intermediaries and commodities intermediaries, and assign its rights under any landlord waiver or bailee’s letter or any similar agreement or arrangement granting it rights or access to Shared Collateral and (c) notify any governmental authority involved in any condemnation or similar proceeding involving a Grantor that the new Designated Senior Representative is entitled to approve any awards granted in such proceeding.
ARTICLE VI

Insolvency or Liquidation Proceedings .
SECTION 6.01.     Finance and Sale Issues . Until the Discharge of Senior Obligations has occurred, if the Company or any other Grantor shall be subject to any Insolvency or Liquidation Proceeding and any Senior Representative or any Senior Secured Party shall desire to permit (or not object to) the sale, use or lease of cash or other collateral or to permit (or not object to) the Company’s or any other Grantor’s obtaining financing under Section 363 or Section 364 of the Bankruptcy Code or any similar provision of any other Bankruptcy Law (“ DIP Financing ”), then each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, agrees that it will raise no (a) objection to and will not otherwise contest or oppose (or join with or support any third party opposing, objection to or contesting) such sale, use or lease of such cash or other collateral or such DIP Financing and, except to the extent permitted by Section 6.03, will not request adequate protection or any other relief in connection therewith and, to the extent the Liens securing the Senior Obligations under the Credit Agreement or, if no Credit Agreement exists, under the other Senior Debt Documents are subordinated or pari passu with such DIP Financing, will subordinate (and will be deemed hereunder to have subordinated) its Liens in the Shared Collateral to (x) such DIP Financing (and all obligations relating thereto) on the same basis as the Liens securing the Second Priority Debt Obligations are so subordinated to Liens securing Senior Obligations under this Agreement, (y) any adequate protection Liens granted to the Senior Secured Parties and (z) any “carve-out” for professional and United States Trustee fees agreed to by the Designated Senior Representative, (b) objection to (and will not otherwise contest or oppose (or join with or support any third party opposing, objecting to or contesting)) any motion for relief from the automatic stay or from any injunction against foreclosure or enforcement in respect of Senior Obligations made by any Senior Representative or any other Senior Secured Party, (c) objection to (and will not otherwise contest or oppose (or join with or support any third party opposing, objecting to or contesting)) any exercise by any Senior Secured Party of the right to credit bid Senior Obligations at any sale in foreclosure of Senior Collateral or to exercise any rights under Section 1111(b) of the United States Code, (d) objection to (and will not otherwise contest or oppose (or join with or support any third party opposing, objecting to or contesting) any other request for judicial relief made in any court by any Senior Secured Party relating to the lawful enforcement of any Lien on Senior Collateral or (e) objection to (and will not otherwise contest or oppose (or join with or support any third party opposing, objecting to or contesting) and will be deemed to have consented to) any order relating to a sale or other disposition of assets of any Grantor for which the Designated Senior Representative has consented that provides, to the extent such sale or other disposition is to be free and clear of Liens, that the Liens securing the Senior Obligations and the Second Priority Debt Obligations will attach to the proceeds of the sale on the same basis of priority as the Liens on the Shared Collateral securing the Senior Obligations rank to the Liens on the Shared Collateral securing the Second Priority Debt Obligations pursuant to this Agreement; provided that (i) each Second Priority Representative retains the right to object to any ancillary agreements or arrangements regarding the cash collateral use or the DIP Financing that are materially prejudicial to their interests, (ii) (A) the DIP Financing does not compel the Borrower to seek confirmation of a specific plan of reorganization for which all or substantially all of the material terms are set forth in the DIP Financing documentation or a related document or (B) the DIP Financing documentation or cash collateral order does not expressly require the sale or other liquidation of the Shared Collateral prior to a default under the DIP Financing documentation or cash collateral order, and (iii) that any form of order submitted in connection with interim or final approval of such DIP Financing shall provide that the Second Priority Debt Parties shall receive adequate protection in the form of replacement liens on additional collateral or super priority claims in connection with such DIP Financing. Each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, agrees that notice received two Business Days prior to the entry of a final order approving such usage of cash or other collateral or approving such financing shall be adequate notice and no notice shall be given in respect of an interim order approving such usage of cash or other collateral.
SECTION 6.02.     Relief from the Automatic Stay . Until the Discharge of Senior Obligations has occurred, each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, agrees that none of them shall seek relief from the automatic stay or any other stay in any Insolvency or Liquidation Proceeding or take any action in derogation thereof, in each case in respect of any Shared Collateral, without the prior written consent of the Designated Senior Representative.
SECTION 6.03.     Adequate Protection . Each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, agrees that none of them shall object, contest or support any other Person objecting to or contesting (a) any request by any Senior Representative or the Senior Secured Parties for adequate protection, (b) any objection by any Senior Representative or the Senior Secured Parties to any motion, relief, action or proceeding based on any Senior Representative’s or Senior Secured Party’s claiming a lack of adequate protection or (c) the payment of interest, fees, expenses or other amounts of any Senior Representative or any other Senior Secured Party under Section 506(b) or 506(c) of Title 11 of the United States Code or any similar provision of any other Bankruptcy Law. Notwithstanding anything contained in this Section 6.03 or in Section 6.01, in any Insolvency or Liquidation Proceeding, (i) if the Senior Secured Parties (or any subset thereof) are granted adequate protection in the form of additional collateral in connection with any DIP Financing or use of cash collateral under Section 363 or 364 of Title 11 of the United States Code or any similar provision of any other Bankruptcy Law (other than in a capacity as a DIP Financing provider) and the Senior Secured Parties do not object to the adequate protection being provided to the Senior Secured Parties, then each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, may seek or request adequate protection in the form of a replacement Lien on such additional collateral, which Lien is subordinated to the Liens securing the Senior Obligations and such DIP Financing (and all obligations relating thereto) on the same basis as the other Liens securing the Second Priority Debt Obligations are so subordinated to the Liens securing Senior Obligations under this Agreement and (ii) in the event any Second Priority Representatives, for themselves and on behalf of the Second Priority Debt Parties under their Second Priority Debt Facilities, seek or request adequate protection and such adequate protection is granted in the form of additional collateral, then such Second Priority Representatives, for themselves and on behalf of each Second Priority Debt Party under their Second Priority Debt Facilities, agree that each Senior Representative shall also be granted, as applicable, a senior Lien on such additional collateral as security for the Senior Obligations and any such DIP Financing and that any Lien on such additional collateral securing the Second Priority Debt Obligations shall be subordinated to the Liens on such collateral securing the Senior Obligations and any such DIP Financing (and all obligations relating thereto) and any other Liens granted to the Senior Secured Parties as adequate protection on the same basis as the other Liens securing the Second Priority Debt Obligations are so subordinated to such Liens securing Senior Obligations under this Agreement.
SECTION 6.04.     Preference Issues . If any Senior Secured Party is required in any Insolvency or Liquidation Proceeding or otherwise to disgorge, turn over or otherwise pay any amount to the estate of the Company or any other Grantor (or any trustee, receiver or similar Person therefor), because the payment of such amount was declared to be fraudulent or preferential in any respect or for any other reason, any amount (a “ Recovery ”), whether received as proceeds of security, enforcement of any right of setoff or otherwise, then the Senior Obligations shall be reinstated to the extent of such Recovery and deemed to be outstanding as if such payment had not occurred and the Senior Secured Parties shall be entitled to the benefits of this Agreement until a Discharge of Senior Obligations with respect to all such recovered amounts. If this Agreement shall have been terminated prior to such Recovery, this Agreement shall be reinstated in full force and effect, and such prior termination shall not diminish, release, discharge, impair or otherwise affect the obligations of the parties hereto. Each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, hereby agrees that none of them shall be entitled to benefit from any avoidance action affecting or otherwise relating to any distribution or allocation made in accordance with this Agreement, whether by preference or otherwise, it being understood and agreed that the benefit of such avoidance action otherwise allocable to them shall instead be allocated and turned over for application in accordance with the priorities set forth in this Agreement.
SECTION 6.05.     Separate Grants of Security and Separate Classifications . Each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, acknowledges and agrees that (a) the grants of Liens pursuant to the Senior Collateral Documents and the Second Priority Collateral Documents constitute separate and distinct grants of Liens and (b) because of, among other things, their differing rights in the Shared Collateral, the Second Priority Debt Obligations are fundamentally different from the Senior Obligations and must be separately classified in any plan of reorganization proposed or adopted in an Insolvency or Liquidation Proceeding. To further effectuate the intent of the parties as provided in the immediately preceding sentence, if it is held that the claims of the Senior Secured Parties and the Second Priority Debt Parties in respect of the Shared Collateral constitute a single class of claims (rather than separate classes of senior and junior secured claims), then each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, hereby acknowledges and agrees that all distributions shall be made as if there were separate classes of senior and junior secured claims against the Grantors in respect of the Shared Collateral with the effect being that, to the extent that the aggregate value of the Shared Collateral is sufficient (for this purpose ignoring all claims held by the Second Priority Debt Parties), the Senior Secured Parties shall be entitled to receive, in addition to amounts distributed to them in respect of principal, pre-petition interest and other claims, all amounts owing in respect of post-petition interest, fees and expenses (whether or not allowed or allowable) before any distribution is made in respect of the Second Priority Debt Obligations, with each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, hereby acknowledging and agreeing to turn over to the Designated Senior Representative amounts otherwise received or receivable by them to the extent necessary to effectuate the intent of this sentence, even if such turnover has the effect of reducing the claim or recovery of the Second Priority Debt Parties.
SECTION 6.06.     Post-Petition Interest; Section 1111(b)(2) Waiver .
(a)    Regardless of whether any such claim for post-petition interest, fees or expenses is allowed or allowable, and without limiting the generality of the other provisions of this Agreement, this Agreement expressly is intended to include and does include the “rule of explicitness” in that this Agreement expressly entitles the Senior Secured Parties, and is intended to provide the Senior Secured Parties with the right, to receive payment of all post-petition interest, fees or expenses through distributions made pursuant to the provisions of this Agreement even though such interest, fees and expenses are not allowed or allowable against the bankruptcy estate of the Company or any other Grantor under Section 502(b)(2) or Section 506(b) of the Bankruptcy Code or under any other provision of the Bankruptcy Code or any other Bankruptcy Law.
(b)    Each Second Priority Representative, for itself and on behalf of the other Second Priority Debt Parties, waives any claim it may hereafter have against any Senior Secured Party arising out of the election by any Senior Secured Party of the application to the claims of any Senior Secured Party of Section 1111(b)(2) of the Bankruptcy Code, and/or out of any sale, use or lease, cash collateral or DIP Financing arrangement or out of any grant of a security interest in connection with the Shared Collateral in any Insolvency or Liquidation Proceeding.
SECTION 6.07.     No Waivers of Rights of Senior Secured Parties . Nothing contained herein shall, except as expressly provided herein, prohibit or in any way limit any Senior Representative or any other Senior Secured Party from objecting in any Insolvency or Liquidation Proceeding or otherwise to any action taken by any Second Priority Debt Party, including the seeking by any Second Priority Debt Party of adequate protection or the asserting by any Second Priority Debt Party of any of its rights and remedies under the Second Priority Debt Documents or otherwise.
SECTION 6.08.     Asset Sales . Each Second Priority Representative agrees, for and on behalf of itself and the Second Priority Debt Parties represented thereby, that it will not oppose any sale consented to by any Senior Representative of any Collateral pursuant to Section 363(f) of the Bankruptcy Code (or any similar provision under the law applicable to any Insolvency or Liquidation Proceeding), so long as the proceeds of such sale are applied in accordance with this Agreement.
SECTION 6.09.     Application . This Agreement, which the parties hereto expressly acknowledge is a “subordination agreement” under Section 510(a) of Title 11 of the Bankruptcy Code or any similar provision of any other Bankruptcy Law, shall be effective before, during and after the commencement of any Insolvency or Liquidation Proceeding. The relative rights as to the Shared Collateral and proceeds thereof shall continue after the commencement of any Insolvency or Liquidation Proceeding on the same basis as prior to the date of the petition therefor, subject to any court order approving the financing of, or use of cash collateral by, any Grantor. All references herein to any Grantor shall include such Grantor as a debtor-in-possession and any receiver or trustee for such Grantor.
SECTION 6.10.     Other Matters . To the extent that any Second Priority Representative or any Second Priority Debt Party has or acquires rights under Section 363 or Section 364 of Title 11 of the Bankruptcy Code or any similar provision of any other Bankruptcy Law with respect to any of the Shared Collateral, such Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, agrees not to assert any such rights without the prior written consent of the Designated Senior Representative, provided that if requested by the Designated Senior Representative, such Second Priority Representative shall timely exercise such rights in the manner requested by the Designated Senior Representative, including any rights to payments in respect of such rights.
SECTION 6.11.     506(c) Claims . Until the Discharge of Senior Obligations has occurred, each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, agrees that it will not assert or enforce any claim under Section 506(c) of Title 11 of the United States Code or any similar provision of any other Bankruptcy Law senior to or on a parity with the Liens securing the Senior Obligations for costs or expenses of preserving or disposing of any Shared Collateral.
SECTION 6.12.     Reorganization Securities . If, in any Insolvency or Liquidation Proceeding, debt obligations of the reorganized debtor secured by Liens upon any property of the reorganized debtor are distributed, pursuant to a plan of reorganization or similar dispositive restructuring plan, on account of both the Senior Obligations and the Second Priority Debt Obligations, then, to the extent the debt obligations distributed on account of the Senior Obligations and on account of the Second Priority Debt Obligations are secured by Liens upon the same assets or property, the provisions of this Agreement will survive the distribution of such debt obligations pursuant to such plan and will apply with like effect to the Liens securing such debt obligations.
ARTICLE VII

Reliance; etc .
SECTION 7.01.     Reliance . The consent by the Senior Secured Parties to the execution and delivery of the Second Priority Debt Documents to which the Senior Secured Parties have consented and/or agreed to pursuant to the terms and provisions of the Senior Debt Documents and all loans and other extensions of credit made or deemed made on and after the date hereof by the Senior Secured Parties to the Company or any Subsidiary shall be deemed to have been given and made in reliance upon this Agreement. Each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, acknowledges that it and such Second Priority Debt Parties have, independently and without reliance on any Senior Representative or other Senior Secured Party, and based on documents and information deemed by them appropriate, made their own credit analysis and decision to enter into the Second Priority Debt Documents to which they are party or by which they are bound, this Agreement and the transactions contemplated hereby and thereby, and they will continue to make their own credit decision in taking or not taking any action under the Second Priority Debt Documents or this Agreement.
SECTION 7.02.     No Warranties or Liability . Each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, acknowledges and agrees that neither any Senior Representative nor any other Senior Secured Party has made any express or implied representation or warranty, including with respect to the execution, validity, legality, completeness, collectability or enforceability of any of the Senior Debt Documents, the ownership of any Shared Collateral or the perfection or priority of any Liens thereon. The Senior Secured Parties will be entitled to manage and supervise their respective loans and extensions of credit under the Senior Debt Documents in accordance with law and as they may otherwise, in their sole discretion, deem appropriate, and the Senior Secured Parties may manage their loans and extensions of credit without regard to any rights or interests that the Second Priority Representatives and the Second Priority Debt Parties have in the Shared Collateral or otherwise, except as otherwise provided in this Agreement. Neither any Senior Representative nor any other Senior Secured Party shall have any duty to any Second Priority Representative or Second Priority Debt Party to act or refrain from acting in a manner that allows, or results in, the occurrence or continuance of an event of default or default under any agreement with the Company or any Subsidiary (including the Second Priority Debt Documents), regardless of any knowledge thereof that they may have or be charged with. Except as expressly set forth in this Agreement, the Senior Representatives, the Senior Secured Parties, the Second Priority Representatives and the Second Priority Debt Parties have not otherwise made to each other, nor do they hereby make to each other, any warranties, express or implied, nor do they assume any liability to each other with respect to (a) the enforceability, validity, value or collectability of any of the Senior Obligations, the Second Priority Debt Obligations or any guarantee or security which may have been granted to any of them in connection therewith, (b) any Grantor’s title to or right to transfer any of the Shared Collateral or (c) any other matter except as expressly set forth in this Agreement.
SECTION 7.03.     Obligations Unconditional . All rights, interests, agreements and obligations of the Senior Representatives, the Senior Secured Parties, the Second Priority Representatives and the Second Priority Debt Parties hereunder shall remain in full force and effect irrespective of:
(a)    any lack of validity or enforceability of any Senior Debt Document or any Second Priority Debt Document;
(b)    any change in the time, manner or place of payment of, or in any other terms of, all or any of the Senior Obligations or Second Priority Debt Obligations, or any amendment or waiver or other modification, including any increase in the amount thereof, whether by course of conduct or otherwise, of the terms of the Credit Agreement or any other Senior Debt Document or of the terms of any Second Priority Debt Document;
(c)    any exchange of any security interest in any Shared Collateral or any other collateral or any amendment, waiver or other modification, whether in writing or by course of conduct or otherwise, of all or any of the Senior Obligations or Second Priority Debt Obligations or any guarantee thereof;
(d)    the commencement of any Insolvency or Liquidation Proceeding in respect of the Company or any other Grantor; or
(e)    any other circumstances that otherwise might constitute a defense available to, or a discharge of, (i) the Company or any other Grantor in respect of the Senior Obligations or (ii) any Second Priority Representative or Second Priority Debt Party in respect of this Agreement.
ARTICLE VIII

Miscellaneous
SECTION 8.01.     Conflicts . Subject to Section 8.18, in the event of any conflict between the provisions of this Agreement and the provisions of any Senior Debt Document or any Second Priority Debt Document, the provisions of this Agreement shall govern. Notwithstanding the foregoing, the relative rights and obligations of the Senior Representatives and the Senior Secured Parties (as amongst themselves) with respect to any Senior Collateral shall be governed by the terms of the First-Lien Intercreditor Agreement and in the event of any conflict between the First-Lien Intercreditor Agreement and this Agreement, the provisions of the First-Lien Intercreditor Agreement shall control.
SECTION 8.02.     Continuing Nature of this Agreement; Severability . Subject to Section 6.04, this Agreement shall continue to be effective until the Discharge of Senior Obligations shall have occurred. This is a continuing agreement of Lien subordination, and the Senior Secured Parties may continue, at any time and without notice to the Second Priority Representatives or any Second Priority Debt Party, to extend credit and other financial accommodations and lend monies to or for the benefit of the Company or any Subsidiary constituting Senior Obligations in reliance hereon. The terms of this Agreement shall survive and continue in full force and effect in any Insolvency or Liquidation Proceeding. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
SECTION 8.03.     Amendments; Waivers .
(a)    No failure or delay on the part of any party hereto in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereto are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any party hereto in any case shall entitle such party to any other or further notice or demand in similar or other circumstances.
(b)    This Agreement may be amended in writing signed by each Representative (in each case, acting in accordance with the documents governing the applicable Debt Facility); provided that any such amendment, supplement or waiver which by the express terms of this Agreement requires the Company’s consent or which directly and adversely affects the rights, interests, liabilities or privileges of (including, without limitation, those rights, interests, liabilities or privileges set forth in Sections 2.06, 3.01, 5.01, 5.02, 8.03(b), 8.08, 8.09, 8.11, 8.13, 8.14 and 8.18), or imposes additional duties and obligations on, the Company or any Grantor, shall require the consent of the Company. Any such amendment, supplement or waiver shall be in writing and shall be binding upon the Senior Secured Parties and the Second Priority Debt Parties and their respective successors and assigns.
(c)    Notwithstanding the foregoing, without the consent of any Secured Party, any Representative may become a party hereto by execution and delivery of a Joinder Agreement in accordance with Section 8.09 of this Agreement and upon such execution and delivery, such Representative and the Secured Parties and Senior Obligations or Second Priority Debt Obligations of the Debt Facility for which such Representative is acting shall be subject to the terms hereof.
SECTION 8.04.     Information Concerning Financial Condition of the Company and the Subsidiaries . The Senior Representatives, the Senior Secured Parties, the Second Priority Representatives and the Second Priority Debt Parties shall each be responsible for notices and other documents received pursuant to Senior Debt Documents and Second Priority Debt Documents, respectively, regarding (a) the financial condition of the Company and the Subsidiaries and all endorsers or guarantors of the Senior Obligations or the Second Priority Debt Obligations and (b) all other circumstances bearing upon the risk of nonpayment of the Senior Obligations or the Second Priority Debt Obligations. The Senior Representatives, the Senior Secured Parties, the Second Priority Representatives and the Second Priority Debt Parties shall have no duty to advise any other party hereunder of information known to it or them regarding such condition or any such circumstances or otherwise. In the event that any Senior Representative, any Senior Secured Party, any Second Priority Representative or any Second Priority Debt Party, in its sole discretion, undertakes at any time or from time to time to provide any such information to any other party, it shall be under no obligation to (i) make, and the Senior Representatives, the Senior Secured Parties, the Second Priority Representatives and the Second Priority Debt Parties shall not make or be deemed to have made, any express or implied representation or warranty, including with respect to the accuracy, completeness, truthfulness or validity of any such information so provided, (ii) provide any additional information or to provide any such information on any subsequent occasion, (iii) undertake any investigation or (iv) disclose any information that, pursuant to accepted or reasonable commercial finance practices, such party wishes to maintain confidential or is otherwise required to maintain confidential.
SECTION 8.05.     Subrogation . Each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, hereby waives any rights of subrogation it may acquire as a result of any payment hereunder until the Discharge of Senior Obligations has occurred.
SECTION 8.06.     Application of Payments . Except as otherwise provided herein, all payments received by the Senior Secured Parties may be applied, reversed and reapplied, in whole or in part, to such part of the Senior Obligations as the Senior Secured Parties, in their sole discretion, deem appropriate and consistent with the terms of the Senior Debt Documents. Except as otherwise provided herein, each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, assents to any such extension or postponement of the time of payment of the Senior Obligations or any part thereof and to any other indulgence with respect thereto, to any substitution, exchange or release of any security that may at any time secure any part of the Senior Obligations and to the addition or release of any other Person primarily or secondarily liable therefor.
SECTION 8.07.     Additional Grantors . The Company agrees that, if any Subsidiary shall become a Grantor after the date hereof, it will promptly cause such Subsidiary to become party hereto by executing and delivering an instrument in the form of Annex II. Upon such execution and delivery, such Subsidiary will become a Grantor hereunder with the same force and effect as if originally named as a Grantor herein. The execution and delivery of such instrument shall not require the consent of any other party hereunder, and will be acknowledged by the Designated Senior Representative and the Designated Second Priority Representative. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Agreement.
SECTION 8.08.     Dealings with Grantors . Upon any application or demand by the Company or any Grantor to any Representative to take or permit any action under any of the provisions of this Agreement or under any Collateral Document (if such action is subject to the provisions hereof), the Company or such Grantor, as appropriate, shall furnish to such Representative a certificate of a Responsible Officer (an “ Officer’s Certificate ”) stating that all conditions precedent, if any, provided for in this Agreement or such Collateral Document, as the case may be, relating to the proposed action have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Agreement or any Collateral Document relating to such particular application or demand, no additional certificate or opinion need be furnished.
SECTION 8.09.     Additional Debt Facilities . To the extent, but only to the extent, permitted by the provisions of the Senior Debt Documents and the Second Priority Debt Documents, the Company may incur or issue and sell one or more Series or classes of Second Priority Debt and one or more Series or classes of Additional Senior Debt. Any such additional class or Series of Second Priority Debt (the “ Second Priority Class Debt ”) may be secured by a second priority, subordinated Lien on Shared Collateral, in each case under and pursuant to the relevant Second Priority Collateral Documents for such Second Priority Class Debt, if and subject to the condition that the Representative of any such Second Priority Class Debt (each, a “ Second Priority Class Debt Representative ”), acting on behalf of the holders of such Second Priority Class Debt (such Representative and holders in respect of any Second Priority Class Debt being referred to as the “ Second Priority Class Debt Parties ”), becomes a party to this Agreement by satisfying conditions (i) through (v), as applicable, of the immediately succeeding paragraph. Any such additional class or Series of Senior Facilities (the “ Senior Class Debt ”; and the Senior Class Debt and Second Priority Class Debt, collectively, the “ Class Debt ”) may be secured by a senior Lien on Shared Collateral, in each case under and pursuant to the Senior Collateral Documents, if and subject to the condition that the Representative of any such Senior Class Debt (each, a “ Senior Class Debt Representative ”; and the Senior Class Debt Representatives and Second Priority Class Debt Representatives, collectively, the “ Class Debt Representatives ”), acting on behalf of the holders of such Senior Class Debt (such Representative and holders in respect of any such Senior Class Debt being referred to as the “ Senior Class Debt Parties ”; and the Senior Class Debt Parties and Second Priority Class Debt Parties, collectively, the “ Class Debt Parties ”), becomes a party to this Agreement by satisfying the conditions set forth in clauses (i) through (v), as applicable, of the immediately succeeding paragraph.
In order for a Class Debt Representative to become a party to this Agreement:
(i)    such Class Debt Representative shall have executed and delivered a Joinder Agreement substantially in the form of Annex III (if such Representative is a Second Priority Class Debt Representative) or Annex IV (if such Representative is a Senior Class Debt Representative) (with such changes as may be reasonably approved by the Designated Senior Representative, the Designated Second Priority Representative and such Class Debt Representative) pursuant to which it becomes a Representative hereunder, and the Class Debt in respect of which such Class Debt Representative is the Representative and the related Class Debt Parties become subject hereto and bound hereby;
(ii)    the Company shall have delivered to the Designated Senior Representative and the Designated Second Priority Representative true and complete copies of each of the Second Priority Debt Documents or Senior Debt Documents, as applicable, relating to such Class Debt, certified as being true and correct by a Responsible Officer of the Company;
(iii)    in the case of any Second Priority Class Debt, all filings, recordations and/or amendments or supplements to the Second Priority Collateral Documents necessary or desirable in the opinion of such Class Debt Representative to confirm and perfect the second priority Liens securing the relevant Second Priority Debt Obligations relating to such Class Debt shall have been made, executed and/or delivered (or, with respect to any such filings or recordations, acceptable provisions to perform such filings or recordings have been taken in the reasonable judgment of the Designated Second Priority Representative), and all fees and taxes in connection therewith shall have been paid (or acceptable provisions to make such payments have been taken in the reasonable judgment of the Designated Second Priority Representative);
(iv)    in the case of any Senior Class Debt, all filings, recordations and/or amendments or supplements to the Senior Collateral Documents necessary or desirable in the opinion of such Class Debt Representative to confirm and perfect the senior Liens securing the relevant Senior Obligations relating to such Class Debt shall have been made, executed and/or delivered (or, with respect to any such filings or recordations, acceptable provisions to perform such filings or recordings have been taken in the reasonable judgment of the Designated Senior Representative), and all fees and taxes in connection therewith shall have been paid; and
(v)    the Second Priority Debt Documents or Senior Debt Documents, as applicable, relating to such Class Debt shall provide, in a manner reasonably satisfactory to the Designated Senior Representative and the Designated Second Priority Representative, that each Class Debt Party with respect to such Class Debt will be subject to and bound by the provisions of this Agreement in its capacity as a holder of such Class Debt.
SECTION 8.10.     Consent to Jurisdiction: Waivers . Each Representative, on behalf of itself and the Secured Parties of the Debt Facility for which it is acting, irrevocably and unconditionally:
(a)    submits for itself and its property in any legal action or proceeding relating to this Agreement and the Collateral Documents, or for recognition and enforcement of any judgment in respect thereof, to the exclusive jurisdiction of the courts of the State of New York located in the County of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof;
(b)    consents that any such action or proceeding shall be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;
(c)    agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Person (or its Representative) at the address referred to in Section 8.11;
(d)    agrees that nothing herein shall affect the right of any other party hereto (or any Secured Party) to effect service of process in any other manner permitted by law; and
(e)    waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section 8.10 any special, exemplary, punitive or consequential damages.
SECTION 8.11.     Notices . All notices, requests, demands and other communications provided for or permitted hereunder shall be in writing and shall be sent:
(i)    if to the Company or any Grantor, to the Company, at its address at: [          ], Attention of [___], telecopy [_____];
(ii)    if to the Initial Second Priority Representative to it at [____], Attention of [____], telecopy [______];
(iii)    if to the original Administrative Agent, to it at: [___], Attention of [_____], telecopy [______];
(iv)    if to the original 2016 Trustee, to it at: [___], Attention of [_____], telecopy [______]; and
(v)    if to any other Second Priority Representative or Senior Representative, to it at the address specified by it in the Joinder Agreement delivered by it pursuant to Section 8.09.
Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and, may be personally served, faxed, electronically mailed or sent by courier service or U.S. mail and shall be deemed to have been given when delivered in person or by courier service, upon receipt of a fax or electronic mail or upon receipt via U.S. mail (registered or certified, with postage prepaid and properly addressed). For the purposes hereof, the addresses of the parties hereto shall be as set forth above or, as to each party, at such other address as may be designated by such party in a written notice to all of the other parties. As agreed to in writing among each Representative from time to time, notices and other communications may also be delivered by e-mail to the e-mail address of a representative of the applicable person provided from time to time by such person; provided that the Company must also agree to such notice provisions if such provisions would impact the Company.
SECTION 8.12.     Further Assurances . Each Senior Representative, for itself and on behalf of each Senior Secured Party, and each Second Priority Representative, for itself and on behalf of each Second Priority Debt Party under its Second Priority Debt Facility, agrees that it will take such further action and shall execute and deliver such additional documents and instruments (in recordable form, if requested) as the other parties hereto may reasonably request to effectuate the terms of, and the Lien priorities contemplated by, this Agreement.
SECTION 8.13.     GOVERNING LAW: WAIVER OF JURY TRIAL .
(a)     THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW.
(b)     EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 8.14.     Binding on Successors and Assigns . This Agreement shall be binding upon the Senior Representatives, the Senior Secured Parties, the Second Priority Representatives, the Second Priority Debt Parties, the Company, the other Grantors party hereto and their respective successors and assigns.
SECTION 8.15.     Section Titles . The section titles contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of this Agreement.
SECTION 8.16.     Counterparts . This Agreement may be executed in counterparts, each of which shall constitute an original but all of which when taken together shall constitute a single contract. Delivery of an executed signature page to this Agreement by facsimile or electronic transmission (including in “.pdf” or “.tif” format) shall be as effective as delivery of a manually signed counterpart of this Agreement.
SECTION 8.17.     Authorization . By its signature, each Person executing this Agreement on behalf of a party hereto represents and warrants to the other parties hereto that it is duly authorized to execute this Agreement. The Administrative Agent represents and warrants that this Agreement is binding upon the Credit Agreement Secured Parties. The 2016 Trustee represents and warrants that this Agreement is binding upon the Additional Senior Debt Parties under the 2016 Notes Indenture. The Initial Second Priority Representative represents and warrants that this Agreement is binding upon the Initial Second Priority Debt Parties.
SECTION 8.18.     No Third Party Beneficiaries; Successors and Assigns . The lien priorities set forth in this Agreement and the rights and benefits hereunder in respect of such lien priorities shall inure solely to the benefit of the Senior Representatives, the Senior Secured Parties, the Second Priority Representatives and the Second Priority Debt Parties, and their respective permitted successors and assigns, and no other Person (including the Grantors, or any trustee, receiver, debtor in possession or bankruptcy estate in a bankruptcy or like proceeding) shall have or be entitled to assert such rights; provided that the Grantors shall be entitled to the benefits and rights of the Grantors expressly set forth in Sections 2.06, 5.01, 5.02, 5.03, 5.05, 5.06, 6.01, 6.08, 7.03, 8.03(b), 8.08 and 8.09.
SECTION 8.19.     Effectiveness . This Agreement shall become effective when executed and delivered by the parties hereto.
SECTION 8.20.     Administrative Agent and Trustee . It is understood and agreed that (a) Citibank, N.A. is entering into this Agreement in its capacities as Administrative Agent under the Credit Agreement and the provisions of Article 9 of the Credit Agreement applicable to it as administrative agent thereunder shall also apply to it hereunder and (b) Deutsche Bank Trust Company Americas is entering in this Agreement in its capacity as Trustee under the 2016 Notes Indenture and the provisions of Article VII of the 2016 Notes Indenture applicable to the Trustee thereunder shall also apply to the Trustee hereunder.
SECTION 8.21.     2016 Trustee . Whenever reference is made in this Agreement to any action by, consent, designation, specification, requirement or approval of, notice, request or other communication from, or other direction given or action to be undertaken or to be (or not to be) suffered or omitted by the 2016 Trustee to any amendment, waiver or other modification of this Agreement to be executed (or not to be executed) by the 2016 Trustee or to any election, decision, opinion, acceptance, use of judgment, expression of satisfaction or other exercise of discretion, rights or remedies to be made (or not to be made) by the 2016 Trustee, it is understood that in all cases the 2016 Trustee shall be acting, giving, withholding, suffering, omitting, making or otherwise undertaking and exercising the same (or shall not be undertaking and exercising the same) as directed in accordance with the 2016 Notes Indenture.
SECTION 8.22.     Incorporation by Reference . Notwithstanding anything to the contrary herein, Deutsche Bank Trust Company Americas, as Trustee under the 2016 Notes Indenture, is entitled to all the rights, entitlements, privileges, protections and immunities, including, without limitation, the right to indemnification and payment of fees and expenses, granted to Deutsche Bank Trust Company Americas as Trustee under the 2016 Notes Indenture, for any actions taken by it as 2016 Trustee under this Agreement.
SECTION 8.23.     Relative Rights . Notwithstanding anything in this Agreement to the contrary (except to the extent contemplated by Section 5.01(a), 5.01(d), 5.02 or 5.03(b)), nothing in this Agreement is intended to or will (a) amend, waive or otherwise modify the provisions of the Credit Agreement, any other Senior Debt Document or any Second Priority Debt Documents, or permit the Company or any Grantor to take any action, or fail to take any action, to the extent such action or failure would otherwise constitute a breach of, or default under, the Credit Agreement or any other Senior Debt Document or any Second Priority Debt Documents, (b) change the relative priorities of the Senior Obligations or the Liens granted under the Senior Collateral Documents on the Shared Collateral (or any other assets) as among the Senior Secured Parties, (c) otherwise change the relative rights of the Senior Secured Parties in respect of the Shared Collateral as among such Senior Secured Parties or (d) obligate the Company or any Grantor to take any action, or fail to take any action, that would otherwise constitute a breach of, or default under, the Credit Agreement or any other Senior Debt Document or any Second Priority Debt Document.
SECTION 8.24.     Survival of Agreement . All covenants, agreements, representations and warranties made by any party in this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement.
[Signature pages follow]



D-3


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
CITIBANK, N.A.,
as Representative for the Credit Agreement Secured Parties
By:             

    Name:

    Title:
DEUTSCHE BANK TRUST COMPANY AMERICAS,
as Trustee under the 2016 Notes Indenture
By: Deutsche Bank National Trust Company
By:             

    Name:

    Title:
By:             

    Name:

    Title:

S-1


AVON INTERNATIONAL OPERATIONS, INC.
By:             

    Name:

    Title:
THE GRANTORS LISTED ON ANNEX I HERETO
By:             

    Name:

    Title:


S-2
NYDOCS01/1670282.6
Americas 91514551
 
 



[________],

as Initial Second Priority Representative
By:             

    Name:

    Title:

ANNEX I
Grantors
[    ]

ANNEX II
SUPPLEMENT NO. _____ dated as of ____, to the SECOND LIEN INTERCREDITOR AGREEMENT dated as of [_______], 20[____] (the “ Second-Lien Intercreditor Agreement ”), among Avon International Operations, Inc., a Delaware corporation (the “ Company ”), certain subsidiaries and affiliates of the Company (each a “ Grantor ”), Citibank, N.A., as Senior Representative under the Credit Agreement, Deutsche Bank Trust Company Americas, as Trustee under the 2016 Notes Indenture, [_________], as Initial Second Priority Representative, and the additional Representatives from time to time a party thereto.
A.    Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Second-Lien Intercreditor Agreement.
B.    The Grantors have entered into the Second-Lien Intercreditor Agreement. Pursuant to the Credit Agreement, certain Additional Senior Debt Documents and certain Second Priority Debt Documents, certain newly acquired or organized Subsidiaries of the Company are required to enter into the Second-Lien Intercreditor Agreement. Section 8.07 of the Second-Lien Intercreditor Agreement provides that such Subsidiaries may become party to the Second-Lien Intercreditor Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the “ New Grantor ”) is executing this Supplement in accordance with the requirements of the Credit Agreement, the Second Priority Debt Documents and Additional Senior Debt Documents.
Accordingly, the Designated Senior Representative, the Designated Second Priority Representative and the New Subsidiary Grantor agree as follows:
SECTION 1. In accordance with Section 8.07 of the Second-Lien Intercreditor Agreement, the New Grantor by its signature below becomes a Grantor under the Second-Lien Intercreditor Agreement with the same force and effect as if originally named therein as a Grantor, and the New Grantor hereby agrees to all the terms and provisions of the Second-Lien Intercreditor Agreement applicable to it as a Grantor thereunder. Each reference to a “Grantor” in the Second-Lien Intercreditor Agreement shall be deemed to include the New Grantor. The Second-Lien Intercreditor Agreement is hereby incorporated herein by reference.
SECTION 2. The New Grantor represents and warrants to the Designated Senior Representative, the Designated Second Priority Representative and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.
SECTION 3. This Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Designated Senior Representative and the Designated Second Priority Representative shall have received a counterpart of this Supplement that bears the signature of the New Grantor. Delivery of an executed signature page to this Supplement by facsimile transmission or other electronic method (including “.pdf” or “.tif” format) shall be as effective as delivery of a manually signed counterpart of this Supplement.
SECTION 4. Except as expressly supplemented hereby, the Second-Lien Intercreditor Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, no party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Second-Lien Intercreditor Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 8.11 of the Second-Lien Intercreditor Agreement. All communications and notices hereunder to the New Grantor shall be given to it in care of the Company as specified in the Second-Lien Intercreditor Agreement.
SECTION 8. The Company agrees to reimburse the Designated Senior Representative and the Designated Second Priority Representative for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Designated Senior Representative and the Designated Second Priority Representative.
[Signature pages follow]

IN WITNESS WHEREOF, the parties hereto have duly executed this Supplement to the Second-Lien Intercreditor Agreement as of the day and year first above written.
[NAME OF NEW SUBSIDIARY GRANTOR],
By:             

    Name:

    Title:
Acknowledged by:
Citibank, N.A.,
as Designated Senior Representative,
By:         

    Name:

    Title:
[___________],

as Designated Second Priority Representative,
By:         

    Name:

    Title:

ANNEX III
[FORM OF] REPRESENTATIVE SUPPLEMENT NO. [ ] dated as of [____], 20[__] to the SECOND LIEN INTERCREDITOR AGREEMENT dated as of [_______], 20[____] (the “ Second-Lien Intercreditor Agreement ”), among Avon International Operations, Inc., a Delaware corporation (the “ Company ”), certain subsidiaries and affiliates of the Company (each a “ Grantor ”), Citibank, N.A., as Senior Representative under the Credit Agreement, Deutsche Bank Trust Company Americas, as Trustee under the 2016 Notes Indenture, [_________], as Initial Second Priority Representative, and the additional Representatives from time to time a party thereto.
A.    Capitalized terms used herein but not otherwise defined herein shall have the meanings assigned to such terms in the Second-Lien Intercreditor Agreement.
B.    As a condition to the ability of the Company to incur Second Priority Class Debt and to secure such Second Priority Class Debt with the Second Priority Lien and to have such Second Priority Class Debt guaranteed by the Grantors on a subordinated basis, in each case under and pursuant to the Second Priority Collateral Documents, the Second Priority Class Representative in respect of such Second Priority Class Debt is required to become a Representative under, and such Second Priority Class Debt and the Second Priority Class Debt Parties in respect thereof are required to become subject to and bound by, the Second-Lien Intercreditor Agreement. Section 8.09 of the Second-Lien Intercreditor Agreement provides that such Second Priority Class Debt Representative may become a Representative under, and such Second Priority Class Debt and such Second Priority Class Debt Parties may become subject to and bound by, the Second-Lien Intercreditor Agreement, pursuant to the execution and delivery by the Second Priority Class Debt Representative of an instrument in the form of this Representative Supplement and the satisfaction of the other conditions set forth in Section 8.09 of the Second-Lien Intercreditor Agreement. The undersigned Second Priority Class Debt Representative (the “ New Representative ”) is executing this Supplement in accordance with the requirements of the Senior Debt Documents and the Second Priority Debt Documents.
Accordingly, the Designated Senior Representative, the Designated Second Priority Representative and the New Representative agree as follows:
SECTION 1. In accordance with Section 8.09 of the Second-Lien Intercreditor Agreement, the New Representative by its signature below becomes a Representative under, and the related Second Priority Class Debt consisting of [                      ] and Second Priority Class Debt Parties become subject to and bound by, the Second-Lien Intercreditor Agreement with the same force and effect as if the New Representative had originally been named therein as a Representative, and the New Representative, on behalf of itself and such Second Priority Class Debt Parties, hereby agrees to all the terms and provisions of the Second-Lien Intercreditor Agreement applicable to it as a Second Priority Representative and to the Second Priority Class Debt Parties that it represents as Second Priority Debt Parties. Each reference to a “ Representative ” or “ Second Priority Representative ” in the Second-Lien Intercreditor Agreement shall be deemed to include the New Representative. The Second-Lien Intercreditor Agreement is hereby incorporated herein by reference.
SECTION 2. The New Representative represents and warrants to the Designated Senior Representative, the Designated Second Priority Representative and the other Secured Parties that (i) it has full power and authority to enter into this Representative Supplement, in its capacity as [agent] [trustee], (ii) this Representative Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with the terms of such Agreement and (iii) the Second Priority Debt Documents relating to such Second Priority Class Debt provide that, upon the New Representative’s entry into this Agreement, the Second Priority Class Debt Parties in respect of such Second Priority Class Debt will be subject to and bound by the provisions of the Second-Lien Intercreditor Agreement as Second Priority Debt Parties.
SECTION 3. This Representative Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Representative Supplement shall become effective when the Designated Senior Representative and the Designated Second Priority Representative shall have received a counterpart of this Representative Supplement that bears the signature of the New Representative. Delivery of an executed signature page to this Representative Supplement by facsimile transmission or other electronic method (including “.pdf” or “.tif” format) shall be effective as delivery of a manually signed counterpart of this Representative Supplement.
SECTION 4. Except as expressly supplemented hereby, the Second-Lien Intercreditor Agreement shall remain in full force and effect.
SECTION 5. THIS REPRESENTATIVE SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this Representative Supplement should be held invalid, illegal or unenforceable in any respect, no party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Second-Lien Intercreditor Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 8.11 of the Second-Lien Intercreditor Agreement. All communications and notices hereunder to the New Representative shall be given to it at the address set forth below its signature hereto.
SECTION 8. The Company agrees to reimburse the Designated Senior Representative and the Designated Second Priority Representative for its reasonable out-of-pocket expenses in connection with this Representative Supplement, including the reasonable fees, other charges and disbursements of counsel for the Designated Senior Representative and the Designated Second Priority Representative.
[Signature pages follow]

IN WITNESS WHEREOF, the parties hereto have duly executed this Representative Supplement to the Second-Lien Intercreditor Agreement as of the day and year first above written.
[NAME OF NEW REPRESENTATIVE], as
[_________] for the holders of [_________________],
By:             

    Name:

    Title:
Address for notices:
    
    
    
attention of:     
Telecopy:     
CITIBANK, N.A.,
as Designated Senior Representative,
By:             

    Name:

    Title:
[______________],

as Designated Second Priority Representative,
By:             

    Name:

    Title:

Acknowledged by:
AVON INTERNATIONAL OPERATIONS, INC.
By:         

    Name:

    Title:
THE GRANTORS
LISTED ON SCHEDULE I HERETO
By:         

    Name:

    Title:


S-3


Schedule I to the
Representative Supplement to the
Second-Lien Intercreditor Agreement
Grantors
[_________]





ANNEX IV
[FORM OF] REPRESENTATIVE SUPPLEMENT NO. [  ] dated as of [______], 20[______] to the SECOND LIEN INTERCREDITOR AGREEMENT dated as of [_______], 20[____] (the “ Second-Lien Intercreditor Agreement ”), among Avon International Operations, Inc., a Delaware corporation (the “ Company ”), certain subsidiaries and affiliates of the Company (each a “ Grantor ”), Citibank, N.A., as Senior Representative under the Credit Agreement, Deutsche Bank Trust Company Americas, as Trustee under the 2016 Notes Indenture, [_________], as Initial Second Priority Representative, and the additional Representatives from time to time a party thereto.
A.    Capitalized terms used herein but not otherwise defined herein shall have the meanings assigned to such terms in the Second-Lien Intercreditor Agreement.
B.    As a condition to the ability of the Company to incur Senior Class Debt after the date of the Second-Lien Intercreditor Agreement and to secure such Senior Class Debt with the Senior Lien and to have such Senior Class Debt guaranteed by the Grantors on a senior basis, in each case under and pursuant to the Senior Collateral Documents, the Senior Class Debt Representative in respect of such Senior Class Debt is required to become a Representative under, and such Senior Class Debt and the Senior Class Debt Parties in respect thereof are required to become subject to and bound by, the Second-Lien Intercreditor Agreement. Section 8.09 of the Second-Lien Intercreditor Agreement provides that such Senior Class Debt Representative may become a Representative under, and such Senior Class Debt and such Senior Class Debt Parties may become subject to and bound by, the Second-Lien Intercreditor Agreement, pursuant to the execution and delivery by the Senior Class Debt Representative of an instrument in the form of this Representative Supplement and the satisfaction of the other conditions set forth in Section 8.09 of the Second-Lien Intercreditor Agreement. The undersigned Senior Class Debt Representative (the “ New Representative ”) is executing this Supplement in accordance with the requirements of the Senior Debt Documents and the Second Priority Debt Documents.
Accordingly, the Designated Senior Representative, the Designated Second Priority Representative and the New Representative agree as follows:
SECTION 1. In accordance with Section 8.09 of the Second-Lien Intercreditor Agreement, the New Representative by its signature below becomes a Representative under, and the related Senior Class Debt consisting of [                     ] and Senior Class Debt Parties become subject to and bound by, the Second-Lien Intercreditor Agreement with the same force and effect as if the New Representative had originally been named therein as a Representative, and the New Representative, on behalf of itself and such Senior Class Debt Parties, hereby agrees to all the terms and provisions of the Second-Lien Intercreditor Agreement applicable to it as a Senior Representative and to the Senior Class Debt Parties that it represents as Senior Debt Parties. Each reference to a “ Representative ” or “ Senior Representative ” in the Second-Lien Intercreditor

1


Agreement shall be deemed to include the New Representative. The Second-Lien Intercreditor Agreement is hereby incorporated herein by reference.
SECTION 2. The New Representative represents and warrants to the Designated Senior Representative, the Designated Second Priority Representative and the other Secured Parties that (i) it has full power and authority to enter into this Representative Supplement, in its capacity as [agent] [trustee], (ii) this Representative Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with the terms of such Agreement and (iii) the Senior Debt Documents relating to such Senior Class Debt provide that, upon the New Representative’s entry into this Agreement, the Senior Class Debt Parties in respect of such Senior Class Debt will be subject to and bound by the provisions of the Second-Lien Intercreditor Agreement as Senior Secured Parties.
SECTION 3. This Representative Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Representative Supplement shall become effective when the Designated Senior Representative and the Designated Second Priority Representative shall have received a counterpart of this Representative Supplement that bears the signature of the New Representative. Delivery of an executed signature page to this Representative Supplement by facsimile transmission or other electronic method (including “.pdf” or “.tif” format) shall be effective as delivery of a manually signed counterpart of this Representative Supplement.
SECTION 4. Except as expressly supplemented hereby, the Second-Lien Intercreditor Agreement shall remain in full force and effect.
SECTION 5. THIS REPRESENTATIVE SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this Representative Supplement should be held invalid, illegal or unenforceable in any respect, no party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Second-Lien Intercreditor Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 8.11 of the Second-Lien Intercreditor Agreement. All communications and notices hereunder to the New Representative shall be given to it at the address set forth below its signature hereto.
SECTION 8. The Company agrees to reimburse the Designated Senior Representative and the Designated Second Priority Representative for its reasonable out-of-pocket expenses in connection with this Representative Supplement, including the reasonable fees, other

2


charges and disbursements of counsel for the Designated Senior Representative and the Designated Second Priority Representative.
[Signature pages follow]

3



IN WITNESS WHEREOF, the parties hereto have duly executed this Representative Supplement to the Second-Lien Intercreditor Agreement as of the day and year first above written.
[NAME OF NEW REPRESENTATIVE], as
[_________] for the holders of [_______________]
By:             

    Name:

    Title:
Address for notices:
    
    
    
attention of:     
Telecopy:     
CITIBANK, N.A.,
as Designated Senior Representative
By:             

    Name:

    Title:
[______________],
as Designated Second Priority Representative

4


By:             

    Name:

    Title:



5
Exhibit 10.2

[Avon Letterhead]
August 12, 2017
Personal & Confidential
James Scully
110 Drake Smith Lane
Rye, NY 10580

Re:     Severance Benefit Letter Agreement and General Release of Claims
Dear Jim:

This Severance Benefit Letter Agreement and General Release of Claims (this “Agreement”) sets forth the terms and conditions of your benefits under an individual severance agreement with Avon Products, Inc. (“Avon” or the “Company”) that provides benefits in excess of the benefits available under the Avon Products, Inc. Severance Pay Plan (the “Severance Plan”). The Severance Plan limits total payouts to any participant to no more than $540,000 for separations that occur in 2017 (the “409A Limit”). Because your total severance payments are in excess of the amount that would otherwise be provided under the Severance Plan, this Agreement will be provided to you in lieu of any benefits payable under the Severance Plan and you agree that you waive all your rights to benefits under the Severance Plan.
The severance benefits being offered to you are as follows:
a.
Basic Severance Benefits : As long as you work through the Separation Date (defined below in numbered Paragraph 1), you are eligible for a severance payment representing two weeks of your base salary, less deductions (the “Basic Severance”); or
b.
Additional Severance Benefits : As an alternative to the Basic Severance, you may elect to receive a collection of benefits consisting of payment to you of an amount greater than the Basic Severance amount plus certain other benefits as described below. For clarity, this collection of severance benefits will be called “Additional Severance Benefits.” The Additional Severance Benefits are payable instead of the Basic Severance. The Additional Severance Benefits are being offered to you in consideration of this Agreement, and, if applicable, the Second General Release (as defined below).


To be eligible for the Additional Severance Benefits, as detailed below, you must: (1) work through the Separation Date; (2) timely sign this Agreement; (3) allow this Agreement to become effective and irrevocable (by not revoking it within seven days of your signature); and (4) if you signed this Agreement before the Separation Date, you must timely sign another general release of claims (the “Second General Release”) and allow the Second General Release to become effective and irrevocable (by not revoking it within seven days of your signature). A copy of this Second General Release is included with the Agreement. See the Paragraph below entitled Permissible Time to Sign Agreement and Possible Second General Release regarding the timing requirements for deciding whether to execute these documents and the accompanying instructions in the Second General Release.
If your employment does not end for any reason, or if you are transferred or receive certain offers of employment from Avon or its affiliates to commence promptly after the Separation Date, consistent with the Severance Plan, your eligibility to receive either Basic Severance or Additional Severance Benefits will cease.
Until this Agreement and, if applicable, the Second General Release becomes effective, you are not eligible for and do not have a binding right to severance benefits beyond the Basic Severance (two weeks of base salary, less deductions). If you elect not to sign the Agreement, you are entitled to retain the Basic Severance. The below Paragraphs briefly describe the treatment of your benefits after the Separation Date (defined in Paragraph 1), including the enhanced severance benefits available to you if you elect the Additional Severance Benefits. Please note, however, that the actual written plan documents for the relevant benefit plans set forth the terms and conditions of benefits and control in the event of differences described herein.
1.
Last Day of Active Employment
Your last day of active employment with Avon will be October 1, 2017 (the “Separation Date”). You must work through the Separation Date to either receive Basic Severance or Additional Severance Benefits.
Regardless of whether you work through the Separation Date or whether you elect the Additional Severance Benefits, if you are entitled to any payment for accrued but unused paid time off benefits (e.g., vacation) through your last day of work, in accordance with applicable law, or the terms of an applicable Avon policy, you will receive a separate payment representing such amount(s), if any.


2.
Salary Continuation
You must work through the Separation Date to either receive Basic Severance or Additional Severance Benefits.  For example, if, prior to the Separation Date, you (i) voluntarily resign your employment, (ii) are terminated by Avon for cause (as defined in the Severance Plan), or (iii) are terminated by Avon for poor performance (as defined in the Severance Plan) in accordance with our regular processes, you will not have met the requirement to work through the Separation Date.
If you work through the Separation Date, you will be eligible for either Basic Severance or Additional Severance Benefits:
Basic Severance: If you do not elect the Additional Severance Benefits, you are eligible for an automatic two-week severance period (two weeks of your base salary), less applicable deductions, paid in accordance with the next-scheduled payroll cycle following the Separation Date.
Additional Severance Benefits : If you elect the Additional Severance Benefits, you will receive salary continuation for 24 months immediately following the Separation Date (referred to as the “Salary Continuation Period”) based upon your annual salary as in effect on the Separation Date. Avon payroll will calculate the total amount of salary continuation payable, in accordance with Avon’s normal payroll practices.
Because you are one of the top 50 highest paid employees at Avon (a “specified employee”), under Internal Revenue Code Section 409A (“Section 409A”), the section which governs nonqualified deferred compensation (including separation agreements), certain limitations may apply on how the separation payments will be made to you if the total severance payments exceed the 409A Limit. Since your total severance payments under the Additional Severance Benefits are expected to exceed the 409A Limit, you will receive your severance in two tranches:
(a)
The first tranche (“Tranche A”) will be equal to the 409A Limit, payable over the Salary Continuation Period in substantially equal, bi-weekly installments (less applicable deductions) on each of Avon’s regular payroll dates.
(b)
The second tranche (“Tranche B”) will be equal to the remaining amount of salary continuation owed to you under this Agreement in excess of the 409A Limit, payable from the first administratively feasible Avon regular


payroll date that occurs in the seventh month following the Separation Date through the end of the Salary Continuation Period, in substantially equal, bi-weekly installments (less applicable deductions) on each of Avon’s regular payroll dates.
Where both tranches are being paid at the same time, there will be one check paid to you by Avon.
For the avoidance of doubt, payments under Tranche A are intended to be exempt from the requirements of Section 409A. Payments under Tranche B are intended to either be exempt from the requirements of Section 409A or satisfy any applicable requirements of Section 409A for payments of nonqualified deferred compensation to specified employees.
The Additional Severance Benefits are instead of the Basic Severance and any severance benefits that may otherwise be contemplated under any agreement with Avon or any Avon plan, policy or program.
During the Salary Continuation Period, as explained below, you will be eligible to continue to participate in certain of Avon’s benefit plans in accordance with the provisions of the relevant plan documents, including any amendments to those plans that may be enacted from time to time, and any applicable elections that you may have on file with Avon. You will not, however, accrue any vacation days or be eligible for any other benefits provided to active employees during the Salary Continuation Period, other than those expressly provided for herein and/or as otherwise required by law.
Notwithstanding the foregoing, if you are receiving the Additional Severance Benefits in the form of salary continuation but you accept a position with another business entity, Avon may elect, in its sole discretion, to pay any remaining cash severance payments to you in the form of a lump sum payment (except that any such election to accelerate payment will not apply to the extent that it would violate Section 409A), in which case your participation in all Avon benefit plans (for example, the active medical plan) will cease, and you will no longer have a “Salary Continuation Period.” However, as used in Paragraphs 10(c), 10(d), or 10(e), below, the “Salary Continuation Period” shall mean the entire period of time that you would have received salary continuation payments under this Paragraph 2 had you not received all or a portion of your severance payments in the form of a lump sum payment.


3.
Avon Personal Savings Account Plan : With respect to the Avon Personal Savings Account Plan (the “PSA”), also known as the 401(k) Plan, you are considered a terminated employee on the Separation Date. Even if you elect the Additional Severance Benefits, you will not be entitled to participate in the PSA during the Salary Continuation Period. Whether or not you elect the Additional Severance Benefits, upon the Separation Date, you may take a distribution of your benefits immediately. You may roll over the contents of your PSA account into an Individual Retirement Account or other tax-deferred savings account in accordance with the PSA and applicable tax rules. Please consult with your accountant or tax advisor before doing so. Any outstanding PSA loans you may have are payable within three months after your Separation Date if you do not make arrangements to continue to make regular loan repayments after the Separation Date through the PSA third party administrator, Empower Retirement. You should contact Empower Retirement if you have an outstanding plan loan.
4.
Cash Incentive Award
As a reminder, all cash incentive awards are subject to Avon’s compensation recoupment policy.
Annual EIP: You are currently a participant in the Avon Products, Inc. 2013-2017 Executive Incentive Plan (the “Annual EIP”) for 2017. Regardless of whether or not you elect the Additional Severance Benefits, payments, if any, of the Annual EIP award are governed by the terms of the Annual EIP and are triggered by the attainment of performance measures, as determined in accordance with Company policies. Payment, if any, of the 2017 Annual EIP award, will be made in 2018 at the same time active 2017 Annual EIP participants receive their payments. Even if you elect the Additional Severance Benefits, you are not eligible for an award for any years after 2017 under the Annual EIP or any other bonus program.
5.
Deferred Compensation Plan

Regardless of whether or not you elect the Additional Severance Benefits, under the Avon Products, Inc. Deferred Compensation Plan (the “DCP”) distributions will begin in accordance with the terms of such plan and any elections you may have made under such plan, including any amendments to such plan that may be enacted from time to time. If you elect the Additional Severance Benefits, during the Salary Continuation Period, you are not eligible to defer any monies into the DCP. Your DCP form and timing of payment elections are available online at http://retirementnq.prudential.com.



6.
Equity Awards
Regardless of whether or not you elect the Additional Severance Benefits, each equity award (such as restricted stock units and stock options) will continue to be governed by the applicable equity agreement(s) and the applicable stock incentive plan(s) (including, but not limited to, terms and conditions regarding vesting and settlement of awards).
7.
Career Transition and Development Services
Additional Severance Benefits : If you elect the Additional Severance Benefits, you will receive career transition and development services (outplacement services) provided by a vendor and program selected by Avon. More information will be provided to you under separate cover closer to the Separation Date. Your eligibility for outplacement services will begin on the day following the Separation Date and will continue for twelve (12) months following the Separation Date. If, at the conclusion of this initial career transition and development period, you have not found new employment, you may be eligible for a maximum of twelve (12) additional months of career transition and development services, to be granted in one-month increments at the sole discretion of Avon.
Basic Severance : If you do not elect the Additional Severance Benefits, no career transition and development services will be provided to you.
8.
Health and Welfare Plans
Additional Severance Benefits : If you elect the Additional Severance Benefits, during the Salary Continuation Period, and provided that you are a participant in the applicable Avon plan as of the Separation Date, you generally will continue to be eligible to participate in the following benefit plans: Medical, Dental, Vision, Employee Assistance Program, Group Life Insurance, Supplemental Group Life Insurance, Group Accidental Death and Dismemberment (“AD&D”) and Supplemental Group AD&D. For those plans requiring premium payments, you will be required to pay the same portion of the total premium as an active associate pays. If you elect to continue Medical, Dental and/or Vision coverage, your benefit coverage level will be provided at the benefit coverage level that you previously selected, subject to Avon’s right to amend, modify, or terminate such arrangements at any time. But note, however, because you are considered one of the top 25% highest paid associates at Avon per IRS regulations, you will be paying your entire premiums on an after-tax basis and your Form W-2s will include imputed income equal to value of the subsidized premiums being


provided by Avon, as required by the Internal Revenue Code. Because of this required tax treatment, the cost to you of continuing coverage may be substantially higher than while you were actively employed. You may wish to consult a tax advisor to see how this change may impact you.
Also, in the event that during the Salary Continuation Period you should become employed by another employer and are provided with medical and/or dental insurance coverage, you may either drop your Avon coverage or continue your coverage under both plans. Under the second alternative, your coverage will be coordinated between the two plans, with your new employer’s plan serving as the primary payer. In the event that your group health plan coverage ceases during the Salary Continuation Period due to a “qualifying event,” or due to the expiration of the Salary Continuation Period, you will then be entitled to elect continued coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) at your own expense, assuming you satisfy the requirements of COBRA.
In addition, pursuant to Section 409A, the following rules apply to your continued receipt of the above welfare benefits to the extent those benefits are not exempt from the requirements of Section 409A: (x) to the extent that any such benefit is provided via reimbursement to you, no such reimbursement will be made by Avon later than the end of the year following the year in which the underlying expense is incurred; (y) any such benefit provided by Avon in any year will not be affected by the amount of any such benefit provided by Avon in any other year; and (z) under no circumstances will you be permitted to liquidate or exchange any such benefit for cash or any other benefit.
Basic Severance : If you do not elect the Additional Severance Benefits, your participation in the Medical, Dental, Vision, Employee Assistance Program, Group Life Insurance, Supplemental Group Life Insurance, Group AD&D and Supplemental Group AD&D will generally end on the Separation Date (or no later than the last day of the month in which Basic Severance ceases, pursuant to the terms of each plan and/or policy). You are entitled to elect to continue group health plan coverage under COBRA at your own expense, assuming you satisfy the requirements of COBRA. Information regarding COBRA coverage will be sent to you under separate cover if you do not elect the Additional Severance Benefits.
Other Welfare Benefits
Regardless of whether or not you elect the Additional Severance Benefits, your participation in the Short-Term and Long-Term Disability plans, the Flexible


Spending Accounts, and the Transit Incentive Plan will cease following the Separation Date (except that you may continue to participate in the Health Care Flexible Spending Account for the remainder of the calendar year in which the Separation Date occurs in accordance with COBRA, assuming you satisfy the requirements of COBRA and assuming that you elect COBRA). You will receive separate paperwork required to elect COBRA continuation coverage for the Health Care Flexible Spending Account.
If you participate in the Transit Incentive Program, you will have 90 days after the Separation Date to spend the remaining pre-tax and after-tax funds on your WageWorks Transit Commuter Card.  After the 90-day period has expired, the post-tax contributions will be returned to you. Pre-tax contributions, per regulations, will be forfeited .  For more information please contact WageWorks at 877-924-3967.
Also, when your group life insurance coverage terminates (either immediately, or if you elect the Additional Severance Benefits, at the end of the Salary Continuation Period, if any), you may be entitled to convert the group coverage to individual life insurance coverage. Please contact the group life insurance vendor (currently Liberty Mutual at 888-787-2129) before your group life insurance coverage terminates for details.
9.
Perquisites

a.
Executive Health Exam
Additional Severance Benefits : If you elect the Additional Severance Benefits and if you have not already received your annual Executive Health Exam in the calendar year in which your Severance Date occurs, you may still receive the exam for up to the earlier of three months following the Separation Date or the end of the calendar year in which the Separation Date occurs. Note, however, that because you are considered a “specified employee” under Section 409A, reimbursements for an Executive Health Exam after the Separation Date will be subject to a six-month delay from the Separation Date, and so any such reimbursements will be payable to you no earlier than the seventh month following the Separation Date.
Basic Severance : If you do not elect the Additional Severance Benefits, your eligibility for an Executive Health Exam will end on the Separation Date.

b.
Financial Planning and Tax Preparation


Regardless of whether or not you elect the Additional Severance Benefits, your eligibility for Financial Planning and Tax Preparation will end on the Separation Date.
Your receipt of the above perquisite(s) is subject to the following rules: (x) to the extent that any such perquisite is provided via reimbursement to you, no such reimbursement will be made by Avon later than the end of the year following the year in which the underlying expense is incurred; (y) any such perquisite provided by Avon in any year will not be affected by the amount of any such perquisite provided by Avon in any other year; and (z) under no circumstances will you be permitted to liquidate or exchange any such perquisite for cash or any other benefit.
10.
Your Obligations to Avon
Additional Severance Benefits : Except as otherwise provided in this Agreement, in consideration of your election of the Additional Severance Benefits, you further agree to the following:
a.
Confidentiality: You agree to keep and hold in strict trust all Confidential Information that you obtained or generated during or as a result of your employment at Avon. You promise not to knowingly use, disclose, copy, distribute or reverse-engineer, directly or through persons interposed, without Avon’s prior written consent (which may only be provided by the Chief Executive Officer), as and from this date, and at any time, Avon’s Confidential Information. For this purpose, “Confidential Information” means any secret, confidential, and/or proprietary information or knowledge relating to Avon or related to any of Avon’s affiliated companies, and/or their respective businesses, agents, employees, customers and independent sales representatives, that is not generally known to the public. Such Confidential Information includes, but is not limited to, financial information and projections, marketing information and plans, product formulations, samples, processes, production methods, intellectual property and trade secrets, data, know-how, sales, market development programs and plans, and other types of information not generally known to the public, including non-public unpublished or pending patent applications and all related patent rights, techniques, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and developments, whether or not patentable and whether or not copyrightable. Notwithstanding your confidentiality obligations, you are permitted to disclose Confidential Information that is required to be disclosed by you pursuant to judicial order or other legal mandate, provided that you have given Avon prompt notice of the disclosure requirement, and that you fully cooperate with any efforts by


Avon to obtain and comply with any protective order imposed on such disclosure.

In accordance with the Defend Trade Secrets Act of 2016, you are hereby notified by Avon that you will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (i) is made (x) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and (y) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. You are further notified by Avon that, if you file a lawsuit for retaliation by an employer for reporting a suspected violation of law, then you may disclose the employer’s trade secrets to your attorney and use the trade secret information in the court proceeding if you: (A) file any document containing the trade secret under seal; and (B) do not disclose the trade secret, except pursuant to court order.

b.
Use of Confidential Information : You agree that you will not use Avon’s Confidential Information in connection with any publicity, advertising, endorsement or other promotion. You further agree not to use Avon’s trademarks, logos, service marks or other intellectual property in any form of advertising, publicity or release without Avon’s prior written approval. You understand that nothing in this Agreement shall be construed to prevent lawful communications regarding working conditions, or other terms and conditions of employment protected under Section 7 of the National Labor Relations Act or applicable state law.

c.
Non-solicitation : You will not, without Avon’s prior written consent (which may only be provided by the Chief Executive Officer), during the Salary Continuation Period, directly or indirectly hire, solicit, or aid in the solicitation of, any employee of Avon or an affiliated company, including any solicitation or recruitment of such employee to take him or her away from or to leave his or her Avon employment to work for any other employer or other entity.

d.
Non-competition : Notwithstanding anything else in this Agreement, you will not, during the Salary Continuation Period, without Avon’s prior written consent (which may only be provided by the Chief Executive Officer), accept employment with, or act as a consultant or independent contractor to, any company engaged in the direct selling business or beauty business within or without the United States including, but not limited to, the following: Amway


Corp./Alticor Inc., Amore Pacific, Arabela, Arbonne, Beiersdorf (Nivea), COTY, De Millus S.A., Ebel Int’l/Belcorp Corp., Elizabeth Arden, Faberlic, Herbalife Ltd., Inter Parfums, Jequiti, Lady Racine/LR Health & Beauty Systems GmbH, LG Health & Household, L’Occitane, L’Oréal Group/Cosmair Inc., Mary Kay Inc., Mistine/Better Way (Thailand) Co. Ltd., Natura Cosmetics S.A., Neways Int’l, NuSkin Enterprises Inc., O Boticário, Oriflame Cosmetics S.A., Origami Owl, Reckitt Benckiser PLC, Revlon Inc., Rodan & Fields, Shaklee Corp., Shiseido, Stella & Dot, Silpada, The Body Shop Int’l PLC, The Estée Lauder Companies Inc., The Procter & Gamble Company, Tupperware Corp., Unilever Group (N.V. and PLC), Vorwerk & Co. KG/Jafra Worldwide Holdings (Lux) S.à.R.L. Inc., Yanbal Int’l (Yanbal, Unique), Younique or any of their affiliates.

e.
By signing this Agreement and, if applicable, the Second General Release, you are agreeing that you may be reasonably requested from time to time by Avon: (x) to advise and consult on matters within or related to your expertise and knowledge in connection with the business of Avon; (y) to make yourself available to Avon to respond to requests for information concerning matters involving facts or events relating to Avon; and (z) to assist with pending and future litigation, investigations, arbitrations, and/or other dispute resolution matters, in each case solely regarding matters with respect to which you have direct personal knowledge due to your prior employment with Avon. If you provide such consultation during the Salary Continuation Period, Avon will only reimburse you for reasonable related out-of-pocket expenses. If you provide such consultation after the Salary Continuation Period ends, you shall be paid at your current salary rate, and in accordance with applicable law, for time expended by you at Avon’s request on such matters, and shall also receive reimbursement for reasonable out-of-pocket expenses incurred in connection with such assistance. Any time spent related to this paragraph shall be structured, to the extent practicable and reasonable, in a manner to minimize disruption to your ability to fulfill any other professional and personal commitments you may have from time to time. You understand that, with respect to any consultation services provided by you under this paragraph, you will not be credited with any compensation, service or age credit for purposes of eligibility, vesting, or benefit accrual under any employee benefit plan of Avon, unless such employee benefit plan otherwise expressly and specifically provides for such credit.

f.
By signing this Agreement and, if applicable, the Second General Release, you acknowledge that you understand that violations of any of the preceding covenants of Paragraph 10 are material and that any violations may result in a


forfeiture, at Avon’s sole, but reasonable, discretion, of your benefits and payments under this Agreement in excess of the Basic Severance (including salary continuation, whether or not already paid), but do not relieve you of your continuing obligations under this Agreement. You agree that Avon’s remedies at law for any breach by you of the preceding covenants will be inadequate and that Avon will also have the right to obtain immediate injunctive relief, without a bond, so as to prevent any continued breach of any of these covenants, in addition to any other available legal remedies. It is understood that any remedy available at law or in equity shall be available to Avon should the preceding covenants be breached.

g.
By signing this Agreement and the Second General Release, if applicable, to the fullest extent allowed by law, you agree not to commence, join, participate in, or assist any lawsuit, action, investigation or proceeding arising from or relating to any act or omission by any of the “Avon Released Parties” (as that term is defined both in this Agreement in Paragraph 19 below and, if applicable, in the Second General Release) unless you are compelled by law to do so and you also agree not to recover or seek to recover any damages, backpay or other monetary relief as part of any action or class action brought by any other individual, the EEOC, or any other civil rights or governmental agency.

11.
E-Mail and Voicemail : You acknowledge and understand that your access to Avon’s e-mail and voicemail, as well as other communication systems, will be discontinued as of the Separation Date.

12.
Return of Avon Property : On or before the Separation Date, you agree to promptly deliver to Avon, and not keep in your possession, duplicate, or deliver to any other person or entity, any and all property (whether in hard copy, physical form, or electronic form) that belongs to Avon or any of its affiliated companies, including, without limitation, automobiles, computer hardware and software, cell phones, Blackberrys, iPhones, Androids, other smartphones, iPads, other tablets, thumb drives, other electronic equipment, keys, credit cards, identification cards, records, files, data, and other documents and information, including any and all copies of the foregoing.

13.
Employment Inquiries : You understand and agree that, in the event Avon receives any inquiries from your prospective employers, it shall be the policy of Avon to respond by advising that Avon’s policy is to provide information only as to service dates and positions held.



14.
Entire Agreement and Amendments to Agreement : You acknowledge that the only consideration for your execution and non-revocation of this Agreement (which includes a general release of claims) and, if applicable, your execution and non-revocation of the Second General Release are the benefits which are expressly stated in this document. All other promises or agreements of any kind, including but not limited to, your employment offer letter agreement with Avon dated January 23, 2015, that have been made by or between the parties or by any other person or entity whatsoever that are related to the subject matter of this Agreement are superseded, revoked and cancelled by this Agreement, except that any arbitration, nondisclosure, intellectual property protection, non-solicit, non-compete or classified information provisions and/or agreements with the Company continue to apply in accordance with their terms (and the greater protection to Avon applies in the event of any conflict between this Agreement and such other agreements) and any plans, equity award agreements, or policies that are referenced in this Agreement as continuing to be applicable (including, without limitation, the Company’s “Associate Arbitration Policy”) are not superseded and will remain in effect. In addition, any compensation recoupment provisions, practices or policies will continue to apply, as applicable. You agree that this Agreement and, if applicable, the Second General Release, may not be changed orally, by email, or by any other form of electronic communication, but only by a written agreement signed by both you and an authorized representative of Avon.

15.
Severability : You agree that the provisions of this Agreement and, if applicable, the Second General Release, are severable. If a provision or any part of a provision is held to be invalid under any law or ruling, all of the remaining provisions of this Agreement and, if applicable, the Second General Release will remain in full force and effect and be enforceable to the extent allowed by law. If any restriction contained in this Agreement or, if applicable, the Second General Release is held to be excessively broad as to duration, activity, or scope, then you agree that such restriction may be construed, “blue-penciled” or judicially modified so as to be limited or reduced to the extent required to be enforceable under applicable law.

16.
Voluntary Nature : You are not required to elect the Additional Severance Benefits. Any election to do so by you is completely voluntary. By signing this Agreement and, if applicable, the Second General Release, you warrant and represent that you have read this entire Agreement and, if applicable, the Second General Release, that you have had an opportunity to consult fully with an attorney, and that you fully understand the meaning and intent of this Agreement and, if applicable, the Second General Release. Further, you knowingly and


voluntarily, of your own free will, without any duress, being fully informed, and after due deliberation, accept its terms and sign below as your own free act. You understand that as a result of executing this Agreement and, if applicable, the Second General Release, you will not have the right to assert that Avon or any other Avon Released Party (as defined both in this Agreement in Paragraph 19 below and, if applicable, in the Second General Release) unlawfully terminated your employment or violated any of your rights in connection with your employment.

17.
Governing Law : You agree that this Agreement (which includes a general release of claims) and, if applicable, the Second General Release will be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict of laws principles, and federal law where applicable. Any legal action to enforce this Agreement, and, if applicable the Second General Release, by either party, shall be subject to arbitration in accordance with Avon’s “Associate Arbitration Policy”. To the extent that Avon is seeking equitable relief to enforce your obligations under this Agreement, Avon may seek such relief as provided in the Paragraph above entitled Your Obligations to Avon in any federal, state or local court in any jurisdiction.

18.
Election Not to Accept the Additional Severance Benefits : Should you elect not to accept the Additional Severance Benefits, you will be provided only with the Basic Severance (two weeks of base salary, less applicable withholdings) and continued coverage under certain Avon benefit plans during that period (or, for some plans, until the last day of the month in which such payments end, in accordance with the terms of such plans (which control in the event of any discrepancy herein)). Following this two-week salary continuation period, you will be notified by a separate letter of your right to elect continued group health plan coverage, at your own expense, under COBRA, as applicable.

19.
General Release of Claims
In consideration of the severance benefits herein (i.e., the acceptance of the Additional Severance Benefits) and the other terms and conditions of this Agreement, you agree, on behalf of yourself and your heirs, executors, administrators, and assigns, to forever release, dismiss, and discharge (except as provided by this Agreement) Avon and its affiliated companies and each of their respective current and former officers, directors, associates, employees, agents, employee benefit plans, employee benefit plan fiduciaries, employee benefit plan trustees, employee benefit plan administrators, representatives, attorneys, shareholders, successors and assigns, each and all of them in every capacity,


personal and representative (collectively referred to as the “Avon Released Parties”), from any and all actions, causes of action, claims, suits, losses, demands, judgments, charges, contracts, obligations, debts, and liabilities of whatever nature (“Claims”), that you and your heirs, executors, administrators, and assigns have or may hereafter have against the Avon Released Parties or any of them arising out of or by reason of any cause, matter, or thing whatsoever from the beginning of the world to the date hereof, including, without limitation:
•
All Claims arising from your employment relationship with Avon and the termination of such relationship;
•
All Claims arising under any federal, state, or local constitution, statute, rule, or regulation, or principle of contract law or common law;
•
All Claims for breach of contract, wrongful discharge, tort, breach of common-law duty, or breach of fiduciary duty;
•
All Claims for violation of laws prohibiting any form of employment discrimination or other unlawful employment practice, including without limitation, as applicable:
o
The Worker Adjustment and Retraining Notification Act of 1988, as amended, 29 U.S.C. §§ 2101 et seq.;
o
Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§ 2000e et seq.;
o
The Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. §§ 621 et seq. (the “ADEA”);
o
The Americans with Disabilities Act of 1990, as amended, 42 U.S.C. §§ 12101 et seq.;
o
The Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001 et seq.;
o
The Family and Medical Leave Act of 1993, as amended, 29 U.S.C. §§ 2601 et seq.;
o
The Genetic Information Nondiscrimination Act of 2008, as amended, 42 U.S.C. §§ 2000ff et seq.;



o
The National Labor Relations Act of 1935, as amended, 29 U.S.C. §§ 151 et seq. (the “NLRA”);
o
the Fair Credit Reporting Act, as amended, 15 U.S.C. §§ 1681 et seq.;
o
“Whistleblower” laws (other than as provided for in Paragraph 21 herein) and laws protecting “whistleblowers” from retaliation;
o
The New York State Human Rights Law, as amended, N.Y. Exec. Law §§ 290 et seq.; the New York State Worker Adjustment and Retraining Notification Act, as amended, N.Y. Labor Law §§ 860 et seq.; Article 6 of the New York Labor Law, as amended, N.Y. Labor Law §§ 190 et seq.; the New York Nondiscrimination for Legal Actions Law, as amended, N.Y. Labor Law § 201-d; the New York State Fair Credit Reporting Act, as amended, N.Y. Gen. Bus. Law §§ 380 et seq.; Article 23-A of the New York State Corrections Law, as amended, N.Y. Correc. Law §§ 750 et seq.; the New York City Human Rights Law, as amended, N.Y.C. Admin. Code §§ 8-101 et seq.; the New York City Earned Sick Time Act, as amended, N.Y.C. Admin. Code §§ 20-911 et seq.; the New York City Stop Credit Discrimination in Employment Act, as amended, N.Y.C. Admin. Code §§ 8-102(29), 8-107(9)(d), 8-107(24); and the New York City Fair Chance Act, as amended, N.Y.C. Admin. Code §§ 8-102(5), 8-107(9) et seq.;
o
Any other state’s and local government’s human rights laws, anti-discrimination laws, and “plant closing”/mini-WARN Act laws;
o
Anti-retaliation laws, including without limitation retaliation claims under the New York State Workers' Compensation Law, as amended, N.Y. Workers' Comp. Law § 120, and the New York State Disability Benefits Law, as amended, N.Y. Workers' Comp. Law § 241; and
o
Any other federal, state, or local constitution, statute, rule, or regulation;
provided , that you do not release or discharge the Avon Released Parties: (x) from any Claims arising after the date on which you execute this Agreement (except, where applicable, you later execute and do not revoke the Second General Release); (y) from any Claims for a breach by Avon of its obligations


under this Agreement; or (z) from any Claims that by law cannot be released or waived. It is understood that the release herein does not release the Avon employee benefit plans from any claims for vested benefits that you have under the terms of any of Avon’s employee benefit plans applicable to you. It is further understood that nothing in this General Release of Claims shall preclude or prevent you from challenging the validity of this General Release of Claims solely with respect to any waiver of any Claims arising under the ADEA after the date on which you execute this General Release of Claims.
Nothing in this Agreement is to be construed as an admission on behalf of the Avon Released Parties of any wrongdoing with respect to you, any such wrongdoing being expressly denied.
You represent and warrant that you have not filed any complaint, charge, claim, or proceeding against any of the Avon Released Parties before any federal, state, or local agency, court, or other body relating to your employment and the cessation thereof or to any claim released in this Agreement, and that you are not currently aware of any facts or basis for filing such a complaint, charge, claim, or proceeding against any of the Avon Released Parties. Except as otherwise provided in this Agreement, you agree that, if you or any other person or entity files an action, complaint, charge, claim, or proceeding against any of the Avon Released Parties, you will not seek or accept any monetary, equitable, or other relief in such action, complaint, charge, claim, or proceeding (including without limitation, relief that would provide you with reinstatement to employment with Avon) and that you will take all available steps/procedures to withdraw and/or dismiss the complaint, charge, claim or proceeding, regardless of who filed or initiated such complaint, charge, claim, or proceeding, whether pursued solely on your behalf or on behalf of a greater class of individuals.
If you are employed in, or, were formerly employed in the State of California, you additionally acknowledge that you are aware of and familiar with the provisions of Section 1542 of the California Civil Code, which provides as follows:
“A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the general release which if known by him must have materially affected his settlement with the debtor.”
If you are employed in, or, were formerly employed in the State of California, by signing this Agreement, you hereby waive and relinquish all rights and benefits which you may have under Section 1542 of the California Civil Code and under


the law of any other state or jurisdiction to the same or similar effect. You represent and warrant that you have the authority to enter into this general release on your behalf individually and to bind all persons and entities claiming through you.
You acknowledge: (w) that you are receiving valuable consideration in exchange for your execution of this Agreement, and if applicable, the Second General Release, that you would not otherwise be entitled to receive; (x) that you were given at least twenty-one (21) days in which to consider this Agreement and the Second General Release; (y) that any changes made to this Agreement, whether material or immaterial, will not restart the twenty-one (21) day consideration period; and (z) that you are entitled to revoke this Agreement and the Second General Release (if applicable) in writing, within seven (7) days after you sign each, respectively. Such revocation must be delivered to the Company as provided herein within the applicable seven (7)-day period, in which case you will receive no benefits other than Basic Severance and neither this Agreement, nor your election to accept the Additional Severance Benefits, will go into effect.
20.
Additional Representations

a.
You acknowledge that you have been paid in full (or will be paid in full pursuant to the Company’s normal payroll practice policy) for all hours that you have worked for Avon, that you have properly reported all hours worked, and that other than what is provided for in this Agreement (and under the terms and conditions of the employee benefit plans and equity agreements and plans referenced herein), you have no other rights to any other compensation or benefits.

b.
You further acknowledge that you have not been denied any leave requested under the Family and Medical Leave Act (“FMLA”) or applicable state leave laws and that, to the extent applicable, you have been returned to your job, or an equivalent position, following any FMLA or state leave taken pursuant to the FMLA or state laws.

c.
You acknowledge, understand and agree that you have reported (or will timely report for occurrences that occur after the date that you sign this Agreement) to Avon any work related injury or illness that occurred up to and including the Separation Date.

d.
You acknowledge and certify that you have complied with Avon’s Code of Conduct (the “Code”) and its principles, and you agree to continue to comply with the Code through the Separation Date.


21.
Reservation of Certain Rights
You understand that nothing in this Agreement is intended, and nothing in this Agreement will be construed, to prevent, interfere with, or otherwise restrict communications or actions protected or required by applicable law, including the legitimate exercise of any Section 7 rights under the NLRA that you may have during your employment with Avon (such as discussing terms and conditions of employment and other workplace conditions).
Protection of Whistleblower Rights: This Agreement is not intended to, and shall be interpreted in a manner that does not, limit or restrict you from exercising any legally protected rights that you may have under any applicable statutes, regulations and rules intended to protect whistleblowers (including pursuant to Rule 21F under the Securities Exchange Act of 1934, as amended).
22.
Compliance with Laws/Tax Treatment : Avon will comply with all payroll/tax withholding requirements and will include in income these benefits as required by law. Avon cannot guarantee the tax treatment of any of these benefits and makes no representation regarding the tax treatment.

23.
Internal Revenue Code Section 409A : The parties hereto have a made a good faith effort to comply with current guidance under Section 409A. The intent of the parties hereto is that payments and benefits under this Agreement comply with or be exempt from Section 409A and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith, including, without limitation, that references to “termination of employment” and like terms, with respect to payments and benefits that are provided under a “nonqualified deferred compensation plan” (as defined in Section 409A) that is not exempt from Section 409A, will be interpreted to mean “separation from service” (as defined in Section 409A). In the event that amendments to this Agreement are necessary in order to comply with Section 409A or to minimize or eliminate any income inclusion and penalties under Section 409A ( e.g. , under any document or operational correction program), Avon and you agree to negotiate in good faith the applicable terms of such amendments and to implement such negotiated amendments, on a prospective and/or retroactive basis, as needed. To the extent that any amount payable or benefit to be provided under this Agreement constitutes an amount payable or benefit to be provided under a “nonqualified deferred compensation plan” (as defined in Section 409A) that is not exempt from Section 409A, and such amount or benefit is payable or to be provided as a result of a “separation from service” (as defined in Section 409A), and you are a specified employee (as defined in Section 409A and determined pursuant to procedures adopted by Avon from time to time) on your separation


from service date, then, notwithstanding any other provision in this Agreement to the contrary, such payment or benefit will not be made or provided to you during the six (6) month period following your separation from service. Notwithstanding the foregoing, Avon makes no representation to you about the effect of Section 409A on the provisions of this Agreement and Avon shall have no liability to you in the event that you become subject to taxation under Section 409A (other than any tax reporting and/or withholding obligations that Avon may have under applicable law).

24.
Advice of Counsel : You acknowledge that you have been and are hereby advised by Avon to consult with an attorney about this Agreement and its General Release of Claims (and, if applicable, the Second General Release) prior to signing (at your own expense) and you represent that you did so to the extent that you deemed appropriate or you knowingly and voluntarily waived your right to do so. You represent and warrant that you fully understand the terms of this Agreement and its General Release of Claims (and, if applicable, the Second General Release), and you knowingly and voluntarily, of your own free will, without any duress, being fully informed, and after due deliberation, accept its terms and sign below as your own free act. You understand that, as a result of signing this Agreement and, if applicable, the Second General Release, you will not have the right to assert that Avon or any other Avon Released Party unlawfully terminated your employment or violated any of your rights in connection with your employment.

25.
Challenge to the Validity of the Agreement and Communication with Government Agency : Nothing in this Agreement: (y) limits or affects your right to challenge the validity of the General Release of Claims under the ADEA or the Older Workers Benefit Protection Act; or (z) precludes you from filing an administrative charge or otherwise communicating with any federal, state or local government office, official or agency. However, you promise and agree never to seek or accept any damages or other legal remedies, or any equitable remedies or relief (including, without limitation, relief that would provide you with reinstatement to employment with Avon), and hereby waive any right to recovery of any such damages, remedies or other relief for you personally with respect to any claim released by Paragraph 19, regardless of whether another person or entity or you initiate the underlying action related to the Claim. You also promise and agree not to voluntarily offer to be a witness and/or voluntarily provide evidence in support of any lawsuit brought by a third party (excluding governmental agencies) against Avon or the Avon Released Parties (as defined in the General Release of Claims above).



26.
Permissible Time to Sign Agreement and Possible Second General Release . If you do not sign this Agreement and return it to Avon within twenty-one (21) days after the date on which you receive this Agreement and, if applicable, if you do not sign the Second General Release and return it within twenty-one (21) days following the Separation Date , then the offer of Additional Severance Benefits described herein will expire and you will not be entitled to any Additional Severance Benefits beyond the Basic Severance. As long as you sign and return this Agreement within this time period, you will have seven (7) days immediately after the date of your signature to revoke your decision by delivering, within the seven (7) day period, written notice of revocation to the Senior Vice President, Human Resources. If you do not revoke your decision during that seven (7)-day period, then this Agreement will become effective on the eighth (8th) day. Note that similar consideration and revocation rules apply to the Second General Release (except that the consideration period begins on the Separation Date and the revocation period begins on the date you sign the Second General Release). If you timely sign and return this Agreement and, if applicable, the Second General Release and do not revoke the Agreement, and, if applicable, the Second General Release, each will become effective, respectively, on the day following the expiration of their respective seven (7)-day revocation periods .

You understand that the present offer of the Additional Severance Benefits is made without prejudice and is conditional upon its unqualified acceptance and compliance with the execution and delivery requirements described above for this Agreement, and, if applicable, for the Second General Release. Note that the Agreement includes an agreement regarding your ongoing obligation to protect and preserve the confidentiality of the Confidential Information obtained or accessed while you were in the employ of Avon.
Your signature below signifies your voluntary acceptance of the terms of this Agreement, its confidentiality clauses and your election to receive the Additional Severance Benefits, which benefits you acknowledge are in excess and in lieu of those provided under Avon’s regular severance pay plan(s) and policies.
A duplicate copy of this Agreement and the Second General Release is attached for your files. Please sign and date both copies of this Agreement, in the spaces provided, returning one copy to Avon and retaining the other copy for your records. If you elect not to accept the Additional Severance Benefits, please notify Avon, in writing, as soon as practicable of your decision. Your failure to timely return the executed Agreement, and if applicable, the Second General Release, will be treated as your failure to elect the Additional Severance Benefits.



[Signatures on next page]




We thank you for your contributions to Avon, and wish you success with your future career.
Sincerely,
AVON PRODUCTS, INC.

By: /s/ Susan Ormiston ____________
Susan Ormiston
SVP, Chief Human Resources Officer


You have carefully reviewed, understood and agree with the terms and conditions specified in this Agreement above. You have signed to indicate your acceptance thereof.

Date: 8/16/17 ________    By: /s/ James Scully ______________
James Scully



SECOND GENERAL RELEASE
A.
General Release of Any Claims That May Have Arisen During the Period From the Date of “Severance Benefit Letter Agreement and General Release of Claims” Through the Date of This Second General Release :
As one of the conditions of my eligibility for, and in consideration of my receipt of, the severance benefits referred to as the “Additional Severance Benefits” and set forth in the Severance Benefit Letter Agreement and General Release of Claims between Avon Products, Inc. (“Avon”) and James Scully dated August 12, 2017 (the “Agreement”), and in consideration of the other terms and conditions of the Agreement, I agree, on behalf of myself and my heirs, executors, administrators, and assigns, to forever release, dismiss, and discharge (except as otherwise provided by the Agreement and this Second General Release), Avon and its affiliated companies and each of their respective current and former officers, directors, associates, employees, agents, employee benefit plans, employee benefit plan fiduciaries, employee benefit plan trustees, employee benefit plan administrators, representatives, attorneys, shareholders, successors, and assigns, each and all of them in every capacity, personal and representative (collectively referred to as the “Avon Released Parties”), from any and all actions, causes of action, claims, suits, losses, demands, judgments, charges, contracts, obligations, debts, and liabilities of whatever nature (“Claims”), that I and my heirs, executors, administrators, and assigns have or may hereafter have against the Avon Released Parties or any of them arising out of or by reason of any cause, matter, or thing whatsoever from the date I signed the Agreement to the date hereof, including, without limitation:
•
All Claims arising from my employment relationship with Avon and the termination of such relationship;
•
All Claims arising under any federal, state, or local constitution, statute, rule, or regulation, or principle of contract law or common law;
•
All Claims for breach of contract, wrongful discharge, tort, breach of common-law duty, or breach of fiduciary duty;
•
All Claims for violation of laws prohibiting any form of employment discrimination or other unlawful employment practice, including without limitation, as applicable:
o
The Worker Adjustment and Retraining Notification Act of 1988, as amended, 29 U.S.C. §§ 2101 et seq.;


o
Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§ 2000e et seq.;
o
The Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. §§ 621 et seq. (the “ADEA”);
o
The Americans with Disabilities Act of 1990, as amended, 42 U.S.C. §§ 12101 et seq.;
o
The Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001 et seq.;
o
The Family and Medical Leave Act of 1993, as amended, 29 U.S.C. §§ 2601 et seq.;
o
The Genetic Information Nondiscrimination Act of 2008, as amended, 42 U.S.C. §§ 2000ff et seq.;
o
The National Labor Relations Act of 1935, as amended, 29 U.S.C. §§ 151 et seq. (the “NLRA”);
o
the Fair Credit Reporting Act, as amended, 15 U.S.C. §§ 1681 et seq.;
o
“Whistleblower” laws (other than as provided for in Paragraph C(vii) below) and laws protecting “whistleblowers” from retaliation;
o
The New York State Human Rights Law, as amended, N.Y. Exec. Law §§ 290 et seq.; the New York State Worker Adjustment and Retraining Notification Act, as amended, N.Y. Labor Law §§ 860 et seq.; Article 6 of the New York Labor Law, as amended, N.Y. Labor Law §§ 190 et seq.; the New York Nondiscrimination for Legal Actions Law, as amended, N.Y. Labor Law § 201-d; the New York State Fair Credit Reporting Act, as amended, N.Y. Gen. Bus. Law §§ 380 et seq.; Article 23-A of the New York State Corrections Law, as amended, N.Y. Correc. Law §§ 750 et seq.; the New York City Human Rights Law, as amended, N.Y.C. Admin. Code §§ 8-101 et seq.; the New York City Earned Sick Time Act, as amended, N.Y.C. Admin. Code §§ 20-911 et seq.; the New York City Stop Credit Discrimination in Employment Act, as amended, N.Y.C. Admin. Code §§ 8-102(29), 8-107(9)(d), 8-


107(24); and the New York City Fair Chance Act, as amended, N.Y.C. Admin. Code §§ 8-102(5), 8-107(9) et seq.;
o
Any other state’s and local government’s human rights laws, anti-discrimination laws, and “plant closing”/mini-WARN Act laws;
o
Anti-retaliation laws, including without limitation retaliation claims under the New York State Workers' Compensation Law, as amended, N.Y. Workers' Comp. Law § 120, and the New York State Disability Benefits Law, as amended, N.Y. Workers' Comp. Law § 241; and
o
Any other federal, state, or local constitution, statute, rule, or regulation;
provided that I do not release or discharge the Avon Released Parties: (1) from any Claims arising after the date on which I execute this Second General Release; (2) from any Claims for a breach by Avon of its obligations under the Agreement or this Second General Release; or (3) from any Claims that by law cannot be released or waived. It is understood that this Second General Release does not release the Avon employee benefit plans from any claims for vested benefits that I may have under the terms of any of Avon’s employee benefit plans applicable to me. It is further understood that nothing in this Second General Release will preclude or prevent me from challenging the validity of the Second General Release solely with respect to any waiver of any Claims arising under the ADEA after the date on which I execute this Second General Release.

A.

B.
Challenge to the Validity of the Agreement and Communication with Government Agency :
Nothing in this Second General Release (i) limits or affects my right to challenge the validity of the Second General Release of Claims under the ADEA or the Older Workers Benefit Protection Act; or (ii) precludes me from filing an administrative charge or otherwise communicating with any federal, state or local government office, official or agency. However, I promise and agree never to seek or accept any damages or other legal remedies, or any equitable remedies or relief (including, without limitation, relief that would provide me with reinstatement to employment with Avon), and hereby waive any right to recovery of any such damages, remedies or other relief for myself personally with respect to any Claim released by Paragraph A, regardless of whether another person or entity or I initiate the underlying action related to the Claim. I also promise and agree not to voluntarily offer to be a witness and/or voluntarily provide evidence in support of any lawsuit brought by a third party (excluding governmental agencies) against one or more of the Avon Released Parties.


C. Other Representations and Reservation of Certain Rights:
I make the following additional representations, which I acknowledge the Company has relied upon in entering into this Second General Release:
i.
Nothing in this Second General Release is to be construed as an admission on behalf of the Avon Released Parties of any wrongdoing with respect to me, any such wrongdoing being expressly denied.
ii.
I represent and warrant that as of today’s date, I have not filed any complaint, charge, claim, or proceeding against any of the Avon Released Parties before any federal, state, or local agency, court, or other body relating to my employment and the cessation thereof or to any claim released in the Agreement or this Second General Release, and that I am not currently aware of any facts or basis for filing such a complaint, charge, claim, or proceeding against any of the Avon Released Parties. Except as otherwise provided in the Agreement and this Second General Release, I agree that, if I or any other person or entity files an action, complaint, charge, claim, or proceeding against any of the Avon Released Parties, I agree that, to the maximum extent permitted by law, I will not seek or accept any monetary, equitable, or other relief in such action, complaint, charge, claim, or proceeding (including without limitation relief that would provide me with reinstatement to employment with Avon), and that I will take all available steps/procedures to withdraw and/or dismiss the complaint, charge, claim or proceeding, regardless of who filed or initiated such complaint, charge, claim or proceeding, whether pursued solely on my behalf or on behalf of a greater class of individuals.
iii.
If I am employed in, or was formerly employed in, the State of California, I acknowledge that I am aware of and familiar with the provisions of Section 1542 of the California Civil Code, which provides as follows:
“A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the general release which if known by him must have materially affected his settlement with the debtor.”
If I am employed in, or was formerly employed in, the State of California, by signing this Second General Release, I hereby waive and relinquish all rights and benefits which I may have under Section 1542 of the California


Civil Code and under the law of any other state or jurisdiction to the same or similar effect.
iv.
I represent and warrant that I have the authority to enter into this Second General Release on my behalf individually and to bind all persons and entities claiming through me.
v.
I understand that nothing in the Agreement or this Second General Release will limit or interfere with any rights that I may have under Section 7 of the NLRA.
vi.
I acknowledge and certify that I have complied with Avon’s Code of Conduct and its principles.
vii.
Protection of Whistleblower Rights : I understand that this Second General Release is not intended to, and shall be interpreted in a manner that does not, limit or restrict me from exercising any legally protected rights that I may have under any applicable statutes, regulations and rules intended to protect whistleblowers (including pursuant to Rule 21F under the Securities Exchange Act of 1934, as amended).
viii.
I acknowledge that Avon has advised me, and hereby advises me, to consult with legal counsel prior to signing the Agreement and the Second General Release. I represent and warrant that I fully understand the terms of the Agreement and the Second General Release, that I have been encouraged to seek the benefit of advice of counsel and either have done so or have knowingly and voluntarily waived my right to do so, and that I knowingly and voluntarily, of my own free will, without any duress, being fully informed, and after due deliberation, accept its terms and sign below as my own free act. I understand that as a result of signing the Agreement and the Second General Release (subject to Paragraph B above), I will not have the right to assert that Avon or any other Avon Released Party unlawfully terminated my employment or violated any of my rights in connection with my employment with Avon or the cessation thereof.
I acknowledge that I was afforded at least twenty-one (21) days (the “consideration period”) to consider whether to sign this Second General Release (it was included with my Agreement) during which time Avon did not change or revoke the terms of this Second General Release or the Agreement. I understand that, in order to receive the Additional Severance Benefits, I must sign and return this Second General Release no earlier than my last day of active employment and no later than the end of the consideration period specified in my Agreement.


I understand that if I do not sign this Second General Release and return it to Avon within the time period specified above, then I will not be entitled to any Additional Severance Benefits beyond the basic severance as defined in the Agreement. I understand that, as long as I sign and return this Second General Release within the consideration period, I will have seven (7) days immediately after the date of my signature in which I may revoke my decision to sign this Second General Release by delivering, within the seven (7) day period, written notice of revocation to the Senior Vice President, Human Resources. If I do not revoke my decision during that seven (7)-day period, then this Second General Release will become effective on the eighth (8th) day after I sign it and will be irrevocable.
I acknowledge: (w) that I am receiving valuable consideration in exchange for the execution of the Agreement and this Second General Release that I would not otherwise be entitled to receive; (x) that I was given at least twenty-one (21) days in which to consider the Agreement and a separate twenty-one (21) days in which to consider the Second General Release; (y) that any changes made to the Agreement or Second General Release, whether material or immaterial, will not restart their respective twenty-one (21) day consideration periods; and (z) that I am entitled to revoke the Agreement and the Second General Release in writing, within seven (7) days after I sign each, respectively. Such revocation must be delivered to the Company as provided herein within the applicable seven (7)-day period, in which case I will receive no benefits other than basic severance and neither the Agreement, the Second General Release, nor my election to accept the Additional Severance Benefits, will go into effect.
This Second General Release shall be governed by the laws of the State of New York without giving effect to its conflict of laws principles.

Date: _________________
By: ____________________
     James Scully


Exhibit 10.3

Termination Agreement
 
Beendigungs-vereinbarung
(herein referred to as “this Agreement”)
 
(nachfolgend als „diese Vereinbarung“ bezeichnet)
between
 
zwischen
Avon Cosmetics GmbH
Zeppelinstraße 3
85399 Hallbergmoos
 
Avon Cosmetics GmbH
Zeppelinstraße 3
85399 Hallbergmoos
(hereinafter referred to as “Avon Germany”)
 
(nachfolgend als „Avon Deutschland“ bezeichnet)
and
 
und
Avon Products Inc.
Principal Executive Offices:
Building 6, Chiswick Park
London W4 5HR
United Kingdom
 
Avon Products Inc.
Principal Executive Offices:
Building 6, Chiswick Park
London W4 5HR
Vereinigtes Königreich
and
 
und
John Higson
Bergstrasse 12
86573 Obergriesbach
Germany
 
John Higson
Bergstrasse 12
86573 Obergriesbach
Deutschland
(hereinafter referred to as “Employee”)
 
(nachfolgend als „Mitarbeiter“ bezeichnet)
1. It is agreed between the parties hereto that the employee’s employment relationship with Avon Germany under the agreement dated 20 September 1999 as well as any preceding or subsequent agreements, amendments and
 
1. Die Vertragsparteien sind sich darüber einig, dass das Arbeitsverhältnis des Mitarbeiters mit Avon Deutschland gemäß dem Vertrag vom 20. September 1999 nebst etwaigen vorherigen bzw. nachfolgenden Abreden,


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addenda hereto shall be terminated with effect as of 30 September 2017 (the “Termination Date”).
   
 
Änderungen oder Ergänzungen hierzu mit Wirkung zum 30. September 2017 beendet wird („Beendigungstermin“).
2.      It is agreed between the parties hereto that the employee’s employment relationship with Avon Products, Inc. and any parent, subsidiary or other affiliated company of Avon Products, Inc. (collectively, the “Companies”) as well as any preceding or subsequent agreements, amendments and addenda hereto shall be terminated with effect as of the Termination Date.
 
2.      Die Vertragsparteien sind sich darüber einig, dass das Arbeitsverhältnis des Mitarbeiters mit der Avon Products, Inc. sowie etwaigen Mutter-, Tochter- oder sonstigen verbundenen Unternehmen der Avon Products, Inc. (gemeinsam die „Avon-Gesellschaften“) sowie etwaige vorherige bzw. nachfolgende Abreden, Änderungen oder Ergänzungen hierzu mit Wirkung zum Beendigungstermin beendet werden.
3.      There are no other employments or service contracts between the Employee and the Companies.
 
3.      Es bestehen keine sonstigen Arbeits- oder Dienstverträge zwischen dem Mitarbeiter und den Avon-Gesellschaften.
4.      Any existing directorships and officerships that the Employee holds with Avon Germany or the Companies shall cease on the Termination Date.
 
4.      Bestehende Ämter, die der Mitarbeiter in unternehmensleitenden Gremien bzw. als leitender Angestellte bei Avon Deutschland oder den Avon-Gesellschaften innehat, enden zum Beendigungstermin.
5.      Until the Termination Date, the Employee shall receive his monthly gross base salary of EUR 43,069 (EUR 516,837 annualized).
 
5.      Der Mitarbeiter erhält bis zum Beendigungstermin sein monatliches Brutto-Grundgehalt i. H. v. EUR 43.069 (EUR 516.837 auf Jahresbasis umgerechnet).
Medical coverage will be paid as previously up to the Termination Date. After the Termination Date no
 
Die Krankenversicherung des Mitarbeiters wird bis zum Beendigungstermin wie bisher


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medical coverage will be paid any more.
 
bezahlt. Nach dem Beendigungstermin wird keine Krankenversicherung mehr bezahlt.
6.      The Employee shall receive benefits according to the applicable provisions of the International Retirement Plan. In terms of the Employee’s other pension entitlements, the trustees of the relevant pension scheme(s) shall be notified of the Employee's termination of employment and shall provide written confirmation of the Employee's accrued entitlement under the relevant pension scheme(s).
 
6.      Der Mitarbeiter erhält Vorsorgeleistungen gemäß den geltenden Bestimmungen des International Retirement Plans. In Bezug auf die sonstigen Pensionsansprüche des Mitarbeiters werden die Treuhänder des/der jeweiligen Pensionsplans/Pensionspläne über die Beendigung des Arbeitsverhältnisses des Mitarbeiters informiert und diese werden die erworbenen Pensionsanwartschaften des Mitarbeiters gemäß dem/den jeweiligen Pensionsplan/Pensionsplänen schriftlich bestätigen.
Furthermore, Employee remains eligible pursuant to the applicable policies of the Companies, for tax filing support services from the Companies’ selected vendor for tax years in which the income Employee received for services provided to the Companies generates multi-country tax filings.
 
Darüber hinaus bleibt der Mitarbeiter weiterhin gemäß den geltenden Richtlinien der Avon-Gesellschaften berechtigt, die Unterstützungsleistungen des von den Avon-Gesellschaften ausgewählten Anbieters bei Steuererklärungen für die Steuerjahre in Anspruch zu nehmen, in denen das Einkommen des Mitarbeiters für Leistungen, die der Mitarbeiter für die Avon-Gesellschaften erbracht hat, die Einreichung von Steuererklärungen in mehreren Ländern erfordert.
7.      The Employee is a participant in the Avon Products, Inc. 2013-2017 Executive Incentive Plan (EIP).
 
7.      Der Mitarbeiter nimmt an dem Avon Products, Inc. 2013-2017 Executive Incentive Plan (EIP) teil.


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Payments, if any, of the EIP award are governed by the terms of the EIP and are triggered by the attainment of performance measures, as determined in accordance with Avon Products, Inc.’s policies. Payment, if any, of the 2017 EIP award, will be made in 2018 at the same time active 2017 Annual EIP participants receive their payments. The Employee is not eligible for an award for any years after the Termination Date under the EIP or any other bonus program.
 
Etwaige Leistungen nach dem EIP erfolgen gemäß den Bedingungen des EIP und werden durch die Erreichung von Leistungszielen ausgelöst, die gemäß den Richtlinien von Avon Products, Inc. festgelegt werden. Etwaige Leistungen nach dem EIP 2017 werden zum gleichen Zeitpunkt in 2018 ausgezahlt, an dem aktive Teilnehmer an dem EIP 2017 ihre Leistungen ausgezahlt bekommen. Der Mitarbeiter hat keinen Anspruch auf Leistungen nach dem EIP oder einem sonstigen Bonusprogramm für die Jahre nach dem Beendigungstermin.
The parties are agreed that the Employee does not participate in any other annual incentive or bonus plan or program (including, but not limited to the Management Incentive Plan (MIP)), and has no claims based on any other program.
 
Die Parteien sind sich darüber einig, dass der Mitarbeiter an keinem sonstigen jährlichen Incentive bzw. Bonusplan oder -Programm (insbesondere dem Management Incentive Plan (MIP)) teilnimmt und er keine diesbezüglichen Ansprüche auf der Grundlage eines sonstigen Programms hat.
8.      Each currently outstanding equity award in Avon Products, Inc. (such as restricted stock units, performance restricted stock units and stock options) that has been granted to the Employee will continue to be subject to and governed by the applicable equity agreement(s) and the applicable stock incentive plan(s) (including, but not limited to, terms and conditions regarding vesting and settlement of awards) – i.e., the Avon Products Inc. 2016 Omnibus
 
8.      Sämtliche derzeit ausstehenden Leistungsprämien, die in Aktien der Avon Products, Inc. gewährt werden (etwa Aktien mit Veräußerungssperre (restricted stock units), Aktien bei der Erreichung vorgegebener Leistungsziele (performance restricted stock units) und Aktienoptionen), die dem Mitarbeiter gewährt wurden, unterliegen weiterhin den geltenden Mitarbeiterbeteiligungsvereinbarun


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Incentive Plan, the Avon Products, Inc. 2013 Stock Incentive Plan or the Avon Products, Inc. 2005 Stock Incentive Plan.
 
gen bzw. werden durch diese weiterhin bestimmt (insbesondere den Bestimmungen und Bedingungen in Bezug auf die Ausübung und Abwicklung der gewährten Aktien(-Optionen)), d. h. der Avon Products Inc. 2016 Omnibus Incentive Plan, der Avon Products, Inc. 2013 Stock Incentive Plan bzw. der Avon Products, Inc. 2005 Stock Incentive Plan.
The regulations under such plans shall remain valid and binding regarding such stock awards. To the extent the Companies are obligated to remit wage tax with respect to any stock award, the Employee shall reimburse the Companies the amount remitted; the Companies may withhold the amount of wage tax probably becoming due from the amount which is payable.
 
Die Regelungen dieser Pläne bleiben in Bezug auf die Gewährung dieser Aktien-(Optionen) gültig und bindend. Soweit die Avon-Gesellschaften verpflichtet sind, Lohnsteuer auf die Gewährung dieser Aktien(-Optionen) abzuführen, erstattet der Mitarbeiter den Avon-Gesellschaften den insoweit abgeführten Betrag; die Avon-Gesellschaften sind berechtigt, die auf den auszuzahlenden Betrag voraussichtlich fällige Lohnsteuer einzubehalten.
The Employee has no other claims to remuneration or bonus or otherwise to payments or benefits-in-kind against Avon Germany or the Companies.
 
Der Mitarbeiter hat keine sonstigen Ansprüche gegen Avon Deutschland oder die Avon-Gesellschaften auf Vergütung, Boni oder sonstige Zahlungen und Sachleistungen.
9.      On the Termination Date, the Employee shall receive as compensation for the loss of the job pursuant to §§ 9, 10 KSchG (German Act Against Unfair Dismissal) a severance payment of EUR 1,033,674 gross plus an additional amount of EUR 32,000
 
9.      Der Mitarbeiter erhält am Beendigungstermin als Ausgleich für den Verlust seines Arbeitsplatzes gemäß §§ 9, 10 KSchG eine Abfindung i. H. v. EUR 1.033.674 brutto sowie einen Zusatzbetrag i. H. v. EUR 32.000 brutto. Diese Beträge sind zur


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gross. These amounts are due on the first administratively feasible regular payroll date of Avon Germany following the Termination Date. The Employee shall pay any income tax associated with these payments.
 
Auszahlung fällig am ersten administrativ machbaren Gehaltsabrechnungsdatum der Avon Deutschland nach dem Beendigungstermin. Der Mitarbeiter zahlt die im Zusammenhang mit diesen Zahlungen anfallende Einkommensteuer.
10.      The payments described in Sec. 9 of this Agreement also include compensation for the post-contractual non-competition clause agreed to in this Sec. 10 of this Agreement in the amount required by section 74(2) German Commercial Code. The parties agree that a period of post-contractual non-competition applies for the duration of 24 months following the Termination Date, i.e. until 30 September 2019, in accordance with the provisions set out below:
 
10.      Die in Ziffer 9 dieser Vereinbarung genannten Zahlungen umfassen auch eine Entschädigung für das in Ziffer 10 dieser Vereinbarung vereinbarte nachvertragliche Wettbewerbsverbot in der in § 74 Abs. 2 HGB vorgeschriebenen Höhe. Die Parteien sind sich einig, dass das nachvertragliche Wettbewerbsverbot für einen Zeitraum von 24 Monaten ab dem Beendigungstermin, d. h. bis zum 30. September 2019, gemäß den nachfolgenden Bestimmungen gilt:
10.1      With respect to subject matter, this prohibition of competition applies to all areas in which Avon Germany is engaged at the time the prohibition starts. With respect to subject matter, the prohibition of competition further applies to all areas in which the Companies are engaged at the time the prohibition starts.
 
10.1      Dieses Wettbewerbsverbot gilt inhaltlich für alle Bereiche, in denen Avon Deutschland zu Beginn des Wettbewerbsverbots tätig ist. Ferner gilt das Wettbewerbsverbot inhaltlich für alle Bereiche, in denen die Avon-Gesellschaften zu Beginn des Wettbewerbsverbots tätig sind.
With respect to territory, the prohibition of competition refers to the entire area of activity of Avon Germany at the time when the prohibition starts. With respect to territory, the prohibition of
 
Das Wettbewerbsverbot bezieht sich räumlich auf den gesamten Tätigkeitsbereich von Avon Deutschland zu Beginn des Wettbewerbsverbots. Räumlich bezieht sich das


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competition refers further to the entire area of activity of the Companies at the time when the prohibition starts.
 
Wettbewerbsverbot ferner auf den gesamten Tätigkeitsbereich der Avon-Gesellschaften zu Beginn des Wettbewerbsverbots.
This subject matter and territorial area of application is collectively referred to as “area of business”.
 
Der inhaltliche und räumliche Geltungsbereich des Wettbewerbsverbots wird zusammenfassend als „Geschäftsbereich“ bezeichnet.
The prohibition of competition shall apply with respect to any competing activity in the area of business of Avon Germany whether by any direct or indirect, self-employed activity, as independent contractor, as employee or in a similar position, whether by establishing or participating in any competing enterprise, by any consulting activity or in any other manner. The same applies with respect to any competing activity in the area of business of the Companies.
 
Das Wettbewerbsverbot gilt in Bezug auf sämtliche Wettbewerbsaktivitäten im Geschäftsbereich von Avon Deutschland, gleich ob durch eine direkte oder indirekte selbstständige Tätigkeit, als unabhängiger Auftragnehmer, als Angestellter oder in einer vergleichbaren Position, ob durch Gründung von oder Beteiligung an einem Konkurrenzunternehmen, durch eine etwaige Beratungstätigkeit oder auf sonstige Art und Weise. Gleiches gilt auch für eine etwaige Wettbewerbstätigkeit im Geschäftsbereich der Avon-Gesellschaften.
10.2      The Employee has the further duty not to attempt in any manner to solicit, to try to solicit or to accept from any customer of Avon Germany or the Companies any business within the area of business of Avon Germany or the Companies or to persuade or otherwise cause any customer of Avon Germany or the Companies to cease or reduce the business with Avon Germany or the Companies. “Customer” shall
 
10.2      Der Mitarbeiter ist ferner verpflichtet, sich nicht um etwaige Geschäfte eines Kunden von Avon Deutschland bzw. von den Avon-Gesellschaften innerhalb des Geschäftsbereichs von Avon Deutschland bzw. von den Avon-Gesellschaften zu bemühen, dies zu versuchen oder solche zu übernehmen bzw. einen Kunden von Avon Deutschland oder von den Avon-Gesellschaften dazu zu


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mean any customer of Avon Germany and the Companies with which business relations exist at the Termination Date or have existed during the preceding 12 months before the Termination Date.
 
bewegen bzw. zu veranlassen, das Geschäft mit Avon Deutschland oder mit den Avon-Gesellschaften einzustellen bzw. zu reduzieren. „Kunde“ bezeichnet jeden Kunden von Avon Deutschland oder von den Avon-Gesellschaften, mit dem Geschäftsbeziehungen zum Beendigungstermin bestehen bzw. in den zwölf Monaten vor dem Beendigungstermin bestanden.
The employee will not for a third party solicit or procure the services of or endeavour to entice away from Avon Germany or the Companies any employee or independent contractor, particularly in leading positions or with specific know-how.
 
Der Mitarbeiter wird sich für keinen Dritten um die Dienste eines Mitarbeiters oder eines unabhängigen Auftragnehmers von Avon Deutschland bzw. von den Avon-Gesellschaften, insbesondere solche in leitenden Positionen oder mit bestimmten Sachkenntnissen, bemühen bzw. versuchen diese abzuwerben.
10.3      The Employee is, even after the end of his employment contract, obliged to maintain strict confidentiality concerning business and trade secrets of Avon Germany and the Companies as well as concerning any other confidential matters which are marked as such or which are recognizable as confidential and the content of this Agreement, unless there are legal obligations to disclose such information.
 
10.3      Der Mitarbeiter ist auch nach Beendigung seines Arbeitsvertrages verpflichtet, über Geschäfts- und Betriebsgeheimnisses von Avon Deutschland und von den Avon-Gesellschaften sowie über sonstige vertrauliche Angelegenheiten, die als solche gekennzeichnet oder erkennbar sind, und den Inhalt dieser Vereinbarung absolute Vertraulichkeit zu wahren, es sei denn, dass gesetzliche Verpflichtungen zur Offenlegung dieser Informationen bestehen.
10.4      If the Employee breaches the post-contractual prohibition of competition or the obligation to confidentiality according to Sec.
 
10.4      Verstößt der Mitarbeiter gegen das nachvertragliche Wettbewerbsverbot oder die Vertraulichkeitsverpflichtung


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10.3 of this Agreement, he will be obliged to pay a contractual penalty of two monthly gross salaries. If such a breach consists in capital participation in a competitor company or entry into a long-term contract (e.g. employment, service, commercial agency or consultancy agreement), the contractual penalty will be newly incurred for each commenced month in which the capital participation or contract continues (continuing breach). Several breaches each result in a separate contractual penalty, even several times in any one month, as the case may be. If individual or several breaches occur within a continuing breach, the penalty shall apply for each and every month of the continuing breach and for each and every such individual breach.
 
gemäß Ziffer 10.3 dieser Vereinbarung, ist er zur Zahlung eine Vertragsstrafe i. H. v. zwei Bruttomonatsgehältern verpflichtet. Besteht ein solcher Verstoß in einer Beteiligung an einem Konkurrenzunternehmen oder im Abschluss eines langfristigen Vertrages (z. B. Arbeits-, Dienst-, Handelsvertretungs- oder Beratungsvertrags), wird die Vertragsstrafe erneut für jeden angefangenen Monat verwirkt, in dem die Kapitalbeteiligung bzw. der Vertrag fortbesteht (Dauerverstoß). Mehrere Verstöße führen jeweils zu einer gesonderten Vertragsstrafe, auch mehrmals innerhalb eines Monats. Kommt es zu einzelnen oder mehreren Verstößen innerhalb eines Dauerverstoßes, gilt die Vertragsstrafe für jeden einzelnen Monat des Dauerverstoßes sowie jeden einzelnen solchen Verstoß.
Any further claims of the Companies resulting from any non-compliance with the post-contractual prohibition of competition shall remain unaffected by the aforesaid provision. Notwithstanding anything to the contrary, there shall be no obligation by Avon Germany or the Companies to pay the compensation according to Sec. 9 with respect to the post-contractual non-competition prohibitions of Sec. 10 for the time when the Employee breaches the post-contractual prohibition of competition. In addition, any other
 
Alle weiteren Ansprüche der Avon-Gesellschaften aufgrund der Nichteinhaltung des nachvertraglichen Wettbewerbsverbots bleiben von der vorstehenden Regelung unberührt. Ungeachtet anders lautenden Bestimmungen dieser Vereinbarung besteht keine Verpflichtung seitens Avon Deutschland oder der Avon-Gesellschaften zur Zahlung der Abfindung gemäß Ziffer 9 in Bezug auf das nachvertragliche Wettbewerbsverbot gemäß Ziffer 10 für den Zeitraum, in dem


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outstanding compensation due to the Employee may be offset to the extent legally permissible for any damage or penalty claims resulting from any non-compliance with the post-contractual prohibition of competition or the obligation to confidentiality.
 
der Mitarbeiter gegen das nachvertragliche Wettbewerbsverbot verstößt. Ferner kann eine sonstige, dem Mitarbeiter zustehende Entschädigung – soweit rechtlich zulässig – mit etwaigen Ansprüchen auf Schadensersatz oder Vertragsstrafen verrechnet werden, die sich aus einer Nichteinhaltung des nachvertraglichen Wettbewerbsverbots oder der Verschwiegenheitsverpflichtung ergeben.
11.      The Employee shall return all work equipment, documents, objects, records and other material which were handed over to him by the Companies or which otherwise came into his possession in the course of or in respect to his employment. This obligation regarding the return of documents shall expressly also apply to copies of such documents, discs, other data carriers or handwritten notes.
 
11.      Der Mitarbeiter ist verpflichtet, sämtliche Arbeitsmittel, Unterlagen, Gegenstände, Aufzeichnungen oder sonstigen Materialien, die ihm von den Avon-Gesellschaften während oder in Zusammenhang mit seiner Beschäftigung übergeben worden sind bzw. auf sonstige Weise in seinen Besitz gelangt sind, zurückzugeben. Diese Verpflichtung zur Rückgabe von Unterlagen gilt auch ausdrücklich für etwaige Kopien dieser Unterlagen, CDs/DVDs, sonstiger Datenträger oder handschriftlicher Notizen.
Any right of retention with respect to any such documents, objects, records and material to be returned shall be excluded.
 
Jedwedes Zurückbehaltungsrecht in Bezug auf diese Unterlagen, Gegenstände, Aufzeichnungen und Materialien ist ausgeschlossen.
12.      The Employee can purchase the company car directly from CFC Car Fleet Concept GmbH with a separate purchase contract. If the Employee decides not to purchase
 
12.      Der Mitarbeiter kann mit gesondertem Kaufvertrag seinen Dienstwagen direkt von CFC Car Fleet Concept GmbH erwerben. Entscheidet sich der Mitarbeiter,


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the company car, he will return the company car to Avon Germany together with all keys, papers and other car accessories no later than the Termination Date without being asked.
 
sein Dienstwagen nicht zu kaufen, ist er verpflichtet, diesen nebst sämtlichen Fahrzeugschlüsseln, Fahrzeugpapieren sowie sonstigem Zubehör an Avon Deutschland spätestens bis zum Beendigungstermin zurückzugeben.
13.      Other than provided in this Agreement there are no other mutual financial claims between the parties under the employment relationship and/or as a result of its termination, no matter of what kind, whether known or unknown. Also there are no other mutual financial claims and rights between the Employee and the Companies. This does not apply to claims arising from liability for intent, to claims to payment of the minimum wage according to the Minimum Wage Act, AEntG or AÜG and/or for other statutory mandatory minimum working conditions and other claims based on law, collective bargaining agreements or works agreements which cannot be waived.
 
13.      Soweit in dieser Vereinbarung nicht anders vorgesehen, bestehen zwischen den Parteien keine weiteren gegenseitigen finanziellen Ansprüche aus dem Arbeitsverhältnis und/oder infolge seiner Beendigung, gleich welcher Art und ungeachtet ob diese bekannt oder unbekannt sind. Es bestehen auch keine weiteren gegenseitigen finanziellen Ansprüche oder Rechte zwischen dem Mitarbeiter und den Avon-Gesellschaften. Dies gilt nicht für Ansprüche aus einer Haftung für vorsätzliches Verhalten, Ansprüche auf Zahlung eines Mindestlohns gemäß dem MiLoG, AEntG oder AÜG und/oder andere zwingende gesetzliche Mindestarbeitsbedingungen und für sonstige Ansprüche aus Gesetz, Tarifvertrag oder Betriebsvereinbarung, auf die nicht verzichtet werden kann.
Notwithstanding anything to the contrary, nothing in this Agreement is intended to supersede, cancel, release or waive any rights by the Companies under the Avon Products, Inc. Amended & Restated Compensation Recoupment Policy or with respect to violations of the
 
Ungeachtet anders lautender Bestimmungen dieser Vereinbarung begründen keine Bestimmungen dieser Vereinbarung eine Ablösung, Aufhebung, Freistellung von oder einen Verzicht auf etwaige Rechte seitens der Avon-Gesellschaften gemäß der Avon Products, Inc.


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Avon Code of Conduct and any claims for breaches of this Agreement. In addition, for the avoidance of doubt, the tax equalization benefits that Employee has already been provided by the Companies continues to be subject to the terms and conditions of the applicable tax equalization policies of the Companies, which includes, but is not limited to, the obligation of the Employee to cooperate with Avon Germany and the Companies and repay to Avon Germany and/or the Companies, as applicable, any tax balances or other amounts determined by Avon Germany and/or the Companies to be owed by Employee as a result of the finalization of the tax equalization process for any applicable tax years.
 
Amended & Restated Compensation Recoupment Policy oder in Bezug auf Verstöße gegen den Avon Code of Conduct (Verhaltenkodex) sowie etwaige Ansprüche wegen einer Verletzung dieser Vereinbarung. Darüber hinaus und zur Vermeidung von Zweifeln gilt, dass die Steuerausgleichsvorteile, die dem Mitarbeiter bereits von den Avon-Gesellschaften gewährt worden sind, weiterhin den einschlägigen Bedingungen und Bestimmungen der Steuerausgleichsrichtlinien der Avon-Gesellschaften unterliegen, die insbesondere die Verpflichtung des Mitarbeiters umfassen, mit Avon Deutschland und den Avon-Gesellschaften zusammen zu arbeiten und Avon Deutschland und/oder den Avon-Gesellschaften etwaige Steuerguthaben oder sonstige von Avon Deutschland und/oder den Avon-Gesellschaften festgesetzte Beträge zurück zu erstatten, die ggfs. nach Abschluss des Steuerausgleichsverfahrens von dem Mitarbeiter für den jeweiligen Steuerjahre geschuldet werden.
14. In consideration of the severance benefits herein and the other terms and conditions of this Agreement, the Employee agrees, on behalf of himself and his heirs, executors, administrators, and assigns, to forever release, dismiss, and discharge Avon Germany, Avon Products, Inc. and the Companies and each of their respective current and former officers, directors,
 
14. Unter Berücksichtigung der in dieser Vereinbarung vorgesehenen Abfindungsleistungen sowie der sonstigen Bedingungen und Bestimmungen dieser Vereinbarung verpflichtet sich der Mitarbeiter, im eigenen Namen sowie im Namen seiner Erben, Testamentsvollstrecker, Nachlassverwalter und Rechtsnachfolger, Avon



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associates, employees, agents, employee benefit plans, employee benefit plan fiduciaries, employee benefit plan trustees, employee benefit plan administrators, representatives, attorneys, shareholders, successors and assigns, each and all of them in every capacity, personal and representative (collectively referred to as the “Avon Released Parties”), from any and all actions, causes of action, claims, suits, losses, demands, judgments, charges, contracts, obligations, debts, and liabilities of whatever nature, that he or his heirs, executors, administrators, and assigns have or may hereafter have against the Avon Released Parties or any of them arising out of or by reason of any cause, matter, or thing whatsoever.

 
Deutschland, Avon Products, Inc. und die Avon-Gesellschaften sowie deren jeweiligen ehemaligen und derzeitigen leitenden Angestellten, Mitglieder in Leitungsgremien, Angestellte, Mitarbeiter, Bevollmächtigten, Pensionspläne, Treuhänder von Pensionsplänen, Verwalter von Pensionsplänen, Vertreter, Anwälte, Gesellschafter, sowie Rechtsnachfolger, d. h. jeden und alle von ihnen sowie in jeder Eigenschaft, persönlich und als Vertreter (gemeinsam als die „Freigestellten Avon-Parteien“ bezeichnet), von sämtlichen Klagen, Klagegründen, Ansprüchen, Verlusten, Forderungen, Urteilen, Vorwürfen, Verträgen, Verpflichtungen, Schulden und Verbindlichkeiten jedweder Art, die er oder seine Erben, Testamentsvollstrecker, Nachlassverwalten und Rechtsnachfolger gegen die Freigestellten Avon-Parteien oder einzelne davon aus oder aufgrund von irgendeiner Ursache, Angelegenheit oder Sache haben oder ggfs. haben, dauerhaft freizustellen, zu entlasten und zu entbinden.
Nothing in this Agreement is to be construed as an admission on behalf of the Avon Released Parties of any wrongdoing with respect to the Employee, any such wrongdoing being expressly denied.

 
Keine Bestimmung in dieser Vereinbarung kann als Zugeständnis eines Fehlverhaltens seitens der Freigestellten Avon-Parteien gegenüber dem Mitarbeiter ausgelegt werden; ein solches Fehlverhalten wird ausdrücklich bestritten.


Page 13/17

Neither Avon Germany nor the Companies make any representation to the Employee about the tax effects on the provisions of this Agreement or otherwise, and neither Avon Germany nor the Companies shall have liability to the Employee in the event that the Employee becomes subject to taxation under any jursidiction (other than any tax reporting and/or withholding obligations that the Companies may have under applicable law).
 
Weder Avon Deutschland noch die Avon-Gesellschaften machen dem Mitarbeiter gegenüber irgendwelche Zusicherungen in Bezug auf die steuerlichen oder sonstigen Auswirkungen der Bestimmungen dieser Vereinbarung, und weder Avon Deutschland noch die Avon-Gesellschaften haften dem Mitarbeiter gegenüber, falls der Mitarbeiter in einer Jurisdiktion steuerpflichtig werden sollte (ausgenommen hiervon sind steuerliche Melde- bzw. Einbehaltungspflichten, denen die Avon-Gesellschaften gemäß einschlägigen Gesetzen ggfs. unterliegen).
15. This Agreement constitutes the entire agreement between the parties. There are no oral side agreements.
 
15. Diese Vereinbarung stellt die gesamte Vereinbarung zwischen den Parteien dar. Mündliche Abreden bestehen nicht.
16. Changes to this Agreement shall be valid only if in writing and signed by all parties. This applies also with respect to any waiver or amendment of this written form clause. If any provision of this Agreement is or becomes legally invalid, this shall not affect the validity of the remaining provisions hereof.
 
16. Änderungen zu dieser Vereinbarung sind nur wirksam, sofern diese schriftlich erfolgen und von alle Parteien unterzeichnet werden. Dies gilt auch für den Verzicht auf dieses Schriftformerfordernis oder dessen Änderung. Sollte eine Bestimmung dieser Vereinbarung rechtlich ungültig sein oder werden, bleiben die sonstigen Bestimmungen dieser Vereinbarung davon unberührt.
17. This Agreement is subject to German law. The employee acknowledges that he has no claims
 
17. Diese Vereinbarung unterliegt dem deutschen Recht. Der Mitarbeiter erkennt an, dass er keine Ansprüche


Page 14/17

against any of the Companies in any relevant jurisdiction.
 
gegen eine der Avon-Gesellschaften irgendeiner Jurisdiktion hat.
18. The German version of this Agreement shall be authoritative.
 
18. Die deutsche Version dieser Vereinbarung ist die maßgebliche.
[Signatures follow on next page]
 
[Unterschriften folgen auf der nächsten Seite]



Page 15/17


John Higson
/s/ John Higson____ ____________
Signature

19/09/17 _____________________
Date

 
John Higson
/s/ John Higson  _____________
Unterschrift

19/09/17 ___________________
Datum

Avon Cosmetics GmbH
/s/ Zoltan Radeczky, GM ___________
Signature

Zoltan Radeczky, GM ______________
Name/Title

22-09-2017 ______________________
Date

 
Avon Cosmetics GmbH
/s/ Zoltan Radeczky, GM _________
Unterschrift

Zoltan Radeczky, GM ____________
Name/Position

22-09-2017 ____________________
Datum

Avon Products, Inc.
/s/ Susan Ormiston ________________
Signature

Susan Ormiston
Sr. Vice President, Chief Human Resources   Officer__________________________
Name/Title

19-09-2017 ______________________
Date

 
Avon Products, Inc.
/s/ Susan Ormiston ______________
Unterschrift

Susan Ormiston
Sr. Vice President, Chief Human Resources   Officer________________________
Name/Position

19-09-2017 ____________________
Datum

Avon Products, Inc. on behalf of the Companies
/s/ Susan Ormiston _________________
Signature

Susan Ormiston
Sr. Vice President, CHR O
___________________________
Name/Title



 
Avon Products, Inc. für die Avon-Gesellschaften
/s/ Susan Ormiston _______________
Unterschrift

Susan Ormiston
Sr. Vice President, CHR O  _____________________________
Name/Position





Page 16/17


19-09-2017 ____________________
Date

Signature/Date
/s/ John Higson __________________
John Higson hereby confirms that he has received a counterpart of this Agreement signed by the Parties in original.
 
19-09-2017 ____________________
Datum


Unterschrift/Datum

/s/ John Higson _____________________
John Higson bestätigt hiermit, dass er eine von der Parteien unterzeichnete Ausfertigung dieser Vereinbarung im Original erhalten hat.



Page 17/17
Exhibit 10.4

[Avon Letterhead]

August 31, 2017
Personal & Confidential
Fernando Acosta
9001 Banyan Drive
Coral Gables, FL 33156

Re:     Severance Benefit Letter Agreement and General Release of Claims
Dear Fernando:

This Severance Benefit Letter Agreement and General Release of Claims (this “Agreement”) sets forth the terms and conditions of your benefits under an individual severance agreement with Avon Products, Inc. (“Avon” or the “Company”) that provides benefits in excess of the benefits available under the Avon Products, Inc. Severance Pay Plan (the “Severance Plan”). The Severance Plan limits total payouts to any participant to no more than $540,000 for separations that occur in 2017 (the “409A Limit”). Because your total severance payments are in excess of the amount that would otherwise be provided under the Severance Plan, this Agreement will be provided to you in lieu of any benefits payable under the Severance Plan and you agree that you waive all your rights to benefits under the Severance Plan.
The severance benefits being offered to you are as follows:
a.
Basic Severance Benefits : As long as you work through the Separation Date (defined below in numbered Paragraph 1), you are eligible for a severance payment representing two weeks of your base salary, less deductions (the “Basic Severance”); or
b.
Additional Severance Benefits : As an alternative to the Basic Severance, you may elect to receive a collection of benefits consisting of payment to you of an amount greater than the Basic Severance amount plus certain other benefits as described below. For clarity, this collection of severance benefits will be called “Additional Severance Benefits.” The Additional Severance Benefits are payable instead of the Basic Severance. The Additional Severance Benefits are being offered to you


        

in consideration of this Agreement, and, if applicable, the Second General Release (as defined below).
To be eligible for the Additional Severance Benefits, as detailed below, you must: (1) work through the Separation Date; (2) timely sign this Agreement; (3) allow this Agreement to become effective and irrevocable (by not revoking it within seven days of your signature); and (4) if you signed this Agreement before the Separation Date, you must timely sign another general release of claims (the “Second General Release”) and allow the Second General Release to become effective and irrevocable (by not revoking it within seven days of your signature). A copy of this Second General Release is included with the Agreement. See the Paragraph below entitled Permissible Time to Sign Agreement and Possible Second General Release regarding the timing requirements for deciding whether to execute these documents and the accompanying instructions in the Second General Release.
If your employment does not end for any reason, or if you are transferred or receive certain offers of employment from Avon or its affiliates to commence promptly after the Separation Date, consistent with the Severance Plan, your eligibility to receive either Basic Severance or Additional Severance Benefits will cease.
Until this Agreement and, if applicable, the Second General Release becomes effective, you are not eligible for and do not have a binding right to severance benefits beyond the Basic Severance (two weeks of base salary, less deductions). If you elect not to sign the Agreement, you are entitled to retain the Basic Severance. The below Paragraphs briefly describe the treatment of your benefits after the Separation Date (defined in Paragraph 1), including the enhanced severance benefits available to you if you elect the Additional Severance Benefits. Please note, however, that the actual written plan documents for the relevant benefit plans set forth the terms and conditions of benefits and control in the event of differences described herein.
1.
Last Day of Active Employment
Your last day of active employment with Avon will be November 1, 2017 (the “Separation Date”). You must work through the Separation Date to either receive Basic Severance or Additional Severance Benefits.
Regardless of whether you work through the Separation Date or whether you elect the Additional Severance Benefits, if you are entitled to any payment for accrued but unused paid time off benefits (e.g., vacation) through your last day of work, in accordance with applicable law, or the terms of an applicable Avon policy, you will receive a separate payment representing such amount(s), if any.


        

2.
Salary Continuation
You must work through the Separation Date to either receive Basic Severance or Additional Severance Benefits.  For example, if, prior to the Separation Date, you (i) voluntarily resign your employment, (ii) are terminated by Avon for cause (as defined in the Severance Plan), or (iii) are terminated by Avon for poor performance (as defined in the Severance Plan), you will not have met the requirement to work through the Separation Date.
If you work through the Separation Date, you will be eligible for either Basic Severance or Additional Severance Benefits:
Basic Severance: If you do not elect the Additional Severance Benefits, you are eligible for an automatic two-week severance period (two weeks of your base salary), less applicable deductions, paid in accordance with the next-scheduled payroll cycle following the Separation Date.
Additional Severance Benefits : If you elect the Additional Severance Benefits, you will receive salary continuation for 24 months immediately following the Separation Date (referred to as the “Salary Continuation Period”) based upon your annual salary as in effect on the Separation Date. Avon payroll will calculate the total amount of salary continuation payable, in accordance with Avon’s normal payroll practices.
Because you are one of the top 50 highest paid employees at Avon (a “specified employee”), under Internal Revenue Code Section 409A (“Section 409A”), the section which governs nonqualified deferred compensation (including separation agreements), certain limitations may apply on how the separation payments will be made to you if the total severance payments exceed the 409A Limit. Since your total severance payments under the Additional Severance Benefits are expected to exceed the 409A Limit, you will receive your severance in two tranches:
(a)
The first tranche (“Tranche A”) will be equal to the 409A Limit, payable over the Salary Continuation Period in substantially equal, bi-weekly installments (less applicable deductions) on each of Avon’s regular payroll dates.
(b)
The second tranche (“Tranche B”) will be equal to the remaining amount of salary continuation owed to you under this Agreement in excess of the 409A Limit, payable from the first administratively feasible Avon regular payroll date that occurs in the seventh month following the Separation
    


        

Date through the end of the Salary Continuation Period, in substantially equal, bi-weekly installments (less applicable deductions) on each of Avon’s regular payroll dates.
Where both tranches are being paid at the same time, there will be one check paid to you by Avon.
For the avoidance of doubt, payments under Tranche A are intended to be exempt from the requirements of Section 409A. Payments under Tranche B are intended to either be exempt from the requirements of Section 409A or satisfy any applicable requirements of Section 409A for payments of nonqualified deferred compensation to specified employees.
The Additional Severance Benefits are instead of the Basic Severance and any severance benefits that may otherwise be contemplated under any agreement with Avon or any Avon plan, policy or program.
During the Salary Continuation Period, as explained below, you will be eligible to continue to participate in certain of Avon’s benefit plans in accordance with the provisions of the relevant plan documents, including any amendments to those plans that may be enacted from time to time, and any applicable elections that you may have on file with Avon. You will not, however, accrue any vacation days or be eligible for any other benefits provided to active employees during the Salary Continuation Period, other than those expressly provided for herein and/or as otherwise required by law.
Notwithstanding the foregoing, if you are receiving the Additional Severance Benefits in the form of salary continuation but you accept a position with another business entity, Avon may elect, in its sole discretion, to pay any remaining cash severance payments to you in the form of a lump sum payment (except that any such election to accelerate payment will not apply to the extent that it would violate Section 409A), in which case your participation in all Avon benefit plans (for example, the active medical plan) will cease, and you will no longer have a “Salary Continuation Period.” However, as used in Paragraphs 11(c), 11(d), or 11(e), below, the “Salary Continuation Period” shall mean the entire period of time that you would have received salary continuation payments under this Paragraph 2 had you not received all or a portion of your severance payments in the form of a lump sum payment.
3.
Retirement Plans
a.
Avon Products, Inc. Personal Retirement Account Plan (“PRA”)


        

Additional Severance Benefits : If you elect the Additional Severance Benefits, during the Salary Continuation Period you will continue to be credited with service under the PRA pursuant to and in accordance with the terms of the PRA, including any amendments to the PRA that may be enacted from time to time. This means that as a participant under the Cash Balance benefit formula, you can only continue to accrue vesting service, if applicable, during the Salary Continuation Period. In the month following the end of the Salary Continuation Period, you first may take a distribution from the PRA in the form you then elect in accordance with the terms of the PRA.
Basic Severance : If you do not elect the Additional Severance Benefits, your PRA benefit will be calculated with the service you have earned through the Separation Date in accordance with the terms of the PRA. In the month following the Separation Date, you may first take your PRA benefit in the form you then elect in accordance with the terms of the PRA.
b.
Benefit Restoration Plan of Avon Products, Inc.
Additional Severance Benefits : If you elect the Additional Severance Benefits, your benefit under the Benefit Restoration Pension Plan of Avon Products, Inc. (the “Restoration Plan”), if payable, will be calculated and paid taking into account the Salary Continuation Period in accordance with the terms of the Restoration Plan.
Basic Severance : If you do not elect the Additional Severance Benefits, your Restoration Plan benefit will be calculated based upon your service through the Separation Date only and, if payable, will be paid in accordance with the terms of the Restoration Plan.
If you are considered a specified employee under Section 409A at the time of the Separation Date, payments of benefits under the Restoration Plan will be subject to a six-month delay from the Separation Date, and so any benefits payable to you under the Restoration Plan will not commence until the seventh month following the Separation Date.


        

4.
Avon Personal Savings Account Plan : With respect to the Avon Personal Savings Account Plan (the “PSA”), also known as the 401(k) Plan, you are considered a terminated employee on the Separation Date. Even if you elect the Additional Severance Benefits, you will not be entitled to participate in the PSA during the Salary Continuation Period. Whether or not you elect the Additional Severance Benefits, upon the Separation Date, you may take a distribution of your benefits immediately. You may roll over the contents of your PSA account into an Individual Retirement Account or other tax-deferred savings account in accordance with the PSA and applicable tax rules. Please consult with your accountant or tax advisor before doing so. Any outstanding PSA loans you may have are payable within three months after your Separation Date if you do not make arrangements to continue to make regular loan repayments after the Separation Date through the PSA third party administrator, Empower Retirement. You should contact Empower Retirement if you have an outstanding plan loan.
5.
Cash Incentive Award

As a reminder, all cash incentive awards are subject to Avon’s compensation recoupment policy.
Annual EIP: You are currently a participant in the Avon Products, Inc. 2013-2017 Executive Incentive Plan (the “Annual EIP”) for 2017. Regardless of whether or not you elect the Additional Severance Benefits, payments, if any, of the Annual EIP award are governed by the terms of the Annual EIP and are triggered by the attainment of performance measures, as determined in accordance with Company policies. Payment, if any, of the 2017 Annual EIP award, will be made in 2018 at the same time active 2017 Annual EIP participants receive their payments. Even if you elect the Additional Severance Benefits, you are not eligible for an award for any years after 2017 under the Annual EIP or any other bonus program.
6.
Deferred Compensation Plan

Regardless of whether or not you elect the Additional Severance Benefits, under the Avon Products, Inc. Deferred Compensation Plan (the “DCP”) distributions will begin in accordance with the terms of such plan and any elections you may have made under such plan, including any amendments to such plan that may be enacted from time to time. If you elect the Additional Severance Benefits, during the Salary Continuation Period, you are not eligible to defer any monies into the DCP. Your DCP form and timing of payment elections are available online at http://retirementnq.prudential.com.




        

7.
Equity Awards

Regardless of whether or not you elect the Additional Severance Benefits, each equity award (such as restricted stock units and stock options) will continue to be governed by the applicable equity agreement(s) and the applicable stock incentive plan(s) (including, but not limited to, terms and conditions regarding vesting and settlement of awards).
8.
Career Transition and Development Services

Additional Severance Benefits : If you elect the Additional Severance Benefits, Avon will reimburse you for career transition and development services (outplacement services) provided by a vendor of your choice up to a total maximum gross amount of $18,000. Such outplacement services and request for reimbursement (accompanied by appropriate documentation) must be completed within the twelve (12) months immediately following the Separation Date.
Basic Severance : If you do not elect the Additional Severance Benefits, no career transition and development services will be provided to you.
9.
Health and Welfare Plans

Additional Severance Benefits : If you elect the Additional Severance Benefits, during the Salary Continuation Period, and provided that you are a participant in the applicable Avon plan as of the Separation Date, you generally will continue to be eligible to participate in the following benefit plans: Medical, Dental, Vision, Employee Assistance Program, Group Life Insurance, Supplemental Group Life Insurance, Group Accidental Death and Dismemberment (“AD&D”) and Supplemental Group AD&D. For those plans requiring premium payments, you will be required to pay the same portion of the total premium as an active associate pays. If you elect to continue Medical, Dental and/or Vision coverage, your benefit coverage level will be provided at the benefit coverage level that you previously selected, subject to Avon’s right to amend, modify, or terminate such arrangements at any time. But note, however, because you are considered one of the top 25% highest paid associates at Avon per IRS regulations, you will be paying your entire premiums on an after-tax basis and your Form W-2s will include imputed income equal to value of the subsidized premiums being provided by Avon, as required by the Internal Revenue Code. Because of this required tax treatment, the cost to you of continuing coverage may be substantially higher than while you were actively employed. You may wish to consult a tax advisor to see how this change may impact you.



        

Also, in the event that during the Salary Continuation Period you should become employed by another employer and are provided with medical and/or dental insurance coverage, you may either drop your Avon coverage or continue your coverage under both plans. Under the second alternative, your coverage will be coordinated between the two plans, with your new employer’s plan serving as the primary payer. In the event that your group health plan coverage ceases during the Salary Continuation Period due to a “qualifying event,” or due to the expiration of the Salary Continuation Period, you will then be entitled to elect continued coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) at your own expense, assuming you satisfy the requirements of COBRA.
In addition, pursuant to Section 409A, the following rules apply to your continued receipt of the above welfare benefits to the extent those benefits are not exempt from the requirements of Section 409A: (x) to the extent that any such benefit is provided via reimbursement to you, no such reimbursement will be made by Avon later than the end of the year following the year in which the underlying expense is incurred; (y) any such benefit provided by Avon in any year will not be affected by the amount of any such benefit provided by Avon in any other year; and (z) under no circumstances will you be permitted to liquidate or exchange any such benefit for cash or any other benefit.
Basic Severance : If you do not elect the Additional Severance Benefits, your participation in the Medical, Dental, Vision, Employee Assistance Program, Group Life Insurance, Supplemental Group Life Insurance, Group AD&D and Supplemental Group AD&D will generally end on the Separation Date (or no later than the last day of the month in which Basic Severance ceases, pursuant to the terms of each plan and/or policy). You are entitled to elect to continue group health plan coverage under COBRA at your own expense, assuming you satisfy the requirements of COBRA. Information regarding COBRA coverage will be sent to you under separate cover if you do not elect the Additional Severance Benefits.
Other Welfare Benefits
Regardless of whether or not you elect the Additional Severance Benefits, your participation in the Short-Term and Long-Term Disability plans, the Flexible Spending Accounts, and the Transit Incentive Plan will cease following the Separation Date (except that you may continue to participate in the Health Care Flexible Spending Account for the remainder of the calendar year in which the Separation Date occurs in accordance with COBRA, assuming you satisfy the requirements of COBRA and assuming that you elect COBRA). You will receive


        

separate paperwork required to elect COBRA continuation coverage for the Health Care Flexible Spending Account.
If you participate in the Transit Incentive Program, you will have 90 days after the Separation Date to spend the remaining pre-tax and after-tax funds on your WageWorks Transit Commuter Card.  After the 90-day period has expired, the post-tax contributions will be returned to you. Pre-tax contributions, per regulations, will be forfeited .  For more information please contact WageWorks at 877-924-3967.
Also, when your group life insurance coverage terminates (either immediately, or if you elect the Additional Severance Benefits, at the end of the Salary Continuation Period, if any), you may be entitled to convert the group coverage to individual life insurance coverage. Please contact the group life insurance vendor (currently Liberty Mutual at 888-787-2129) before your group life insurance coverage terminates for details.
10.
Perquisites

a.
Transportation Allowance
Additional Severance Benefits : If you elect the Additional Severance Benefits, you will be entitled to receive a transportation allowance for the three-month period following your last day of active employment. Normally this will be paid in the same manner as it is paid as when you were an active employee. However, because you are a specified employee under Section 409A, you will be paid this benefit in a lump sum payment in the seventh month following the Separation Date.
Basic Severance : If you do not elect the Additional Severance Benefits, your eligibility for a Transportation Allowance will end on the Separation Date.

b.
Executive Health Exam
Additional Severance Benefits : If you elect the Additional Severance Benefits and if you have not already received your annual Executive Health Exam in the calendar year in which your Severance Date occurs, you may still receive the exam for up to the earlier of three months following the Separation Date or the end of the calendar year in which the Separation Date occurs. Note, however, that because you are considered a “specified employee” under Section 409A, reimbursements for an Executive Health Exam after the Separation Date will be


        

subject to a six-month delay from the Separation Date, and so any such reimbursements will be payable to you no earlier than the seventh month following the Separation Date.
Basic Severance : If you do not elect the Additional Severance Benefits, your eligibility for an Executive Health Exam will end on the Separation Date.

c.
Financial Planning and Tax Preparation
Regardless of whether or not you elect the Additional Severance Benefits, your eligibility for Financial Planning and Tax Preparation will end on the Separation Date.
Your receipt of the above perquisite(s) is subject to the following rules: (x) to the extent that any such perquisite is provided via reimbursement to you, no such reimbursement will be made by Avon later than the end of the year following the year in which the underlying expense is incurred; (y) any such perquisite provided by Avon in any year will not be affected by the amount of any such perquisite provided by Avon in any other year; and (z) under no circumstances will you be permitted to liquidate or exchange any such perquisite for cash or any other benefit.
11.
Your Obligations to Avon
Additional Severance Benefits : Except as otherwise provided in this Agreement, in consideration of your election of the Additional Severance Benefits, you further agree to the following:
a.
Confidentiality: You agree to keep and hold in strict trust all Confidential Information that you obtained or generated during or as a result of your employment at Avon. You promise not to knowingly use, disclose, copy, distribute or reverse-engineer, directly or through persons interposed, without Avon’s prior written consent (which may only be provided by the Chief Executive Officer), as and from this date, and at any time, Avon’s Confidential Information. For this purpose, “Confidential Information” means any secret, confidential, and/or proprietary information or knowledge relating to Avon or related to any of Avon’s affiliated companies, and/or their respective businesses, agents, employees, customers and independent sales representatives, that is not generally known to the public. Such Confidential Information includes, but is not limited to, financial information and projections, marketing information and plans, product formulations, samples, processes, production methods, intellectual property and trade secrets, data,
    
    


        

know-how, sales, market development programs and plans, and other types of information not generally known to the public, including non-public unpublished or pending patent applications and all related patent rights, techniques, formulae, processes, discoveries, improvements, ideas, conceptions, compilations of data, and developments, whether or not patentable and whether or not copyrightable. Notwithstanding your confidentiality obligations, you are permitted to disclose Confidential Information that is required to be disclosed by you pursuant to judicial order or other legal mandate, provided that you have given Avon prompt notice of the disclosure requirement, and that you fully cooperate with any efforts by Avon to obtain and comply with any protective order imposed on such disclosure.
 
In accordance with the Defend Trade Secrets Act of 2016, you are hereby notified by Avon that you will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (i) is made (x) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and (y) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. You are further notified by Avon that, if you file a lawsuit for retaliation by an employer for reporting a suspected violation of law, then you may disclose the employer’s trade secrets to your attorney and use the trade secret information in the court proceeding if you: (A) file any document containing the trade secret under seal; and (B) do not disclose the trade secret, except pursuant to court order.
 
b.
Use of Confidential Information : You agree that you will not use Avon’s Confidential Information in connection with any publicity, advertising, endorsement or other promotion. You further agree not to use Avon’s trademarks, logos, service marks or other intellectual property in any form of advertising, publicity or release without Avon’s prior written approval. You understand that nothing in this Agreement shall be construed to prevent lawful communications regarding working conditions, or other terms and conditions of employment protected under Section 7 of the National Labor Relations Act or applicable state law.
 
c.
Non-solicitation : You will not, without Avon’s prior written consent (which may only be provided by the Chief Executive Officer), during the Salary Continuation Period, directly or indirectly hire, solicit, or aid in the solicitation of, any employee of Avon or an affiliated company, including any


        

solicitation or recruitment of such employee to take him or her away from or to leave his or her Avon employment to work for any other employer or other entity.

d.
Non-competition : Notwithstanding anything else in this Agreement, you will not, during the Salary Continuation Period, without Avon’s prior written consent (which may only be provided by the Chief Executive Officer), accept employment with, or act as a consultant or independent contractor to, any company engaged in the direct selling business or beauty business within or without the United States including, but not limited to, the following: Amway Corp./Alticor Inc., Amore Pacific, Arabela, Arbonne, Beiersdorf (Nivea), COTY, De Millus S.A., Ebel Int’l/Belcorp Corp., Elizabeth Arden, Faberlic, Herbalife Ltd., Inter Parfums, Jequiti, Lady Racine/LR Health & Beauty Systems GmbH, LG Health & Household, L’Occitane, L’Oréal Group/Cosmair Inc., Mary Kay Inc., Mistine/Better Way (Thailand) Co. Ltd., Natura Cosmetics S.A., Neways Int’l, NuSkin Enterprises Inc., O Boticário, Oriflame Cosmetics S.A., Origami Owl, Reckitt Benckiser PLC, Revlon Inc., Rodan & Fields, Shaklee Corp., Shiseido, Stella & Dot, Silpada, The Body Shop Int’l PLC, The Estée Lauder Companies Inc., The Procter & Gamble Company, Tupperware Corp., Unilever Group (N.V. and PLC), Vorwerk & Co. KG/Jafra Worldwide Holdings (Lux) S.à.R.L. Inc., Yanbal Int’l (Yanbal, Unique), Younique or any of their affiliates.

e.
By signing this Agreement and, if applicable, the Second General Release, you are agreeing that you may be reasonably requested from time to time by Avon: (x) to advise and consult on matters within or related to your expertise and knowledge in connection with the business of Avon; (y) to make yourself available to Avon to respond to requests for information concerning matters involving facts or events relating to Avon; and (z) to assist with pending and future litigation, investigations, arbitrations, and/or other dispute resolution matters. If you provide such consultation during the Salary Continuation Period, Avon will only reimburse you for reasonable related out-of-pocket expenses. If you provide such consultation after the Salary Continuation Period ends, you shall be paid at your current salary rate, and in accordance with applicable law, for time expended by you at Avon’s request on such matters, and shall also receive reimbursement for reasonable out-of-pocket expenses incurred in connection with such assistance. You understand that, with respect to any consultation services provided by you under this paragraph, you will not be credited with any compensation, service or age credit for purposes of eligibility, vesting, or benefit accrual under any


        

employee benefit plan of Avon, unless such employee benefit plan otherwise expressly and specifically provides for such credit.

f.
By signing this Agreement and, if applicable, the Second General Release, you acknowledge that you understand that violations of any of the preceding covenants are material and that any violations may result in a forfeiture, at Avon’s sole discretion, of your benefits and payments under this Agreement in excess of the Basic Severance (including salary continuation, whether or not already paid), but do not relieve you of your continuing obligations under this Agreement. You agree that Avon’s remedies at law for any breach by you of the preceding covenants will be inadequate and that Avon will also have the right to obtain immediate injunctive relief, without a bond, so as to prevent any continued breach of any of these covenants, in addition to any other available legal remedies. It is understood that any remedy available at law or in equity shall be available to Avon should the preceding covenants be breached.

g.
By signing this Agreement and the Second General Release, if applicable, to the fullest extent allowed by law, you agree not to commence, join, participate in, or assist any lawsuit, action, investigation or proceeding arising from or relating to any act or omission by any of the “Avon Released Parties” (as that term is defined both in this Agreement in Paragraph 20 below and, if applicable, in the Second General Release) unless you are compelled by law to do so and you also agree not to recover or seek to recover any damages, backpay or other monetary relief as part of any action or class action brought by any other individual, the EEOC, or any other civil rights or governmental agency.
 
12.
E-Mail and Voicemail : You acknowledge and understand that your access to Avon’s e-mail and voicemail, as well as other communication systems, will be discontinued as of the Separation Date.
 
13.
Return of Avon Property : On or before the Separation Date, you agree to promptly deliver to Avon, and not keep in your possession, duplicate, or deliver to any other person or entity, any and all property (whether in hard copy, physical form, or electronic form) that belongs to Avon or any of its affiliated companies, including, without limitation, automobiles, computer hardware and software, cell phones, Blackberrys, iPhones, Androids, other smartphones, iPads, other tablets, thumb drives, other electronic equipment, keys, credit cards, identification cards, records, files, data, and other documents and information, including any and all copies of the foregoing.



        

14.
Employment Inquiries : You understand and agree that, in the event Avon receives any inquiries from your prospective employers, it shall be the policy of Avon to respond by advising that Avon’s policy is to provide information only as to service dates and positions held.

15.
Entire Agreement and Amendments to Agreement : You acknowledge that the only consideration for your execution and non-revocation of this Agreement (which includes a general release of claims) and, if applicable, your execution and non-revocation of the Second General Release are the benefits which are expressly stated in this document. All other promises or agreements of any kind, including but not limited to, your employment offer letter agreement with Avon dated February 8, 2012, that have been made by or between the parties or by any other person or entity whatsoever that are related to the subject matter of this Agreement are superseded, revoked and cancelled by this Agreement, except that any arbitration, nondisclosure, intellectual property protection, non-solicit, non-compete or classified information provisions and/or agreements with the Company continue to apply in accordance with their terms (and the greater protection to Avon applies in the event of any conflict between this Agreement and such other agreements) and any plans (such as the PRA), equity award agreements, or policies that are referenced in this Agreement as continuing to be applicable (including, without limitation, the Company’s “Associate Arbitration Policy”) are not superseded and will remain in effect. In addition, any compensation recoupment provisions, practices or policies will continue to apply, as applicable. You agree that this Agreement and, if applicable, the Second General Release, may not be changed orally, by email, or by any other form of electronic communication, but only by a written agreement signed by both you and an authorized representative of Avon.

16.
Severability : You agree that the provisions of this Agreement and, if applicable, the Second General Release, are severable. If a provision or any part of a provision is held to be invalid under any law or ruling, all of the remaining provisions of this Agreement and, if applicable, the Second General Release will remain in full force and effect and be enforceable to the extent allowed by law. If any restriction contained in this Agreement or, if applicable, the Second General Release is held to be excessively broad as to duration, activity, or scope, then you agree that such restriction may be construed, “blue-penciled” or judicially modified so as to be limited or reduced to the extent required to be enforceable under applicable law.



        

17.
Voluntary Nature : You are not required to elect the Additional Severance Benefits. Any election to do so by you is completely voluntary. By signing this Agreement and, if applicable, the Second General Release, you warrant and represent that you have read this entire Agreement and, if applicable, the Second General Release, that you have had an opportunity to consult fully with an attorney, and that you fully understand the meaning and intent of this Agreement and, if applicable, the Second General Release. Further, you knowingly and voluntarily, of your own free will, without any duress, being fully informed, and after due deliberation, accept its terms and sign below as your own free act. You understand that as a result of executing this Agreement and, if applicable, the Second General Release, you will not have the right to assert that Avon or any other Avon Released Party (as defined both in this Agreement in Paragraph 20 below and, if applicable, in the Second General Release) unlawfully terminated your employment or violated any of your rights in connection with your employment.

18.
Governing Law : You agree that this Agreement (which includes a general release of claims) and, if applicable, the Second General Release will be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict of laws principles, and federal law where applicable. Any legal action to enforce this Agreement, and, if applicable the Second General Release, by either party, shall be subject to arbitration in accordance with Avon’s “Associate Arbitration Policy”. To the extent that Avon is seeking equitable relief to enforce your obligations under this Agreement, Avon may seek such relief as provided in the Paragraph above entitled Your Obligations to Avon in any federal, state or local court in any jurisdiction.

19.
Election Not to Accept the Additional Severance Benefits : Should you elect not to accept the Additional Severance Benefits, you will be provided only with the Basic Severance (two weeks of base salary, less applicable withholdings) and continued coverage under certain Avon benefit plans during that period (or, for some plans, until the last day of the month in which such payments end, in accordance with the terms of such plans (which control in the event of any discrepancy herein)). Following this two-week salary continuation period, you will be notified by a separate letter of your right to elect continued group health plan coverage, at your own expense, under COBRA, as applicable.

20.
General Release of Claims
In consideration of the severance benefits herein (i.e., the acceptance of the Additional Severance Benefits) and the other terms and conditions of this


        

Agreement, you agree, on behalf of yourself and your heirs, executors, administrators, and assigns, to forever release, dismiss, and discharge (except as provided by this Agreement) Avon and its affiliated companies and each of their respective current and former officers, directors, associates, employees, agents, employee benefit plans, employee benefit plan fiduciaries, employee benefit plan trustees, employee benefit plan administrators, representatives, attorneys, shareholders, successors and assigns, each and all of them in every capacity, personal and representative (collectively referred to as the “Avon Released Parties”), from any and all actions, causes of action, claims, suits, losses, demands, judgments, charges, contracts, obligations, debts, and liabilities of whatever nature (“Claims”), that you and your heirs, executors, administrators, and assigns have or may hereafter have against the Avon Released Parties or any of them arising out of or by reason of any cause, matter, or thing whatsoever from the beginning of the world to the date hereof, including, without limitation:
•
All Claims arising from your employment relationship with Avon and the termination of such relationship;
•
All Claims arising under any federal, state, or local constitution, statute, rule, or regulation, or principle of contract law or common law;
•
All Claims for breach of contract, wrongful discharge, tort, breach of common-law duty, or breach of fiduciary duty;
•
All Claims for violation of laws prohibiting any form of employment discrimination or other unlawful employment practice, including without limitation, as applicable:
o
The Worker Adjustment and Retraining Notification Act of 1988, as amended, 29 U.S.C. §§ 2101 et seq.;
o
Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§ 2000e et seq.;
o
The Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. §§ 621 et seq. (the “ADEA”);
o
The Americans with Disabilities Act of 1990, as amended, 42 U.S.C. §§ 12101 et seq.;
o
The Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001 et seq.;


        

o
The Family and Medical Leave Act of 1993, as amended, 29 U.S.C. §§ 2601 et seq.;
o
The Genetic Information Nondiscrimination Act of 2008, as amended, 42 U.S.C. §§ 2000ff et seq.;
o
The National Labor Relations Act of 1935, as amended, 29 U.S.C. §§ 151 et seq. (the “NLRA”);
o
the Fair Credit Reporting Act, as amended, 15 U.S.C. §§ 1681 et seq.;
o
“Whistleblower” laws (other than as provided for in Paragraph 22 herein) and laws protecting “whistleblowers” from retaliation;
o
The New York State Human Rights Law, as amended, N.Y. Exec. Law §§ 290 et seq.; the New York State Worker Adjustment and Retraining Notification Act, as amended, N.Y. Labor Law §§ 860 et seq.; Article 6 of the New York Labor Law, as amended, N.Y. Labor Law §§ 190 et seq.; the New York Nondiscrimination for Legal Actions Law, as amended, N.Y. Labor Law § 201-d; the New York State Fair Credit Reporting Act, as amended, N.Y. Gen. Bus. Law §§ 380 et seq.; Article 23-A of the New York State Corrections Law, as amended, N.Y. Correc. Law §§ 750 et seq.; the New York City Human Rights Law, as amended, N.Y.C. Admin. Code §§ 8-101 et seq.; the New York City Earned Sick Time Act, as amended, N.Y.C. Admin. Code §§ 20-911 et seq.; the New York City Stop Credit Discrimination in Employment Act, as amended, N.Y.C. Admin. Code §§ 8-102(29), 8-107(9)(d), 8-107(24); and the New York City Fair Chance Act, as amended, N.Y.C. Admin. Code §§ 8-102(5), 8-107(9) et seq.;
o
Any other state’s and local government’s human rights laws, anti-discrimination laws, and “plant closing”/mini-WARN Act laws;
o
Anti-retaliation laws, including without limitation retaliation claims under the New York State Workers' Compensation Law, as amended, N.Y. Workers' Comp. Law § 120, and the New York State Disability Benefits Law, as amended, N.Y. Workers' Comp. Law § 241;
o
The Florida Civil Human Rights Act; and


        

o
Any other federal, state, or local constitution, statute, rule, or regulation;
provided , that you do not release or discharge the Avon Released Parties: (x) from any Claims arising after the date on which you execute this Agreement (except, where applicable, you later execute and do not revoke the Second General Release); (y) from any Claims for a breach by Avon of its obligations under this Agreement; or (z) from any Claims that by law cannot be released or waived. It is understood that the release herein does not release the Avon employee benefit plans from any claims for vested benefits that you have under the terms of any of Avon’s employee benefit plans applicable to you. It is further understood that nothing in this General Release of Claims shall preclude or prevent you from challenging the validity of this General Release of Claims solely with respect to any waiver of any Claims arising under the ADEA after the date on which you execute this General Release of Claims.
Nothing in this Agreement is to be construed as an admission on behalf of the Avon Released Parties of any wrongdoing with respect to you, any such wrongdoing being expressly denied.
You represent and warrant that you have not filed any complaint, charge, claim, or proceeding against any of the Avon Released Parties before any federal, state, or local agency, court, or other body relating to your employment and the cessation thereof or to any claim released in this Agreement, and that you are not currently aware of any facts or basis for filing such a complaint, charge, claim, or proceeding against any of the Avon Released Parties. Except as otherwise provided in this Agreement, you agree that, if you or any other person or entity files an action, complaint, charge, claim, or proceeding against any of the Avon Released Parties, you will not seek or accept any monetary, equitable, or other relief in such action, complaint, charge, claim, or proceeding (including without limitation, relief that would provide you with reinstatement to employment with Avon) and that you will take all available steps/procedures to withdraw and/or dismiss the complaint, charge, claim or proceeding, regardless of who filed or initiated such complaint, charge, claim, or proceeding, whether pursued solely on your behalf or on behalf of a greater class of individuals.
If you are employed in, or, were formerly employed in the State of California, you additionally acknowledge that you are aware of and familiar with the provisions of Section 1542 of the California Civil Code, which provides as follows:
“A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the


        

time of executing the general release which if known by him must have materially affected his settlement with the debtor.”
If you are employed in, or, were formerly employed in the State of California, by signing this Agreement, you hereby waive and relinquish all rights and benefits which you may have under Section 1542 of the California Civil Code and under the law of any other state or jurisdiction to the same or similar effect. You represent and warrant that you have the authority to enter into this general release on your behalf individually and to bind all persons and entities claiming through you.
You acknowledge: (w) that you are receiving valuable consideration in exchange for your execution of this Agreement, and if applicable, the Second General Release, that you would not otherwise be entitled to receive; (x) that you were given at least twenty-one (21) days in which to consider this Agreement and the Second General Release; (y) that any changes made to this Agreement, whether material or immaterial, will not restart the twenty-one (21) day consideration period; and (z) that you are entitled to revoke this Agreement and the Second General Release (if applicable) in writing, within seven (7) days after you sign each, respectively. Such revocation must be delivered to the Company as provided herein within the applicable seven (7)-day period, in which case you will receive no benefits other than Basic Severance and neither this Agreement, nor your election to accept the Additional Severance Benefits, will go into effect.
21.
Additional Representations

a.
You acknowledge that you have been paid in full (or will be paid in full pursuant to the Company’s normal payroll practice policy) for all hours that you have worked for Avon, that you have properly reported all hours worked, and that other than what is provided for in this Agreement (and under the terms and conditions of the employee benefit plans and equity agreements and plans referenced herein), you have no other rights to any other compensation or benefits.

b.
You further acknowledge that you have not been denied any leave requested under the Family and Medical Leave Act (“FMLA”) or applicable state leave laws and that, to the extent applicable, you have been returned to your job, or an equivalent position, following any FMLA or state leave taken pursuant to the FMLA or state laws.



        

c.
You acknowledge, understand and agree that you have reported (or will timely report for occurrences that occur after the date that you sign this Agreement) to Avon any work related injury or illness that occurred up to and including the Separation Date.

d.
You acknowledge and certify that you have complied with Avon’s Code of Conduct (the “Code”) and its principles, and you agree to continue to comply with the Code through the Separation Date.

22.
Reservation of Certain Rights
You understand that nothing in this Agreement is intended, and nothing in this Agreement will be construed, to prevent, interfere with, or otherwise restrict communications or actions protected or required by applicable law, including the legitimate exercise of any Section 7 rights under the NLRA that you may have during your employment with Avon (such as discussing terms and conditions of employment and other workplace conditions).
Protection of Whistleblower Rights: This Agreement is not intended to, and shall be interpreted in a manner that does not, limit or restrict you from exercising any legally protected rights that you may have under any applicable statutes, regulations and rules intended to protect whistleblowers (including pursuant to Rule 21F under the Securities Exchange Act of 1934, as amended).
23.
Compliance with Laws/Tax Treatment : Avon will comply with all payroll/tax withholding requirements and will include in income these benefits as required by law. Avon cannot guarantee the tax treatment of any of these benefits and makes no representation regarding the tax treatment.

24.
Internal Revenue Code Section 409A : The parties hereto have a made a good faith effort to comply with current guidance under Section 409A. The intent of the parties hereto is that payments and benefits under this Agreement comply with or be exempt from Section 409A and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith, including, without limitation, that references to “termination of employment” and like terms, with respect to payments and benefits that are provided under a “nonqualified deferred compensation plan” (as defined in Section 409A) that is not exempt from Section 409A, will be interpreted to mean “separation from service” (as defined in Section 409A). In the event that amendments to this Agreement are necessary in order to comply with Section 409A or to minimize or eliminate any income inclusion and penalties under Section 409A ( e.g. , under any document or operational correction program), Avon and you agree to negotiate in


        

good faith the applicable terms of such amendments and to implement such negotiated amendments, on a prospective and/or retroactive basis, as needed. To the extent that any amount payable or benefit to be provided under this Agreement constitutes an amount payable or benefit to be provided under a “nonqualified deferred compensation plan” (as defined in Section 409A) that is not exempt from Section 409A, and such amount or benefit is payable or to be provided as a result of a “separation from service” (as defined in Section 409A), and you are a specified employee (as defined in Section 409A and determined pursuant to procedures adopted by Avon from time to time) on your separation from service date, then, notwithstanding any other provision in this Agreement to the contrary, such payment or benefit will not be made or provided to you during the six (6) month period following your separation from service. Notwithstanding the foregoing, Avon makes no representation to you about the effect of Section 409A on the provisions of this Agreement and Avon shall have no liability to you in the event that you become subject to taxation under Section 409A (other than any tax reporting and/or withholding obligations that Avon may have under applicable law).
 
25.
Advice of Counsel : You acknowledge that you have been and are hereby advised by Avon to consult with an attorney about this Agreement and its General Release of Claims (and, if applicable, the Second General Release) prior to signing (at your own expense) and you represent that you did so to the extent that you deemed appropriate or you knowingly and voluntarily waived your right to do so. You represent and warrant that you fully understand the terms of this Agreement and its General Release of Claims (and, if applicable, the Second General Release), and you knowingly and voluntarily, of your own free will, without any duress, being fully informed, and after due deliberation, accept its terms and sign below as your own free act. You understand that, as a result of signing this Agreement and, if applicable, the Second General Release, you will not have the right to assert that Avon or any other Avon Released Party unlawfully terminated your employment or violated any of your rights in connection with your employment.
 
26.
Challenge to the Validity of the Agreement and Communication with Government Agency : Nothing in this Agreement: (y) limits or affects your right to challenge the validity of the General Release of Claims under the ADEA or the Older Workers Benefit Protection Act; or (z) precludes you from filing an administrative charge or otherwise communicating with any federal, state or local government office, official or agency. However, you promise and agree never to seek or accept any damages or other legal remedies, or any equitable remedies or relief (including, without limitation, relief that would provide you with


        

reinstatement to employment with Avon), and hereby waive any right to recovery of any such damages, remedies or other relief for you personally with respect to any claim released by Paragraph 20, regardless of whether another person or entity or you initiate the underlying action related to the Claim. You also promise and agree not to voluntarily offer to be a witness and/or voluntarily provide evidence in support of any lawsuit brought by a third party (excluding governmental agencies) against Avon or the Avon Released Parties (as defined in the General Release of Claims above).
 
27.
Permissible Time to Sign Agreement and Possible Second General Release . If you do not sign this Agreement and return it to Avon within twenty-one (21) days after the date on which you receive this Agreement and, if applicable, if you do not sign the Second General Release and return it within twenty-one (21) days following the Separation Date , then the offer of Additional Severance Benefits described herein will expire and you will not be entitled to any Additional Severance Benefits beyond the Basic Severance. As long as you sign and return this Agreement within this time period, you will have seven (7) days immediately after the date of your signature to revoke your decision by delivering, within the seven (7) day period, written notice of revocation to the Senior Vice President, Human Resources. If you do not revoke your decision during that seven (7)-day period, then this Agreement will become effective on the eighth (8th) day. Note that similar consideration and revocation rules apply to the Second General Release (except that the consideration period begins on the Separation Date and the revocation period begins on the date you sign the Second General Release). If you timely sign and return this Agreement and, if applicable, the Second General Release and do not revoke the Agreement, and, if applicable, the Second General Release, each will become effective, respectively, on the day following the expiration of their respective seven (7)-day revocation periods .
 
You understand that the present offer of the Additional Severance Benefits is made without prejudice and is conditional upon its unqualified acceptance and compliance with the execution and delivery requirements described above for this Agreement, and, if applicable, for the Second General Release. Note that the Agreement includes an agreement regarding your ongoing obligation to protect and preserve the confidentiality of the Confidential Information obtained or accessed while you were in the employ of Avon.
Your signature below signifies your voluntary acceptance of the terms of this Agreement, its confidentiality clauses and your election to receive the Additional Severance Benefits, which benefits you acknowledge are in excess and in lieu of those provided under Avon’s regular severance pay plan(s) and policies.


        

A duplicate copy of this Agreement and the Second General Release is attached for your files. Please sign and date both copies of this Agreement, in the spaces provided, returning one copy to Avon and retaining the other copy for your records. If you elect not to accept the Additional Severance Benefits, please notify Avon, in writing, as soon as practicable of your decision. Your failure to timely return the executed Agreement, and if applicable, the Second General Release, will be treated as your failure to elect the Additional Severance Benefits.

[Signatures on next page]


        



We thank you for your contributions to Avon, and wish you success with your future career.
Sincerely,
AVON PRODUCTS, INC.

By: /s/ Susan Ormiston    
Susan Ormiston
SVP, Chief Human Resources Officer


You have carefully reviewed, understood and agree with the terms and conditions specified in this Agreement above. You have signed to indicate your acceptance thereof.

Date: 12/SEP/2017 _____    By: /s/ Fernando Acosta ________
Fernando Acosta



        

SECOND GENERAL RELEASE
A.
General Release of Any Claims That May Have Arisen During the Period From the Date of “Severance Benefit Letter Agreement and General Release of Claims” Through the Date of This Second General Release :
As one of the conditions of my eligibility for, and in consideration of my receipt of, the severance benefits referred to as the “Additional Severance Benefits” and set forth in the Severance Benefit Letter Agreement and General Release of Claims between Avon Products, Inc. (“Avon”) and Fernando Acosta dated August 31, 2017 (the “Agreement”), and in consideration of the other terms and conditions of the Agreement, I agree, on behalf of myself and my heirs, executors, administrators, and assigns, to forever release, dismiss, and discharge (except as otherwise provided by the Agreement and this Second General Release), Avon and its affiliated companies and each of their respective current and former officers, directors, associates, employees, agents, employee benefit plans, employee benefit plan fiduciaries, employee benefit plan trustees, employee benefit plan administrators, representatives, attorneys, shareholders, successors, and assigns, each and all of them in every capacity, personal and representative (collectively referred to as the “Avon Released Parties”), from any and all actions, causes of action, claims, suits, losses, demands, judgments, charges, contracts, obligations, debts, and liabilities of whatever nature (“Claims”), that I and my heirs, executors, administrators, and assigns have or may hereafter have against the Avon Released Parties or any of them arising out of or by reason of any cause, matter, or thing whatsoever from the date I signed the Agreement to the date hereof, including, without limitation:
•
All Claims arising from my employment relationship with Avon and the termination of such relationship;
•
All Claims arising under any federal, state, or local constitution, statute, rule, or regulation, or principle of contract law or common law;
•
All Claims for breach of contract, wrongful discharge, tort, breach of common-law duty, or breach of fiduciary duty;
•
All Claims for violation of laws prohibiting any form of employment discrimination or other unlawful employment practice, including without limitation, as applicable:
o
The Worker Adjustment and Retraining Notification Act of 1988, as amended, 29 U.S.C. §§ 2101 et seq.;



        

o
Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§ 2000e et seq.;
o
The Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. §§ 621 et seq. (the “ADEA”);
o
The Americans with Disabilities Act of 1990, as amended, 42 U.S.C. §§ 12101 et seq.;
o
The Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001 et seq.;
o
The Family and Medical Leave Act of 1993, as amended, 29 U.S.C. §§ 2601 et seq.;
o
The Genetic Information Nondiscrimination Act of 2008, asS amended, 42 U.S.C. §§ 2000ff et seq.;
o
The National Labor Relations Act of 1935, as amended, 29 U.S.C. §§ 151 et seq. (the “NLRA”);
o
the Fair Credit Reporting Act, as amended, 15 U.S.C. §§ 1681 et seq.;
o
“Whistleblower” laws (other than as provided for in Paragraph C(vii) below) and laws protecting “whistleblowers” from retaliation;
o
The New York State Human Rights Law, as amended, N.Y. Exec. Law §§ 290 et seq.; the New York State Worker Adjustment and Retraining Notification Act, as amended, N.Y. Labor Law §§ 860 et seq.; Article 6 of the New York Labor Law, as amended, N.Y. Labor Law §§ 190 et seq.; the New York Nondiscrimination for Legal Actions Law, as amended, N.Y. Labor Law § 201-d; the New York State Fair Credit Reporting Act, as amended, N.Y. Gen. Bus. Law §§ 380 et seq.; Article 23-A of the New York State Corrections Law, as amended, N.Y. Correc. Law §§ 750 et seq.; the New York City Human Rights Law, as amended, N.Y.C. Admin. Code §§ 8-101 et seq.; the New York City Earned Sick Time Act, as amended, N.Y.C. Admin. Code §§ 20-911 et seq.; the New York City Stop Credit Discrimination in Employment Act, as amended, N.Y.C. Admin. Code §§ 8-102(29), 8-107(9)(d), 8-
    
    


        

107(24); and the New York City Fair Chance Act, as amended, N.Y.C. Admin. Code §§ 8-102(5), 8-107(9) et seq.;
o
Any other state’s and local government’s human rights laws, anti-discrimination laws, and “plant closing”/mini-WARN Act laws;
o
Anti-retaliation laws, including without limitation retaliation claims under the New York State Workers' Compensation Law, as amended, N.Y. Workers' Comp. Law § 120, and the New York State Disability Benefits Law, as amended, N.Y. Workers' Comp. Law § 241;
o
The Florida Civil Human Rights Act; and
o
Any other federal, state, or local constitution, statute, rule, or regulation;
provided that I do not release or discharge the Avon Released Parties: (1) from any Claims arising after the date on which I execute this Second General Release; (2) from any Claims for a breach by Avon of its obligations under the Agreement or this Second General Release; or (3) from any Claims that by law cannot be released or waived. It is understood that this Second General Release does not release the Avon employee benefit plans from any claims for vested benefits that I may have under the terms of any of Avon’s employee benefit plans applicable to me. It is further understood that nothing in this Second General Release will preclude or prevent me from challenging the validity of the Second General Release solely with respect to any waiver of any Claims arising under the ADEA after the date on which I execute this Second General Release.
A.
B.
Challenge to the Validity of the Agreement and Communication with Government Agency :
Nothing in this Second General Release (i) limits or affects my right to challenge the validity of the Second General Release of Claims under the ADEA or the Older Workers Benefit Protection Act; or (ii) precludes me from filing an administrative charge or otherwise communicating with any federal, state or local government office, official or agency. However, I promise and agree never to seek or accept any damages or other legal remedies, or any equitable remedies or relief (including, without limitation, relief that would provide me with reinstatement to employment with Avon), and hereby waive any right to recovery of any such damages, remedies or other relief for myself personally with respect to any Claim released by Paragraph A, regardless of whether another person or entity or I initiate the underlying action related to the Claim. I also promise and agree not to voluntarily offer to be a witness and/or voluntarily provide


        

evidence in support of any lawsuit brought by a third party (excluding governmental agencies) against one or more of the Avon Released Parties.
C. Other Representations and Reservation of Certain Rights:
I make the following additional representations, which I acknowledge the Company has relied upon in entering into this Second General Release:
i.
Nothing in this Second General Release is to be construed as an admission on behalf of the Avon Released Parties of any wrongdoing with respect to me, any such wrongdoing being expressly denied.
ii.
I represent and warrant that as of today’s date, I have not filed any complaint, charge, claim, or proceeding against any of the Avon Released Parties before any federal, state, or local agency, court, or other body relating to my employment and the cessation thereof or to any claim released in the Agreement or this Second General Release, and that I am not currently aware of any facts or basis for filing such a complaint, charge, claim, or proceeding against any of the Avon Released Parties. Except as otherwise provided in the Agreement and this Second General Release, I agree that, if I or any other person or entity files an action, complaint, charge, claim, or proceeding against any of the Avon Released Parties, I agree that, to the maximum extent permitted by law, I will not seek or accept any monetary, equitable, or other relief in such action, complaint, charge, claim, or proceeding (including without limitation relief that would provide me with reinstatement to employment with Avon), and that I will take all available steps/procedures to withdraw and/or dismiss the complaint, charge, claim or proceeding, regardless of who filed or initiated such complaint, charge, claim or proceeding, whether pursued solely on my behalf or on behalf of a greater class of individuals.
iii.
If I am employed in, or was formerly employed in, the State of California, I acknowledge that I am aware of and familiar with the provisions of Section 1542 of the California Civil Code, which provides as follows:
“A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the general release which if known by him must have materially affected his settlement with the debtor.”



        

If I am employed in, or was formerly employed in, the State of California, by signing this Second General Release, I hereby waive and relinquish all rights and benefits which I may have under Section 1542 of the California Civil Code and under the law of any other state or jurisdiction to the same or similar effect.
iv.
I represent and warrant that I have the authority to enter into this Second General Release on my behalf individually and to bind all persons and entities claiming through me.
v.
I understand that nothing in the Agreement or this Second General Release will limit or interfere with any rights that I may have under Section 7 of the NLRA.
vi.
I acknowledge and certify that I have complied with Avon’s Code of Conduct and its principles.
vii.
Protection of Whistleblower Rights : I understand that this Second General Release is not intended to, and shall be interpreted in a manner that does not, limit or restrict me from exercising any legally protected rights that I may have under any applicable statutes, regulations and rules intended to protect whistleblowers (including pursuant to Rule 21F under the Securities Exchange Act of 1934, as amended).
viii.
I acknowledge that Avon has advised me, and hereby advises me, to consult with legal counsel prior to signing the Agreement and the Second General Release. I represent and warrant that I fully understand the terms of the Agreement and the Second General Release, that I have been encouraged to seek the benefit of advice of counsel and either have done so or have knowingly and voluntarily waived my right to do so, and that I knowingly and voluntarily, of my own free will, without any duress, being fully informed, and after due deliberation, accept its terms and sign below as my own free act. I understand that as a result of signing the Agreement and the Second General Release (subject to Paragraph B above), I will not have the right to assert that Avon or any other Avon Released Party unlawfully terminated my employment or violated any of my rights in connection with my employment with Avon or the cessation thereof.
I acknowledge that I was afforded at least twenty-one (21) days (the “consideration period”) to consider whether to sign this Second General Release (it was included with my Agreement) during which time Avon did not change or revoke the terms of this Second General Release or the Agreement. I understand that, in order to


        

receive the Additional Severance Benefits, I must sign and return this Second General Release no earlier than my last day of active employment and no later than the end of the consideration period specified in my Agreement.
I understand that if I do not sign this Second General Release and return it to Avon within the time period specified above, then I will not be entitled to any Additional Severance Benefits beyond the basic severance as defined in the Agreement. I understand that, as long as I sign and return this Second General Release within the consideration period, I will have seven (7) days immediately after the date of my signature in which I may revoke my decision to sign this Second General Release by delivering, within the seven (7) day period, written notice of revocation to the Senior Vice President, Human Resources. If I do not revoke my decision during that seven (7)-day period, then this Second General Release will become effective on the eighth (8th) day after I sign it and will be irrevocable.
I acknowledge: (w) that I am receiving valuable consideration in exchange for the execution of the Agreement and this Second General Release that I would not otherwise be entitled to receive; (x) that I was given at least twenty-one (21) days in which to consider the Agreement and a separate twenty-one (21) days in which to consider the Second General Release; (y) that any changes made to the Agreement or Second General Release, whether material or immaterial, will not restart their respective twenty-one (21) day consideration periods; and (z) that I am entitled to revoke the Agreement and the Second General Release in writing, within seven (7) days after I sign each, respectively. Such revocation must be delivered to the Company as provided herein within the applicable seven (7)-day period, in which case I will receive no benefits other than basic severance and neither the Agreement, the Second General Release, nor my election to accept the Additional Severance Benefits, will go into effect.
This Second General Release shall be governed by the laws of the State of New York without giving effect to its conflict of laws principles.

Date: _________________
By: ___________________________
     Fernando Acosta





Exhibit 31.1
CERTIFICATION
I, Sherilyn S. McCoy, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Avon Products, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 2, 2017
 
/s/ Sherilyn S. McCoy
Sherilyn S. McCoy
Chief Executive Officer




Exhibit 31.2
CERTIFICATION
I, James Wilson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Avon Products, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 2, 2017
 
/s/ James Wilson
James Wilson
Executive Vice President and
Chief Financial Officer




Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Avon Products, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2017 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sherilyn S. McCoy, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/ Sherilyn S. McCoy
Sherilyn S. McCoy
Chief Executive Officer
November 2, 2017




Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Avon Products, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2017 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James Wilson, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/ James Wilson
James Wilson
Executive Vice President and
Chief Financial Officer
November 2, 2017