Exhibit 10.1

 

THIRD AMENDMENT TO CREDIT AGREEMENT

 

THIRD AMENDMENT TO CREDIT AGREEMENT (this “Third Amendment”), dated as of
August 20, 2009, among MICHAELS STORES, INC., a Delaware corporation (the
“Borrower”), the Lenders party to the Credit Agreement referred to below (the
“Lenders”), and DEUTSCHE BANK AG NEW YORK BRANCH, as administrative agent (in
such capacity, the “Administrative Agent”).  Unless otherwise defined herein,
capitalized terms used herein and defined in the Credit Agreement are used
herein as therein defined.

 

W I T N E S S E T H :

 

WHEREAS, the Borrower, the Lenders, the Administrative Agent, the Syndication
Agent and the Co-Documentation Agents have entered into a Credit Agreement,
dated as of October 31, 2006 (as amended, supplemented and/or otherwise modified
to, but not including, the date hereof, the “Credit Agreement”); and

 

WHEREAS, pursuant to Section 10.01 of the Credit Agreement, the parties hereto
wish to amend certain provisions of the Credit Agreement as provided herein,
subject to the terms and conditions set forth below.

 

NOW, THEREFORE, it is agreed;

 

A.                                   AMENDMENTS TO THE CREDIT AGREEMENT

 

1.                                       SECTION 1.01 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY (I) DELETING THE DEFINITIONS OF “COMMITMENT”, “LENDER”,
“LOAN”, “LOAN DOCUMENTS” AND “SECURED HEDGE AGREEMENT” APPEARING IN SAID
SECTION IN THEIR ENTIRETY AND (II) INSERTING IN APPROPRIATE ALPHABETICAL ORDER
THE FOLLOWING NEW DEFINITIONS:

 

“Additional First Lien Intercreditor Agreement” means an intercreditor agreement
among the Administrative Agent, the Collateral Agent and one or more Senior
Representatives for holders of Permitted First Priority Refinancing Debt
providing that, inter alia, the Liens on the Collateral as between the
Collateral Agent (for the benefit of the Secured Parties) and one or more Senior
Representatives (for the benefit of the holders of Permitted First Priority
Refinancing Debt) shall be pari passu (but without regard to control of
remedies), as such intercreditor agreement may be amended, modified or
supplemented from time to time in accordance with the terms hereof and thereof. 
The Additional First Lien Intercreditor Agreement shall be in a form customary
for transactions of the type contemplated thereby and otherwise reasonably
satisfactory to the Administrative Agent and the Borrower and, to the extent
agreed to by the Collateral Agent, the Senior Representative for the applicable
holders of Permitted First Priority Refinancing Debt and the ABL Collateral
Agent, may be in the form of an amendment and restatement of the Intercreditor
Agreement.

 

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“Additional Lender” means, at any time, any bank or other financial institution
or institutional lender (other than any such bank, financial institution or
institutional lender that is a Lender at such time) that agrees to provide any
portion of Credit Agreement Refinancing Indebtedness pursuant to a Refinancing
Amendment in accordance with Section 2.15, provided that each Additional Lender
shall be subject to the approval of the Administrative Agent to the extent that
each such Additional Lender is not then an existing Lender, an Affiliate of a
then existing Lender or an Approved Fund (such approval not to be unreasonably
withheld) and the Borrower.

 

“Appropriate Lender” means, at any time, with respect to Loans of any Class, the
Lenders of such Class.

 

“Class” when used with respect to Loans or a Borrowing, refers to whether such
Loans, or the Loans comprising such Borrowing, are Replacement Loans or Other
Term Loans.

 

“Commitment” means, as to each Lender, its Original Commitment, its New
Commitment, its Replacement Commitment or its Other Term Loan Commitment, as the
context may require.

 

“Credit Agreement Refinancing Indebtedness” means (a) Permitted First Priority
Refinancing Debt, (b) Permitted Unsecured Refinancing Debt or (c) Indebtedness
incurred pursuant to a Refinancing Amendment, in each case, issued, incurred or
otherwise obtained (including by means of the extension or renewal of existing
Indebtedness) in exchange for, or to extend, renew, replace or refinance, in
whole or part, then existing Loans (including any successive Credit Agreement
Refinancing Indebtedness) (“Refinanced Debt”); provided that (i) such extending,
renewing or refinancing Indebtedness is in an original aggregate principal
amount (or accreted value, if applicable) not greater than the aggregate
principal amount (or accreted value, if applicable) of the Refinanced Debt
except by an amount equal to unpaid accrued interest and premium thereon plus
other reasonable amounts paid, and fees and expenses reasonably incurred, in
connection with such extending, renewing or refinancing Indebtedness, (ii) such
Indebtedness has a later maturity and a Weighted Average Life to Maturity equal
to or greater than the Refinanced Debt, and (iii) unless such Credit Agreement
Refinancing Indebtedness is incurred solely by means of extending or renewing
then existing Indebtedness described in clause (a) or (b) above without
resulting in any Net Proceeds, such Refinanced Debt shall be repaid, defeased or
satisfied and discharged with 100% of the Net Proceeds from any Credit Agreement
Refinancing Indebtedness, and all accrued interest, fees and premiums (if any)
in connection therewith shall be paid, on the date such Credit Agreement
Refinancing Indebtedness is issued, incurred or obtained.

 

“Latest Maturity Date” means, at any date of determination, the latest Maturity
Date applicable to any Loan or Commitment hereunder at such time, including the
latest maturity date of any Other Term Loan or any Other Term Commitment, in
each case as extended in accordance with this Agreement from time to time.

 

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“Lender” has the meaning specified in the introductory paragraph to this
Agreement and includes (i) each Replacement Lender and its respective successors
and assigns as permitted hereunder and (ii) each Person that shall become a
party hereto pursuant to a Refinancing Amendment and its respective successors
and assigns as permitted hereunder, each of which is referred to herein as a
“Lender”.

 

“Loan” means (a) the making of an Original Loan by a Lender to the Borrower
pursuant to Section 2.01(a), (b) the making of an Additional New Loan by a
Lender to the Borrower pursuant to Section 2.01(c), (c) the conversion of an
Original Loan to a Converted New Loan by a Lender pursuant to Section 2.01(b),
(d) the making of a Replacement Loan by a Lender to the Borrower pursuant to
Section 2.01(d) or (e) the making of an Other Term Loan by a Lender or an
Additional Lender to the Borrower pursuant to Section 2.15.

 

“Loan Documents” means, collectively, (a) this Agreement, (b) the Notes, (c) the
Guaranty, (d) the Intercreditor Agreement, (e) the Collateral Documents and
(f) on and after the execution and delivery thereof, the Additional First Lien
Intercreditor Agreement.

 

“Other Term Commitments” means one or more term loan commitments hereunder that
fund Other Term Loans of the applicable Class hereunder pursuant to a
Refinancing Amendment.

 

“Other Term Loans” means one or more Classes of term loans hereunder that result
from a Refinancing Amendment.

 

“Permitted First Priority Refinancing Debt” means any secured Indebtedness
incurred by the Borrower in the form of one or more series of senior secured
notes or loans; provided that (i) such Indebtedness is secured by (A) the TL
Priority Collateral on a pari passu first-lien basis (but without regard to the
control of remedies) with the Secured Obligations and (B) the ABL Priority
Collateral on a pari passu second-lien basis (but without regard to the control
of remedies) with the Secured Obligations, and is not secured by any property or
assets of the Borrower or any Subsidiary other than the Collateral, (ii) such
Indebtedness constitutes Credit Agreement Refinancing Indebtedness in respect of
any Class of Loans (including portions of any Class of Loans), (iii) such
Indebtedness (and the Liens securing the same) are permitted by the terms of the
ABL Credit Agreement and the Intercreditor Agreement (in each case, to the
extent the ABL Credit Agreement and the Intercreditor Agreement are then in
effect), (iv) such Indebtedness does not mature or have scheduled amortization
or payments of principal prior to the date that is ninety-one (91) days after
the Latest Maturity Date at the time such Indebtedness is incurred, (v) the
security agreements relating to such Indebtedness are substantially the same as
the Collateral Documents (with such differences as are reasonably satisfactory
to the Administrative Agent), (vi) such Indebtedness is not guaranteed by any
Subsidiaries other than the Subsidiary Guarantors, and (vii) a Senior
Representative acting on behalf of the holders of such Indebtedness shall have

 

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become party to the Additional First Lien Intercreditor Agreement, provided that
if such Indebtedness is the initial Permitted First Priority Refinancing Debt
incurred by the Borrower, then the Borrower, the Subsidiary Guarantors, the
Administrative Agent, the Collateral Agent and the Senior Representative for
such Indebtedness shall have executed and delivered the Additional First Lien
Intercreditor Agreement.  Permitted First Priority Refinancing Debt will include
any Registered Equivalent Notes issued in exchange therefor.

 

“Permitted Refinancing” means, with respect to any Person, any modification,
replacement, refinancing, refunding, renewal or extension of any Indebtedness of
such Person; provided that (a) the principal amount (or accreted value, if
applicable) thereof does not exceed the principal amount (or accreted value, if
applicable) of the Indebtedness so modified, replaced, refinanced, refunded,
renewed or extended except by an amount equal to unpaid accrued interest and
premium thereon plus other reasonable amount paid, and fees and expenses
reasonably incurred, in connection with such modification, replacement,
refinancing, refunding, renewal or extension and by an amount equal to any
existing commitments unutilized thereunder, (b) such modification, replacement,
refinancing, refunding, renewal or extension has a final maturity date equal to
or later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being modified, replaced, refinanced, refunded, renewed or
extended, (c) at the time thereof, no Default or Event of Default shall have
occurred and be continuing, (d) if such Indebtedness being modified, replaced,
refinanced, refunded, renewed or extended is subordinated in right of payment to
the Obligations, such modification, replacement, refinancing, refunding, renewal
or extension is subordinated in right of payment to the Obligations on terms at
least as favorable to the Lenders as those contained in the documentation
governing the Indebtedness being modified, replaced, refinanced, refunded,
renewed or extended, (e) the terms and conditions (including, if applicable, as
to collateral but excluding as to subordination, interest rate and redemption
premium) of any such modified, replaced, refinanced, refunded, renewed or
extended Indebtedness, taken as a whole, are not materially less favorable to
the Loan Parties or the Lenders than the terms and conditions of the
Indebtedness being modified, replaced, refinanced, refunded, renewed or
extended; provided that a certificate of a Responsible Officer delivered to the
Administrative Agent at least five Business Days prior to the incurrence of such
Indebtedness, together with a reasonably detailed description of the material
terms and conditions of such Indebtedness or drafts of the documentation
relating thereto, stating that the Borrower has determined in good faith that
such terms and conditions satisfy the foregoing requirement shall be conclusive
evidence that such terms and conditions satisfy the foregoing requirement unless
the Administrative Agent notifies the Borrower within such five Business Day
period that it disagrees with such determination (including a reasonable
description of the basis upon which it disagrees), (f) any such modification,
replacement, refinancing, refunding, renewal or extension is incurred by the
Person who is the obligor of the Indebtedness being modified, refinanced,
refunded, renewed or extended, (g) in the case of a “Permitted Refinancing” of
Permitted First Priority Refinancing

 

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Debt, such Indebtedness meets the requirements of clauses (i), (iii), (v),
(vi) and (vii) of the definition of “Permitted First Priority Refinancing Debt”
and (h) in the case of a “Permitted Refinancing” of Permitted Unsecured
Refinancing Debt, such Indebtedness meets the requirements of clauses (iv) and
(v) of the definition of “Permitted Unsecured Refinancing Debt”.

 

“Permitted Unsecured Refinancing Debt” means unsecured Indebtedness incurred by
the Borrower in the form of one or more series of senior unsecured notes or
loans; provided that (i) such Indebtedness constitutes Credit Agreement
Refinancing Indebtedness in respect of any Class of Loans (including portions of
any Class of Loans), (iii) such Indebtedness does not mature or have scheduled
amortization or payments of principal prior to the date that is ninety-one (91)
days after the Latest Maturity Date at the time such Indebtedness is incurred,
(iv) such Indebtedness is not guaranteed by any Subsidiaries other than the
Subsidiary Guarantors, and (v) such Indebtedness is not secured by any Lien on
any property or assets of the Company or any Subsidiary.  Permitted Unsecured
Refinancing Debt will include any Registered Equivalent Notes issued in exchange
therefor.

 

“Refinancing Amendment” means an amendment to this Agreement in form and
substance reasonably satisfactory to the Administrative Agent and the Borrower
executed by each of (a) the Borrower, (b) the Administrative Agent and (c) each
Additional Lender and Lender that agrees to provide any portion of the Credit
Agreement Refinancing Indebtedness being incurred pursuant thereto, in
accordance with Section 2.15.

 

“Registered Equivalent Notes” means, with respect to any notes originally issued
in a Rule 144A or other private placement transaction under the Securities Act
of 1933, substantially identical notes (having the same guarantees) issued in a
dollar for dollar exchange therefor pursuant to an exchange offer registered
with the SEC.

 

“Replacement Lender” means each Lender with a Replacement Commitment and/or
Replacement Loans.

 

“Secured Hedge Agreement” means any Swap Contract permitted under Article 7 that
is entered into by and between any Loan Party or any Restricted Subsidiary and
any Hedge Bank and with respect to which, at or prior to the time that such Swap
Contract is entered into, the Borrower (or another Loan Party) and the Hedge
Bank party thereto (except in the case of the Administrative Agent) shall have
delivered written notice to the Administrative Agent that such Swap Contract has
been entered into and that it constitutes a “Secured Hedge Agreement” entitled
to the benefits of the Collateral Documents, the Intercreditor Agreement and (if
then in effect) the Additional First Lien Intercreditor Agreement.

 

“Senior Representative” means, with respect to any series of Permitted First
Priority Refinancing Debt, the trustee, administrative agent, collateral agent,

 

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security agent or similar agent under the indenture or agreement pursuant to
which such Indebtedness is issued, incurred or otherwise obtained, as the case
may be, and each of their successors in such capacities.

 

“Third Amendment” means the Third Amendment to this Agreement, dated as of
August 20, 2009.

 

“Third Amendment Effective Date” has the meaning provided in the Third
Amendment.

 

2.                                       THE DEFINITION OF “COLLATERAL AND
GUARANTEE REQUIREMENT” APPEARING IN SECTION 1.01 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY (I) REPLACING THE TEXT “AND (Y) THE INTERCREDITOR AGREEMENT”
APPEARING IN CLAUSE (A) OF SAID DEFINITION WITH THE TEXT “(Y) THE INTERCREDITOR
AGREEMENT, AND (Z) IF THEN IN EFFECT, THE ADDITIONAL FIRST LIEN INTERCREDITOR
AGREEMENT”, (II) INSERTING THE TEXT “AND, IF THEN IN EFFECT, THE ADDITIONAL
FIRST LIEN INTERCREDITOR AGREEMENT” IMMEDIATELY AFTER THE TEXT “THE
INTERCREDITOR AGREEMENT” APPEARING IN THE FIRST PARENTHETICAL OF CLAUSE (D) OF
SAID DEFINITION, (III) REPLACING THE TEXT “AND THE INTERCREDITOR AGREEMENT”
APPEARING IN CLAUSE (E) OF SAID DEFINITION WITH THE TEXT “, THE INTERCREDITOR
AGREEMENT AND, IF THEN IN EFFECT, THE ADDITIONAL FIRST LIEN INTERCREDITOR
AGREEMENT” AND (IV) INSERTING THE TEXT “AND, IF THEN IN EFFECT, THE ADDITIONAL
FIRST LIEN INTERCREDITOR AGREEMENT” IMMEDIATELY AFTER THE TEXT “THE
INTERCREDITOR AGREEMENT” APPEARING IN THE PARENTHETICAL OF CLAUSE (G)(II) OF
SAID DEFINITION.

 

3.                                       THE DEFINITION OF “DISQUALIFIED STOCK”
APPEARING IN SECTION 1.01 OF THE CREDIT AGREEMENT IS HEREBY AMENDED BY REPLACING
THE TEXT “MATURITY DATE” APPEARING IN CLAUSE (B) OF SAID DEFINITION WITH THE
TEXT “LATEST MATURITY DATE AT THE TIME SUCH DISQUALIFIED STOCK IS FIRST ISSUED”.

 

4.                                       THE DEFINITION OF “PERMITTED COLLATERAL
LIENS” APPEARING IN SECTION 1.01 OF THE CREDIT AGREEMENT IS HEREBY AMENDED BY
REPLACING THE TEXT “AND (LL)” APPEARING IN CLAUSE (C) OF SAID DEFINITION WITH
THE TEXT “, (LL) AND (NN)”.

 

5.                                       THE DEFINITION OF “PERMITTED LIENS”
APPEARING IN SECTION 1.01 OF THE CREDIT AGREEMENT IS HEREBY AMENDED BY
(I) DELETING THE WORD “AND” AT THE END OF CLAUSE (LL) OF SAID DEFINITION,
(II) REPLACING THE PERIOD (“.”) AT THE END OF CLAUSE (MM) OF SAID DEFINITION
WITH THE TEXT “; AND” AND (III) INSERTING THE FOLLOWING NEW CLAUSE (NN) AT THE
END OF SAID DEFINITION:

 

“(NN)                    LIENS ON THE COLLATERAL SECURING PERMITTED FIRST
PRIORITY REFINANCING DEBT (AND PERMITTED REFINANCINGS THEREOF) PERMITTED UNDER
SECTION 7.03(B)(XXII).”.

 

6.                                       SECTION 2.01 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY DELETING THE TEXT “ (I)” APPEARING IN CLAUSE (B) OF SAID
SECTION AND INSERTING A COMMA IN LIEU THEREOF.

 

7.                                       SECTION 2.02 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY (I) INSERTING THE TEXT “THE APPLICABLE CLASS OF” IMMEDIATELY
BEFORE THE TEXT “LOANS,” APPEARING IN THE FIRST SENTENCE OF CLAUSE (B) OF SAID
SECTION AND (II) INSERTING THE WORD “APPROPRIATE” IMMEDIATELY BEFORE THE TEXT
“LENDER SHALL MAKE” APPEARING IN CLAUSE (B) OF SAID SECTION.

 

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8.                                       SECTION 2.05 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY DELETING CLAUSE (A)(I) OF SAID SECTION IN ITS ENTIRETY AND
RESTATING SAID CLAUSE AS FOLLOWS:

 

“(I)  THE BORROWER MAY, UPON NOTICE TO THE ADMINISTRATIVE AGENT, AT ANY TIME OR
FROM TIME TO TIME VOLUNTARILY PREPAY LOANS IN WHOLE OR IN PART WITHOUT PREMIUM
OR PENALTY; PROVIDED THAT (1) SUCH NOTICE MUST BE RECEIVED BY THE ADMINISTRATIVE
AGENT NOT LATER THAN 12:30 P.M. (NEW YORK, NEW YORK TIME) (A) THREE (3) BUSINESS
DAYS PRIOR TO ANY DATE OF PREPAYMENT OF EUROCURRENCY RATE LOANS AND (B) ONE
(1) BUSINESS DAY PRIOR TO ANY DATE OF PREPAYMENT OF BASE RATE LOANS; (2) ANY
PREPAYMENT OF EUROCURRENCY RATE LOANS SHALL BE IN A PRINCIPAL AMOUNT OF
$2,500,000 OR A WHOLE MULTIPLE OF $500,000 IN EXCESS THEREOF; AND (3) ANY
PREPAYMENT OF BASE RATE LOANS SHALL BE IN A PRINCIPAL AMOUNT OF $500,000 OR A
WHOLE MULTIPLE OF $100,000 IN EXCESS THEREOF OR, IN EACH CASE, IF LESS, THE
ENTIRE PRINCIPAL AMOUNT THEREOF THEN OUTSTANDING.  EACH SUCH NOTICE SHALL
SPECIFY THE DATE AND AMOUNT OF SUCH PREPAYMENT, THE TYPE(S) OF LOANS TO BE
PREPAID AND THE MANNER IN WHICH SUCH PREPAYMENT SHALL BE APPLIED TO SCHEDULED
REPAYMENTS OF LOANS REQUIRED PURSUANT TO SECTION 2.07; PROVIDED THAT IN THE
EVENT SUCH NOTICE FAILS TO SPECIFY THE MANNER IN WHICH THE RESPECTIVE PREPAYMENT
SHALL BE APPLIED TO SCHEDULED REPAYMENTS OF SUCH LOANS REQUIRED PURSUANT TO
SECTION 2.07, SUCH PREPAYMENT OF SUCH LOANS SHALL BE APPLIED IN DIRECT ORDER OF
MATURITY TO SCHEDULED REPAYMENTS THEREOF REQUIRED PURSUANT TO SECTION 2.07.  THE
ADMINISTRATIVE AGENT WILL PROMPTLY NOTIFY EACH APPROPRIATE LENDER OF ITS RECEIPT
OF EACH SUCH NOTICE, AND OF THE AMOUNT OF SUCH LENDER’S PRO RATA SHARE OF SUCH
PREPAYMENT.  IF SUCH NOTICE IS GIVEN BY THE BORROWER, THE BORROWER SHALL MAKE
SUCH PREPAYMENT AND THE PAYMENT AMOUNT SPECIFIED IN SUCH NOTICE SHALL BE DUE AND
PAYABLE ON THE DATE SPECIFIED THEREIN.  ANY PREPAYMENT OF A EUROCURRENCY RATE
LOAN SHALL BE ACCOMPANIED BY ALL ACCRUED INTEREST THEREON, TOGETHER WITH ANY
ADDITIONAL AMOUNTS REQUIRED PURSUANT TO SECTION 3.05.  EACH PREPAYMENT OF THE
LOANS PURSUANT TO THIS SECTION 2.05(A) SHALL BE PAID TO THE APPROPRIATE LENDERS
IN ACCORDANCE WITH THEIR RESPECTIVE PRO RATA SHARES.”.

 

9.                                       SECTION 2.05 OF THE CREDIT AGREEMENT IS
HEREBY FURTHER AMENDED BY RESTATING CLAUSE (B)(II) OF SAID SECTION IN ITS
ENTIRETY AS FOLLOWS:

 

“(ii)                            (A) If the Borrower or any Restricted
Subsidiary incurs or issues any Indebtedness not expressly permitted to be
incurred or issued pursuant to Section 7.03, the Borrower shall cause to be
prepaid an aggregate principal amount of Loans in an amount equal to 100% of all
Net Proceeds received therefrom on or prior to the date which is five
(5) Business Days after the receipt of such Net Proceeds.  (B) If the Borrower
incurs or issues any Credit Agreement Refinancing Indebtedness (other than
solely by means of extending or renewing then existing Credit Agreement
Refinancing Indebtedness of the type described in clause (a) or (b) of the
definition thereof without resulting in any Net Proceeds), the Borrower shall
prepay an aggregate principal amount of Loans in an amount equal to 100% of the
Net Proceeds of such Credit Agreement Refinancing Indebtedness on the date such
Credit Agreement Refinancing Indebtedness is incurred or issued; provided, that
each prepayment of Loans required by this clause (B) shall be applied first to
the Class or Classes of Loans with the earliest

 

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Maturity Date until all such Loans of such Class or Classes have been repaid in
full and then to the Class or Classes of Loans with the next earliest Maturity
Date and so on until 100% of the Net Proceeds from such Credit Agreement
Refinancing Indebtedness has been applied to the Loans as required by this
clause (B).”.

 

10.                                 SECTION 2.05 OF THE CREDIT AGREEMENT IS
HEREBY FURTHER AMENDED BY (I) INSERTING THE TEXT “APPROPRIATE” IMMEDIATELY PRIOR
TO THE TEXT “LENDERS” APPEARING IN CLAUSE (B)(III) OF SAID SECTION AND
(II) DELETING THE LAST SENTENCE APPEARING IN CLAUSE (B)(IV) OF SAID SECTION AND
INSERTING THE FOLLOWING SENTENCE IN LIEU THEREOF:

 

“The Administrative Agent will promptly notify each Appropriate Lender of the
contents of the Borrower’s prepayment notice and of such Appropriate Lender’s
Pro Rata Share of the prepayment.”.

 

11.                                 SECTION 2.06 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY (I) INSERTING THE TEXT “ORIGINAL” IMMEDIATELY BEFORE THE TEXT
“COMMITMENT” APPEARING IN SAID SECTION AND (II) DELETING THE TEXT “SECTION 2.01”
IN SAID SECTION AND INSERTING THE TEXT “SECTION 2.01(A)” IN LIEU THEREOF.

 

12.                                 ARTICLE II OF THE CREDIT AGREEMENT IS HEREBY
AMENDED BY INSERTING THE FOLLOWING NEW SECTION 2.15 IMMEDIATELY FOLLOWING
SECTION 2.14 OF SAID ARTICLE:

 

“SECTION 2.15. Refinancing Amendments.  At any time after the Third Amendment
Effective Date, the Borrower may obtain from any Lender or any Additional Lender
Credit Agreement Refinancing Indebtedness in respect of all or any portion of
the Loans then outstanding under this Agreement (which for this purpose will be
deemed to include any then outstanding Other Term Loans), in the form of Other
Term Loans or Other Term Commitments, in each case pursuant to a Refinancing
Amendment; provided that such Credit Agreement Refinancing Indebtedness (i) will
rank pari passu in right of payment and of security with the other Loans and
Commitments hereunder, (ii) have such pricing and optional prepayment terms as
may be agreed by the Borrower and the Lenders thereof, (iii) except as otherwise
provided in Section 2.05(b)(ii)(B) or as may be agreed to by the Lenders and
Additional Lenders providing such Credit Agreement Refinancing Indebtedness in
the respective Refinancing Amendment (but solely as it relates to such Credit
Agreement Refinancing Indebtedness waiving their pro rata share of any
applicable prepayment or repayment), each Class of Other Term Loans shall be
prepaid and repaid (or offered to be repaid in the case of Section 2.05(c)) on a
pro rata basis with all voluntary prepayments and mandatory prepayments (other
than amortization payments) of the other Classes of Loans and (iv) otherwise be
treated hereunder no more favorably, including with respect to covenants and
events of default, than the Refinanced Debt; provided further that the terms and
conditions applicable to such Credit Agreement Refinancing Indebtedness may
provide for any additional or different financial or other covenants or other
provisions that are agreed between the Borrower and the Lenders thereof and
applicable only during periods after the Latest Maturity Date that is in effect
on the date such Credit Agreement Refinancing Indebtedness is issued, incurred
or obtained.  The effectiveness of

 

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any Refinancing Amendment shall be subject to the satisfaction on the date
thereof of each of the conditions set forth in Sections 4.01 (i), (j) and
(k) and, to the extent reasonably requested by the Administrative Agent, receipt
by the Administrative Agent of (i) legal opinions, board resolutions and
officers’ certificates consistent with those delivered on the Closing Date other
than changes to such legal opinion resulting from a change in law, change in
fact or change to counsel’s form of opinion reasonably satisfactory to the
Administrative Agent and (ii) reaffirmation agreements reasonably satisfactory
to the Administrative Agent.  Each tranche of Credit Agreement Refinancing
Indebtedness incurred under this Section 2.15 shall be in an aggregate principal
amount that is not less than $50,000,000.  The Administrative Agent shall
promptly notify each Lender as to the effectiveness of each Refinancing
Amendment.  Each of the parties hereto hereby agrees that, upon the
effectiveness of any Refinancing Amendment, this Agreement shall be deemed
amended to the extent (but only to the extent) necessary to (i) reflect the
existence and terms of the Credit Agreement Refinancing Indebtedness incurred
pursuant thereto (including any amendments necessary to treat the Loans and
Commitments subject thereto as Other Term Loans and/or Other Term Commitments),
(ii) provide certain class protection to the Lenders and Additional Lenders
providing such Credit Agreement Refinancing Indebtedness with respect to
voluntary prepayments and mandatory prepayments and (iii) make such other
changes to this Agreement and the other Loan Documents consistent with the
provisions and intent of the second paragraph of Section 10.01.  Any Refinancing
Amendment may, without the consent of any other Lenders, effect such amendments
to this Agreement and the other Loan Documents as may be necessary or
appropriate, in the reasonable opinion of the Administrative Agent and the
Borrower, to effect the provisions of this Section, and the Required Lenders
hereby expressly authorize the Administrative Agent to enter into any such
Refinancing Amendment.”.

 

13.                                 SECTION 3.07 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY INSERTING THE TEXT “OR ALL THE LENDERS WITH RESPECT TO A
CERTAIN CLASS OF LOANS” IMMEDIATELY FOLLOWING THE TEXT “SECTION 10.01” APPEARING
IN CLAUSE (C) OF SAID SECTION.

 

14.                                 SECTION 7.03 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY INSERTING THE TEXT “(INCLUDING ANY INDEBTEDNESS INCURRED
PURSUANT TO SECTION 2.15)” IMMEDIATELY AFTER THE TEXT “RESTRICTED SUBSIDIARY”
APPEARING AT THE END OF CLAUSE (B)(I) IN SAID SECTION.

 

15.                                 SECTION 7.03 OF THE CREDIT AGREEMENT IS
HEREBY FURTHER AMENDED BY (I) DELETING THE TEXT “AND” APPEARING AT THE END OF
CLAUSE (B)(XX) IN SAID SECTION, (II) REPLACING THE PERIOD (“.”) AT THE END OF
CLAUSE (B)(XXI) IN SAID SECTION WITH A SEMI-COLON (“;”) AND (III) INSERTING THE
FOLLOWING NEW SUBCLAUSES (XXII) AND (XXIII) AT THE END OF CLAUSE (B) OF SAID
SECTION:

 

“(XXII)  PERMITTED FIRST PRIORITY REFINANCING DEBT AND ANY PERMITTED REFINANCING
THEREOF; AND

 

(xxiii) Permitted Unsecured Refinancing Debt and any Permitted Refinancing
thereof.”.

 

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16.                                 SECTION 7.12 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED AND RESTATED AS FOLLOWS:

 

“SECTION 7.12.  Use of Proceeds.  The Borrower shall not, and shall not permit
any of its Restricted Subsidiaries to, use the proceeds of any Borrowing,
whether directly or indirectly, in a manner inconsistent with the uses set forth
in the preliminary statements to this Agreement.  Notwithstanding the foregoing,
(a) proceeds of the Replacement Loans will not be used for any purpose other
than the repayment of principal of the outstanding Refinanced Loans on the
Second Amendment Effective Date and (b) proceeds of any Other Term Loans will
not be used for any purpose other than the repayment of principal and accrued
and unpaid interest and premium on Loans outstanding on the date of incurrence
of such Other Term Loans and payment of other reasonable amounts incurred and
fees and expenses reasonably incurred, in connection with such Other Term
Loans.”.

 

17.                                 SECTION 8.01 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY REPLACING THE TEXT “AND THE INTERCREDITOR AGREEMENT” APPEARING
IN CLAUSE (K) OF SAID SECTION WITH THE TEXT “, THE INTERCREDITOR AGREEMENT AND
(IF THEN IN EFFECT) THE ADDITIONAL FIRST LIEN INTERCREDITOR AGREEMENT”.

 

18.                                 SECTION 9.01 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY REPLACING THE TEXT “THE INTERCREDITOR AGREEMENT” APPEARING IN
CLAUSE (B) OF SAID SECTION WITH THE TEXT “THE INTERCREDITOR AGREEMENT AND (IF
THEN IN EFFECT) THE ADDITIONAL FIRST LIEN INTERCREDITOR AGREEMENT”.

 

19.                                 SECTION 9.11 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY REPLACING THE TEXT “THE INTERCREDITOR AGREEMENT” APPEARING IN
THE INTRODUCTORY CLAUSE OF SAID SECTION WITH THE TEXT “THE INTERCREDITOR
AGREEMENT AND (IF THEN IN EFFECT) THE ADDITIONAL FIRST LIEN INTERCREDITOR
AGREEMENT”.

 

20.                                 SECTION 10.07 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY (I) INSERTING THE TEXT “OF ANY CLASS” IMMEDIATELY AFTER THE
TEXT “ASSIGNING LENDER’S COMMITMENT OR LOANS” APPEARING IN CLAUSE (B)(II)(A) OF
SAID SECTION AND (II) INSERTING THE FOLLOWING SENTENCE IMMEDIATELY AFTER CLAUSE
(B)(II) IN SAID SECTION:

 

“THIS PARAGRAPH (B) SHALL NOT PROHIBIT ANY LENDER FROM ASSIGNING ALL OR A
PORTION OF ITS RIGHTS AND OBLIGATIONS AMONG SEPARATE CLASSES OF LOANS OR
COMMITMENTS ON A NON-PRO RATA BASIS.”.

 

21.                                 SECTION 10.22 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY DELETING CLAUSES (II) AND (III) APPEARING IN SAID SECTION IN
THEIR ENTIRETY AND INSERTING THE FOLLOWING NEW CLAUSES (II) AND (III) IN LIEU
THEREOF:

 

“(II) EACH LENDER AUTHORIZES AND INSTRUCTS THE COLLATERAL AGENT AND THE
ADMINISTRATIVE AGENT TO ENTER INTO THE INTERCREDITOR AGREEMENT AND THE
ADDITIONAL FIRST LIEN INTERCREDITOR AGREEMENT ON BEHALF OF SUCH LENDER, AND TO
TAKE ALL ACTIONS (AND EXECUTE ALL

 

10

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DOCUMENTS) REQUIRED (OR DEEMED ADVISABLE) BY IT IN ACCORDANCE WITH THE TERMS OF
THE INTERCREDITOR AGREEMENT OR THE ADDITIONAL FIRST LIEN INTERCREDITOR
AGREEMENT, AS THE CASE MAY BE.

 

(III)                               THE PROVISIONS OF THIS SECTION 10.22 ARE NOT
INTENDED TO SUMMARIZE ALL RELEVANT PROVISIONS OF (A) THE INTERCREDITOR
AGREEMENT, THE FORM OF WHICH IS ATTACHED AS AN EXHIBIT TO THIS AGREEMENT OR
(B) THE ADDITIONAL FIRST LIEN INTERCREDITOR AGREEMENT, WHICH WILL BE IN THE
FORM APPROVED BY THE ADMINISTRATIVE AGENT AS PERMITTED BY THIS AGREEMENT. 
REFERENCE MUST BE MADE TO THE INTERCREDITOR AGREEMENT OR THE ADDITIONAL FIRST
LIEN INTERCREDITOR AGREEMENT ITSELF TO UNDERSTAND ALL TERMS AND CONDITIONS
THEREOF.  EACH LENDER IS RESPONSIBLE FOR MAKING ITS OWN ANALYSIS AND REVIEW OF
EACH OF THE INTERCREDITOR AGREEMENT AND THE ADDITIONAL FIRST LIEN INTERCREDITOR
AGREEMENT AND THE TERMS AND PROVISIONS THEREOF, AND NO AGENT (AND NONE OF ITS
AFFILIATES) MAKES ANY REPRESENTATION TO ANY LENDER AS TO THE SUFFICIENCY OR
ADVISABILITY OF THE PROVISIONS CONTAINED IN THE INTERCREDITOR AGREEMENT OR THE
ADDITIONAL FIRST LIEN INTERCREDITOR AGREEMENT.”.

 

B.                                     MISCELLANEOUS PROVISIONS

 

1.                                       IN ORDER TO INDUCE THE LENDERS TO ENTER
INTO THIS THIRD AMENDMENT, THE BORROWER HEREBY REPRESENTS AND WARRANTS TO EACH
OF THE LENDERS THAT, AS OF THE THIRD AMENDMENT EFFECTIVE DATE (AS DEFINED
BELOW):

 

(I)                                     THIS THIRD AMENDMENT HAS BEEN DULY
AUTHORIZED, EXECUTED AND DELIVERED BY IT AND THIS THIRD AMENDMENT AND THE CREDIT
AGREEMENT (AS MODIFIED HEREBY) CONSTITUTE ITS LEGAL, VALID AND BINDING
OBLIGATION, ENFORCEABLE AGAINST IT IN ACCORDANCE WITH ITS TERMS, SUBJECT TO
APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM OR OTHER LAWS
AFFECTING CREDITORS’ RIGHTS GENERALLY AND SUBJECT TO GENERAL PRINCIPLES OF
EQUITY, REGARDLESS OF WHETHER CONSIDERED IN A PROCEEDING IN EQUITY OR AT LAW.

 

(II)                                  THE REPRESENTATIONS AND WARRANTIES SET
FORTH IN ARTICLE V OF THE CREDIT AGREEMENT AND IN THE OTHER LOAN DOCUMENTS ARE,
BOTH IMMEDIATELY BEFORE AND AFTER GIVING EFFECT TO THIS THIRD AMENDMENT, TRUE
AND CORRECT IN ALL MATERIAL RESPECTS BOTH ON AND AS OF THE THIRD AMENDMENT
EFFECTIVE DATE WITH THE SAME EFFECT AS THOUGH MADE ON AND AS OF THE THIRD
AMENDMENT EFFECTIVE DATE UNLESS SUCH REPRESENTATIONS AND WARRANTIES RELATE TO A
SPECIFIC EARLIER DATE, IN WHICH CASE SUCH REPRESENTATIONS AND WARRANTIES SHALL
BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS AS OF SUCH EARLIER DATE.

 

(III) THERE EXISTS NO DEFAULT OR EVENT OF DEFAULT ON THE THIRD AMENDMENT
EFFECTIVE DATE, BOTH IMMEDIATELY BEFORE AND AFTER GIVING EFFECT TO THIS THIRD
AMENDMENT.

 

11

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2.                                       (A) EXCEPT AS EXPRESSLY SET FORTH
HEREIN, THIS THIRD AMENDMENT SHALL NOT BY IMPLICATION OR OTHERWISE LIMIT,
IMPAIR, CONSTITUTE A WAIVER OF OR OTHERWISE AFFECT THE RIGHTS AND REMEDIES OF
THE LENDERS OR THE AGENTS UNDER THE CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT,
AND SHALL NOT ALTER, MODIFY, AMEND OR IN ANY WAY AFFECT ANY OF THE TERMS,
CONDITIONS, OBLIGATIONS, COVENANTS OR AGREEMENTS CONTAINED IN THE CREDIT
AGREEMENT OR ANY OTHER PROVISION OF THE CREDIT AGREEMENT OR OF ANY OTHER LOAN
DOCUMENT, ALL OF WHICH ARE RATIFIED AND AFFIRMED IN ALL RESPECTS AND SHALL
CONTINUE IN FULL FORCE AND EFFECT.  NOTHING HEREIN SHALL BE DEEMED TO ENTITLE
THE BORROWER TO RECEIVE A CONSENT TO, OR A WAIVER, AMENDMENT, MODIFICATION OR
OTHER CHANGE OF, ANY OF THE TERMS, CONDITIONS, OBLIGATIONS, COVENANTS OR
AGREEMENTS CONTAINED IN THE CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT IN
SIMILAR OR DIFFERENT CIRCUMSTANCES.

 

(b)                                 On and after the Third Amendment Effective
Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”,
“hereof”, “herein”, or words of like import, and each reference to the Credit
Agreement in any other Loan Document shall be deemed a reference to the Credit
Agreement as modified hereby.  This Third Amendment shall constitute a “Loan
Document” for all purposes of the Credit Agreement and the other Loan Documents.

 

3.                                       THIS THIRD AMENDMENT MAY BE EXECUTED IN
ANY NUMBER OF COUNTERPARTS AND BY THE DIFFERENT PARTIES HERETO ON SEPARATE
COUNTERPARTS, EACH OF WHICH COUNTERPARTS WHEN EXECUTED AND DELIVERED SHALL BE AN
ORIGINAL, BUT ALL OF WHICH SHALL TOGETHER CONSTITUTE ONE AND THE SAME
INSTRUMENT.  DELIVERY BY FACSIMILE OR OTHER ELECTRONIC IMAGING MEANS OF AN
EXECUTED COUNTERPART OF A SIGNATURE PAGE TO THIS THIRD AMENDMENT SHALL BE
EFFECTIVE AS DELIVERY OF AN ORIGINAL EXECUTED COUNTERPART OF THIS THIRD
AMENDMENT. A COMPLETE SET OF COUNTERPARTS EXECUTED BY ALL THE PARTIES HERETO
SHALL BE LODGED WITH THE BORROWER AND THE ADMINISTRATIVE AGENT.

 

4.                                       THIS THIRD AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

 

5.                                       (A) THIS THIRD AMENDMENT SHALL BECOME
EFFECTIVE ON THE DATE (THE “THIRD AMENDMENT EFFECTIVE DATE”) WHEN:

 

(I)                                     THE BORROWER, THE ADMINISTRATIVE AGENT
AND THE REQUIRED LENDERS SHALL HAVE SIGNED A COUNTERPART HEREOF (WHETHER THE
SAME OR DIFFERENT COUNTERPARTS) AND THE BORROWER AND REQUIRED LENDERS SHALL HAVE
DELIVERED (INCLUDING BY WAY OF FACSIMILE TRANSMISSION) THEIR SIGNED COUNTERPARTS
TO THE ADMINISTRATIVE AGENT;

 

(II)                                  THE ADMINISTRATIVE AGENT SHALL HAVE
RECEIVED PAYMENT FROM THE BORROWER, FOR THE ACCOUNT OF EACH LENDER THAT EXECUTES
AND DELIVERS A COUNTERPART SIGNATURE PAGE TO THIS THIRD AMENDMENT PRIOR TO 12:00
NOON, NEW YORK CITY TIME, ON AUGUST 17, 2009, AN AMENDMENT FEE (AN “AMENDMENT
FEE”) IN AN AGGREGATE AMOUNT EQUAL TO 0.025% OF THE AGGREGATE PRINCIPAL AMOUNT
OF THE LOANS OF SUCH LENDER.  THE AMENDMENT FEE SHALL BE PAYABLE IN IMMEDIATELY
AVAILABLE FUNDS AND, ONCE PAID, SUCH FEE OR ANY PART THEREOF SHALL NOT BE
REFUNDABLE; AND

 

(III)                               THE BORROWER SHALL HAVE PAID ALL FEES AND
OTHER AMOUNTS DUE AND PAYABLE PURSUANT TO THIS THIRD AMENDMENT, INCLUDING, TO
THE EXTENT INVOICED, REIMBURSEMENT OR PAYMENT OF REASONABLE OUT-OF-POCKET
EXPENSES IN CONNECTION WITH THIS THIRD AMENDMENT

 

12

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AND ANY OTHER REASONABLE OUT-OF-POCKET EXPENSES OF THE ADMINISTRATIVE AGENT
REQUIRED TO BE PAID OR REIMBURSED PURSUANT TO THE CREDIT AGREEMENT, INCLUDING
THE REASONABLE FEES, CHARGES AND DISBURSEMENTS OF COUNSEL FOR THE ADMINISTRATIVE
AGENT.

 

(b)                                 The Administrative Agent shall notify the
Borrower and the Lenders of the Third Amendment Effective Date and such notice
shall be conclusive and binding.

 

6.                                       BY EXECUTING AND DELIVERING A COPY
HEREOF, EACH LOAN PARTY HEREBY AGREES THAT ALL LOANS SHALL BE FULLY GUARANTEED
PURSUANT TO THE GUARANTY TO WHICH IT IS PARTY IN ACCORDANCE WITH THE TERMS AND
PROVISIONS THEREOF AND SHALL BE FULLY SECURED PURSUANT TO THE APPLICABLE
COLLATERAL DOCUMENTS.

 

7.                                       FROM AND AFTER THE THIRD AMENDMENT
EFFECTIVE DATE, ALL REFERENCES IN THE CREDIT AGREEMENT AND IN THE OTHER LOAN
DOCUMENTS TO THE CREDIT AGREEMENT SHALL BE DEEMED TO BE REFERENCES TO THE CREDIT
AGREEMENT AS MODIFIED HEREBY.

 

*     *     *

 

13

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IN WITNESS WHEREOF, the undersigned have caused this Third Amendment to be duly
executed and delivered as of the date first above written.

 

 

MICHAELS STORES, INC.

 

 

 

 

 

 

 

By:

/s/ Elaine D. Crowley

 

 

Name:

Elaine D. Crowley

 

 

Title:

Executive Vice President — Chief

 

 

 

Financial Officer

 

 

 

 

 

DEUTSCHE BANK AG NEW YORK BRANCH, Individually and as Administrative Agent

 

 

 

 

 

 

 

By:

/s/ Enrique Landaeta

 

 

Name:

Enrique Landaeta

 

 

Title:

Vice President

 

 

 

 

 

By:

/s/ Omayra Laucella

 

 

Name:

Omayra Laucella

 

 

Title:

Vice President

 

--------------------------------------------------------------------------------

 

Each of the undersigned Guarantors acknowledges and agrees to the terms of the
Third Amendment.

 

 

AARON BROTHERS, INC.

 

 

 

 

 

 

 

By:

/s/ Elaine D. Crowley

 

 

Name:

Elaine D. Crowley

 

 

Title:

Executive Vice President - CFO

 

 

 

 

 

 

 

 

 

MICHAELS FINANCE COMPANY, INC.

 

 

 

 

 

 

 

By:

/s/ Elaine D. Crowley

 

 

Name:

Elaine D. Crowley

 

 

Title:

Executive Vice President - CFO

 

 

 

 

 

 

 

 

 

MICHAELS STORES PROCUREMENT COMPANY, INC.

 

 

 

 

 

 

 

By:

/s/ Elaine D. Crowley

 

 

Name:

Elaine D. Crowley

 

 

Title:

Executive Vice President - CFO

 

 

 

 

 

 

 

 

 

MICHAELS STORES CARD SERVICES, LLC

 

 

 

 

 

 

 

By:

/s/ Elaine D. Crowley

 

 

Name:

Elaine D. Crowley

 

 

Title:

President - CFO

 

 

 

 

 

 

 

 

 

ARTISTREE, INC.

 

 

 

 

 

 

 

By:

/s/ Elaine D. Crowley

 

 

Name:

Elaine D. Crowley

 

 

Title:

Executive Vice President - CFO

 

 

 

 

 

 

 

 

 

MICHAELS OF CANADA, ULC

 

 

 

 

 

 

 

By:

/s/ Elaine D. Crowley

 

 

Name:

Elaine D. Crowley

 

 

Title:

Executive Vice President - CFO

 

--------------------------------------------------------------------------------

 

 

SIGNATURE PAGE TO THE THIRD AMENDMENT, DATED AS OF THE DATE FIRST WRITTEN ABOVE,
TO THE CREDIT AGREEMENT DATED AS OF OCTOBER 31, 2006, AMONG MICHAELS STORES,
INC., DEUTSCHE BANK AG NEW YORK BRANCH, AS ADMINISTRATIVE AGENT, JPMORGAN CHASE
BANK, N.A., AS SYNDICATION AGENT, AND BANK OF AMERICA, N.A. AND CREDIT SUISSE,
AS CO-DOCUMENTATION AGENTS

 

 

 

NAME OF INSTITUTION:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

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