Exhibit 10.1

 

EXECUTION VERSION

 

Michaels Stores, Inc.

 

$375,000,000 4.750% Senior Secured Notes due 2027

 

PURCHASE AGREEMENT

 

September 17, 2020

 

J.P. Morgan Securities LLC
      As Representative of the

Initial Purchasers listed

in Schedule I hereto
383 Madison Avenue
New York, New York 10179

 

Ladies and Gentlemen:

 

Michaels Stores, Inc., a Delaware corporation (the “Issuer”), will issue and
sell to the several parties named in Schedule I hereto (each an “Initial
Purchaser” and, together, the “Initial Purchasers”) $375,000,000 aggregate
principal amount of its 4.750% Senior Secured Notes due 2027 (the “Securities”).
The Securities will be issued by the Issuer pursuant to an indenture, to be
dated as of October 1, 2020 (the “Indenture”), among the Issuer, Michaels
Funding, Inc. (“Holdings”), the other Guarantors (as defined herein), U.S. Bank
National Association, as trustee (the “Trustee”) and collateral agent (the
“Collateral Agent”). The Securities will be guaranteed (the “Guarantees”) on a
senior secured basis by Holdings and each of the guarantors listed on Annex A-1
hereto (together, the “Guarantors”). Certain other terms used herein are defined
in Section 17 hereof.

 

The sale of the Securities to the Initial Purchasers will be made without
registration of the Securities under the Act in reliance upon exemptions from
the registration requirements of the Act.

 

In connection with the sale of the Securities, the Issuer has prepared a
preliminary offering memorandum, dated September 17, 2020 (the “Preliminary
Memorandum”) setting forth or including a description of the terms of the
Securities and the Guarantees, the terms of the offering of the Securities and
certain information concerning the Issuer and the Guarantors. As used herein,
“Pricing Disclosure Package” shall mean the Preliminary Memorandum, as
supplemented or amended by any supplement to the Preliminary Memorandum listed
on Annex B hereto in the most recent form that has been prepared and delivered
by the Issuer to the Initial Purchasers in connection with their solicitation of
offers to purchase Securities prior to the time when sales of the Securities
were first made (the “Time of Sale”). Promptly after the date hereof and in any
event no later than the second Business Day following the date hereof, the
Issuer will prepare and deliver to each Initial Purchaser a final offering
memorandum (the “Final Memorandum”), which will consist of the Preliminary
Memorandum with such changes therein as are required to reflect the information
contained in the amendments or supplements listed on Annex B hereto. Any
reference herein to the Preliminary Memorandum, the Pricing Disclosure Package
or the Final Memorandum shall be deemed to refer to and include all documents
filed with the Commission pursuant to Section 13(a), 13(c) or 15(d) of the
Exchange Act on or prior to the date of such document and incorporated by
reference therein, and any reference to the Preliminary Memorandum, the Pricing
Disclosure Package or the Final Memorandum, as the case may be, as amended or
supplemented, as of any specified date, shall be deemed to include any documents
filed with the Commission pursuant to Section 13(a), 13(c) or 15(d) of the
Exchange Act after the date of the Preliminary Memorandum or the Final
Memorandum, as the case may be, and prior to such specified date (such documents
filed with the Commission, the “Incorporated Documents”). The Issuer hereby
confirms that it has authorized the use of the Pricing Disclosure Package, Final
Memorandum and the Recorded Road Show (defined below) in connection with the
offer and sale of the Securities by the Initial Purchasers.

 

 

 

The Securities are being issued to repay, together with the proceeds of other
indebtedness, including new term loans, the Issuer’s outstanding term loan
indebtedness (the “Outstanding Term Loans”), pursuant to the Amended and
Restated Credit Agreement, dated as of January 28, 2013, as amended,
supplemented and/or otherwise modified through the date hereof, including
pursuant to the Fourth Amendment to Amended and Restated Credit Agreement, to be
dated as of the Closing Date (as defined below) (the “Term Loan Credit
Agreement”). The issuance of the Securities, the repayment of the Outstanding
Term Loans and the other related transactions described herein and in the
Pricing Disclosure Package are collectively referred to as the “Transactions.”

 

The Securities and the Guarantees will be secured by (a) a first-priority lien,
subject to Permitted Liens (as defined below), on substantially all of the
tangible and intangible assets (other than ABL Priority Collateral (as defined
in the Pricing Disclosure Package)) of the Issuer and the Guarantors, now owned
or hereafter acquired by the Issuer and any Guarantor, subject to certain
exceptions as described in the Indenture and the Collateral Documents (as
defined below) (the “First Priority Collateral”) and (b) a second-priority lien,
subject to Permitted Liens, in the ABL Priority Collateral, subject to certain
exceptions as described in the Indenture and the Collateral Documents (together
with the First Priority Collateral, the “Collateral”) that secures the Issuer’s
ABL revolving credit facility pursuant to the Third Amended and Restated Credit
Agreement, dated as of May 27, 2016, as amended, supplemented and/or otherwise
modified through the date hereof (the “Revolving Credit Agreement”) on a
first-priority basis. The Collateral shall be described in: (a) with respect to
personal property that constitutes Collateral, the Notes Security Agreement to
be dated as of the Closing Date and entered into by the Issuer and the
Guarantors (the “Security Agreement”) and (b) with respect to the grants of
security interests in registrations and/or applications for trademarks, patents
and copyrights (and exclusive licenses in any of the foregoing) constituting
Collateral, in either the Security Agreement or, respectively, in the Trademark
Security Agreement, the Patent Security Agreement and the Copyright Security
Agreement, each to be dated as of the Closing Date and entered into by each of
the Issuer and the Guarantors, as provided therein (the “Trademark Security
Agreement,” the “Patent Security Agreement” and the “Copyright Security
Agreement,” respectively, and, collectively, the “Intellectual Property Security
Agreements”), each to be delivered to the Trustee, granting a security interest
in the Collateral, subject to Permitted Liens, to the Collateral Agent for its
benefit and the benefit of the Trustee and each holder of the Securities and the
successors and assigns of the foregoing. The term “Collateral Documents,” as
used herein, shall mean the Security Agreement and the Intellectual Property
Security Agreements. The rights of the holders of the Securities with respect to
the Collateral shall be further governed by (i) the intercreditor agreement to
be dated as of the Closing Date (the “Pari Passu Intercreditor Agreement”),
among the Issuer, the Guarantors, the Trustee, the Collateral Agent, the
administrative agent for the lenders under the Term Loan Credit Agreement and
the collateral agent for the lenders under the Term Loan Credit Agreement (the
“Term Loan Collateral Agent”), and (ii) the Amended and Restated Intercreditor
Agreement, to be dated as of the Closing Date (as amended and supplemented to
date (including pursuant to the Joinder Agreement, to be dated as of the Closing
Date (the “ABL Intercreditor Joinder”), by and among the Collateral Agent, the
Term Loan Collateral Agent and the ABL Collateral Agent (as defined below)), the
“ABL Intercreditor Agreement”), among the Term Loan Collateral Agent, the
collateral agent for the lenders under the Revolving Credit Agreement (the “ABL
Collateral Agent”) and the Collateral Agent. The Pari Passu Intercreditor
Agreement and the ABL Intercreditor Agreement are together referred to as the
“Intercreditor Agreements.”

 

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1.         Representations and Warranties. The Issuer and the Guarantors jointly
and severally represent and warrant to each Initial Purchaser as follows as of
the date hereof and as of the Closing Date (references in this Section 1 to the
“Offering Memorandum” are to (x) the Pricing Disclosure Package in the case of
representations and warranties made as of the date hereof and (y) both the
Pricing Disclosure Package and the Final Memorandum in the case of
representations and warranties made as of the Closing Date):

 

(a)         The Preliminary Memorandum, at the date thereof, did not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. At the Time of Sale, the Pricing Disclosure
Package does not, and on the Closing Date will not, and the Final Memorandum as
of its date and on the Closing Date will not, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Issuer and the Guarantors make
no representation or warranty as to the information contained in or omitted from
the Offering Memorandum, in reliance upon and in conformity with the Initial
Purchaser Information (as defined below). The Issuer has not distributed or
referred to and will not distribute or refer to any written communication (as
defined in Rule 405 of the Act) other than the Pricing Disclosure Package, the
Final Memorandum and the investor presentation made orally to investors and
simultaneously recorded on September 17, 2020 and the corresponding slide deck
(the “Recorded Road Show”). The Recorded Road Show, when taken together with the
Pricing Disclosure Package, as of the Time of Sale did not, and at the Closing
Date will not, contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided,
however, that the Issuer and the Guarantors make no representation or warranty
as to the information contained in or omitted from the Recorded Road Show, in
reliance upon and in conformity with the Initial Purchaser Information.

 

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(b)       The documents incorporated by reference in the Preliminary Memorandum,
the Pricing Disclosure Package and the Final Memorandum, when they were filed
with the Commission, conformed in all material respects to the requirements of
the Exchange Act, and none of such documents contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and any further documents so filed and incorporated by
reference in the Preliminary Memorandum, the Pricing Disclosure Package or the
Final Memorandum, when such documents are filed with the Commission, will
conform in all material respects to the requirements of the Exchange Act and
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

 

(c)         Assuming the accuracy of the representations and warranties of the
Initial Purchasers contained in Section 4 and their compliance with the
agreements set forth therein, none of Holdings, the Issuer or any of its
subsidiaries, nor any of their respective Affiliates, or any person acting on
their behalf has, directly or indirectly, made offers or sales of any security,
or solicited offers to buy, any security under circumstances that would require
the registration of the Securities under the Act.

 

(d)          Assuming the accuracy of the representations and warranties of the
Initial Purchasers contained in Section 4 and their compliance with the
agreements set forth therein, none of Holdings, the Issuer or any of its
subsidiaries or any of their respective Affiliates, or any person acting on
their behalf has: (i) engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with any offer or
sale of the Securities or (ii) engaged in any directed selling efforts (within
the meaning of Regulation S) with respect to the Securities; and Holdings, the
Issuer and each of its subsidiaries and each of their respective Affiliates and
each person acting on their behalf have complied with the offering restrictions
requirement of Regulation S. Any sale of the Securities by the Issuer pursuant
to Regulation S is not part of a plan or scheme to evade the registration
provisions of the Act.

 

(e)           The Securities satisfy the eligibility requirements of
Rule 144A(d)(3) under the Act.

 

(f)            Assuming the accuracy of the representations and warranties of
the Initial Purchasers contained in Section 4 and their compliance with the
agreements set forth therein, no registration under the Act of the Securities is
required for the offer and sale of the Securities to the Initial Purchasers or
by the Initial Purchasers to the initial purchasers therefrom, in each case in
the manner contemplated herein, in the Pricing Disclosure Package and in the
Final Memorandum, and it is not necessary to qualify the Indenture under the
Trust Indenture Act. The Indenture, as of the Closing Date, will conform in all
material respects to the requirements of an indenture which is qualified under
the Trust Indenture Act.

 

(g)            None of the Issuer, the Guarantors or any of their respective
subsidiaries is or, after giving effect to the offering and sale of the
Securities and the application of the proceeds thereof as described in the
Offering Memorandum, will be required to register as an “investment company” as
defined in the Investment Company Act, without taking account of any exemption
arising out of the number of holders of the Issuer’s securities.

 

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(h)        None of the Issuer, the Guarantors or any of their respective
subsidiaries has paid or agreed to pay to any person any compensation for
soliciting another to purchase any Securities (except as contemplated in this
Agreement).

 

(i)          None of the Issuer, the Guarantors or any of their respective
subsidiaries or any of their respective Affiliates has taken or will take,
directly or indirectly, any action designed to or that has constituted or that
would reasonably be expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of any security of the
Issuer or any of its subsidiaries to facilitate the sale or resale of the
Securities.

 

(j)           Holdings, the Issuer and each of its subsidiaries have been duly
organized and are validly existing and in good standing (or the equivalent
thereof with respect to the law of foreign countries, if applicable) under the
laws of their respective jurisdictions of organization, are duly qualified to do
business and are in good standing (or the equivalent thereof with respect to the
law of foreign countries, if applicable) in each jurisdiction in which their
respective ownership or lease of property or the conduct of their respective
businesses requires such qualification, and have all power and authority
necessary to own or hold their respective properties and to conduct the
businesses in which they are engaged, except where the failure to be so
qualified or in good standing (or the equivalent thereof with respect to the law
of foreign countries, if applicable) or have such power or authority would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the business, properties, management, financial position,
results of operations or prospects of Holdings, the Issuer and its subsidiaries
taken as a whole or on the performance by the Issuer and the Guarantors taken as
a whole of their obligations under this Agreement, the Indenture, the
Securities, the Guarantees and the Collateral Documents (a “Material Adverse
Effect”).

 

(k)          As of the date hereof, the Issuer has no subsidiaries other than
the entities listed on Annex A-2 hereto.

 

(l)           As of August 1, 2020, on a pro forma basis, after giving effect to
the consummation of the Transactions, the Issuer and its subsidiaries would have
had the issued and outstanding capitalization as set forth in the Offering
Memorandum under the heading “Capitalization,” and all the outstanding
membership interests or shares of capital stock, as applicable, of Holdings, the
Issuer and each of its subsidiaries have been duly authorized and validly
issued, if applicable, are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights; and, except as otherwise set
forth in the Offering Memorandum, all outstanding shares of capital stock or
membership interests of the subsidiaries are owned by the Issuer either directly
or indirectly free and clear of any security interest, claim, lien or
encumbrance (other than security interests, claims, liens, encumbrances and
restrictions imposed in connection with the Issuer’s senior secured credit
facilities or permitted thereunder and by the Act and state securities or “blue
sky” laws of certain jurisdictions).

 

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(m)        (i) This Agreement has been duly authorized, executed and delivered
by the Issuer and each Guarantor; (ii) each of the Indenture, the Pari Passu
Intercreditor Agreement and each of the Collateral Documents has been duly
authorized by the Issuer and each Guarantor, to the extent a party thereto, and,
on the Closing Date and prior to the issuance of the Securities, each of the
Indenture, the Pari Passu Intercreditor Agreement and each of the Collateral
Documents will have been duly executed and delivered by the Issuer and each
Guarantor, to the extent a party thereto, and, assuming due authorization,
execution and delivery thereof by the Collateral Agent, the Trustee, the Term
Loan Collateral Agent and the ABL Collateral Agent, as applicable, the
Indenture, the Intercreditor Agreements and each of the Collateral Documents
will constitute a legally valid and binding instrument enforceable against the
Issuer and each Guarantor in accordance with its terms (in each case subject, as
to the enforcement of remedies, to the effects of (x) bankruptcy,
reorganization, insolvency, fraudulent conveyance, moratorium or other laws
affecting creditors’ rights generally from time to time in effect, (y) general
principles of equity (whether considered in a proceeding in equity or at law)
and (z) an implied covenant of good faith and fair dealing (collectively, the
“Enforceability Limitations”)); (iii) the Securities have been duly authorized
by the Issuer and, when executed and authenticated by the Trustee in accordance
with the provisions of the Indenture and delivered to and paid for by the
Initial Purchasers, will have been duly executed and issued by the Issuer and
will constitute the legal, valid and binding obligations of the Issuer, entitled
to the benefits of the Indenture (subject to the Enforceability Limitations);
and (iv) the Guarantees have been duly authorized by the Guarantors and, when
the Securities have been duly executed and issued, will constitute the legal,
valid and binding obligations of each of the Guarantors, enforceable against
each of the Guarantors in accordance with their terms and entitled to the
benefits of the Indenture (subject to the Enforceability Limitations).

 

(n)          (i) Upon execution and delivery, the Security Agreement and each of
the Intellectual Property Security Agreements will be effective to grant a
legal, valid and enforceable security interest in all of the Issuer’s and the
Guarantors’, to the extent a party thereto, right, title and interest in the
Collateral; and (ii) upon due and timely filing and/or recording of the
financing statements and Intellectual Property Security Agreements, as
applicable, with respect to the Collateral described in the Security Agreement
and the Intellectual Property Security Agreements (the “Personal Property
Collateral”), as applicable, the security interests granted thereby will
constitute valid, perfected first-priority liens and security interests in the
Personal Property Collateral constituting First Priority Collateral and valid,
perfected second-priority liens and security interests in the Personal Property
Collateral constituting ABL Priority Collateral, to the extent such security
interests can be perfected by the filing and/or recording, as applicable, of
financing statements and Intellectual Property Security Agreements for the
benefit of the Collateral Agent, the Trustee and the holders of the Securities,
and such security interests will be enforceable in accordance with the terms
contained therein against all creditors of any grantor or mortgagor and subject
only to liens expressly permitted to be incurred or exist on the Collateral
under the Indenture, including liens with respect to the Revolving Credit
Agreement and the Term Loan Credit Agreement (“Permitted Liens”).

 

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(o)          Since the date of the most recent financial statements of The
Michaels Companies, Inc. (the “Parent”) included or incorporated by reference in
the Offering Memorandum, (i) there has not been any change in the capital stock
or other equity interests of the Issuer or any of the Guarantors (other than the
issuance of shares of common stock upon exercise of stock options, restricted
stock awards and warrants described as outstanding in, and the grant of options,
restricted stock and other awards under existing equity incentive plans
described in, the Offering Memorandum), short-term debt or long-term debt of
Holdings, the Issuer or any of its subsidiaries that, individually or in the
aggregate, is material to Holdings, the Issuer and its subsidiaries taken as a
whole, or any dividend or distribution of any kind declared, set aside for
payment, paid or made by Holdings or the Issuer on any class of capital stock or
other equity interest, or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the business,
properties, management, financial position or results of operations of Holdings,
the Issuer and its subsidiaries taken as a whole; (ii) none of Holdings, the
Issuer or any of its subsidiaries has entered into any transaction or agreement
that is material to Holdings, the Issuer and its subsidiaries taken as a whole
or incurred any liability or obligation, direct or contingent, that is material
to Holdings, the Issuer and its subsidiaries taken as a whole; and (iii) none of
Holdings, the Issuer or any of its subsidiaries has sustained any loss or
interference with its business that is material to Holdings, the Issuer and its
subsidiaries taken as a whole and that is either from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
disturbance or dispute or any action, order or decree of any court or arbitrator
or governmental or regulatory authority, except in each case under clauses (i)
through (iii) above as otherwise disclosed or incorporated by reference in the
Offering Memorandum.

 

(p)           No relationship, direct or indirect, exists between or among
Holdings, the Issuer or any of its subsidiaries, on the one hand, and the
directors, officers, stockholders or other affiliates of Holdings, the Issuer or
any of its subsidiaries, on the other, that is required by the Exchange Act to
be described in the Incorporated Documents and that is not so described in the
Offering Memorandum.

 

(q)           The term “Transaction Documents” refers to this Agreement, the
Securities, the Indenture (including the Guarantees), each of the Collateral
Documents and the Intercreditor Agreements. Each of the Transaction Documents
conforms in all material respects to the description thereof in the Offering
Memorandum.

 

(r)             No consent, approval, authorization, order, registration or
qualification of or with any court or arbitrator or governmental or regulatory
authority is required for the execution, delivery and performance by the Issuer
and the Guarantors of the Transaction Documents and the consummation by the
Issuer and the Guarantors of the transactions contemplated thereby (including,
without limitation, the issuance of the Securities and the Guarantees), except
such (i) as may be required under provincial securities or blue sky laws of any
jurisdiction in which the Securities are offered and sold or (ii) as shall have
been obtained or made prior to the Closing Date.

 

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(s)           None of the execution and delivery of the Transaction Documents,
the issuance and sale of the Securities, the issuance of the Guarantees, the
grant and perfection of liens and security interests in the Collateral pursuant
to the Security Agreement and the Intellectual Property Security Agreements
(including, but not limited to, the filing of any applicable financing
statements pursuant to the Security Agreement or the filing or recording of the
Intellectual Property Security Agreements) or the consummation of any other of
the transactions herein or therein contemplated, or the fulfillment of the terms
hereof or thereof, will (i) conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance (other than any
lien, charge or encumbrance created or imposed pursuant to the Collateral
Documents or the collateral documents relating to the Revolving Credit Agreement
or the Term Loan Credit Agreement) upon any property or assets of the Issuer or
any of the Guarantors pursuant to, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which Holdings, the Issuer or any
of its subsidiaries is a party or by which Holdings, the Issuer or any of its
subsidiaries is bound or to which any of the property or assets of Holdings, the
Issuer or any of its subsidiaries is subject, (ii) result in any violation of
the provisions of the charter or by-laws or similar organizational documents of
Holdings, the Issuer or any of its subsidiaries or (iii) result in the violation
of any law or statute or any judgment, order, rule or regulation of any court or
arbitrator or governmental or regulatory authority having jurisdiction over
Holdings, the Issuer or any of its subsidiaries, except, in the case of clauses
(i) and (iii) above, for any such conflict, breach, violation or default that
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

 

(t)            The consolidated historical financial statements (including the
related notes thereto) of the Parent and its consolidated subsidiaries included
or incorporated by reference in the Offering Memorandum comply in all material
respects with the applicable requirements of the Exchange Act, present fairly in
all material respects the financial position of the Parent and its consolidated
subsidiaries as of the dates indicated and the results of their operations and
the changes in their cash flows for the periods specified; such financial
statements have been prepared in conformity with generally accepted accounting
principles in the United States (“GAAP”) applied on a consistent basis
throughout the periods covered thereby, and any supporting schedules included or
incorporated by reference in the Offering Memorandum present fairly in all
material respects the information required to be stated therein; the selected
historical financial data set forth under the caption “Summary—Summary
Consolidated Financial and Operating Data” in the Offering Memorandum fairly
present in all material respects, on the basis stated in the Offering
Memorandum, the information included therein; and the other financial
information included or incorporated by reference in the Offering Memorandum has
been derived from the accounting records of the Parent and its consolidated
subsidiaries and presents fairly in all material respects the information shown
thereby. The interactive data in eXtensible Business Reporting Language
incorporated by reference in the Offering Memorandum fairly presents the
information called for in all material respects and has been prepared in
accordance with the Commission’s rules and guidelines applicable thereto.

 

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(u)          Except as described, or incorporated by reference, in the Offering
Memorandum, there are no legal, governmental or regulatory investigations,
actions, suits or proceedings pending to which Holdings, the Issuer or any of
its subsidiaries is or may be a party or to which any property of Holdings, the
Issuer or any of its subsidiaries is or may be the subject that, individually or
in the aggregate, if determined adversely to Holdings, the Issuer or any of its
subsidiaries, would reasonably be expected to have a Material Adverse Effect; to
the knowledge of the Issuer and Guarantors, no such investigations, actions,
suits or proceedings are threatened or contemplated by any governmental or
regulatory authority or threatened by others; and (i) there are no current or
pending legal, governmental or regulatory actions, suits or proceedings that are
required under the Exchange Act to be described in the Incorporated Documents
that are not so described in the Incorporated Documents and (ii) there are no
statutes, regulations or contracts or other documents that are required under
the Exchange Act to be filed as exhibits to the Incorporated Documents or
described in the Incorporated Documents that are not so filed as exhibits to the
Incorporated Documents or described in the Incorporated Documents.

 

(v)           Holdings, the Issuer and its subsidiaries have good and marketable
title in fee simple (in the case of real property) to, or have valid rights to
lease or otherwise use, all items of real property and have good title or a
valid legal right to lease or otherwise use all items of real property and
personal property that are material to the business of Holdings, the Issuer and
its subsidiaries taken as a whole, in each case free and clear of all liens,
encumbrances, claims and defects and imperfections of title (other than
Permitted Liens) except those that (i) do not materially interfere with the use
made and proposed to be made of such property by Holdings, the Issuer and its
subsidiaries, (ii) would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect or (iii) are imposed pursuant to
the Collateral Documents or the collateral documents relating to the Revolving
Credit Agreement or the Term Loan Credit Agreement.

 

(w)           None of Holdings, the Issuer or any of its subsidiaries is (i) in
violation of its charter or by-laws or similar organizational documents; (ii) in
default, and no event has occurred that, with notice or lapse of time or both,
would constitute such a default, in the due performance or observance of any
term, covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which Holdings, the Issuer or
any of its subsidiaries is a party or by which Holdings, the Issuer or any of
its subsidiaries is bound or to which any of the property or assets of Holdings,
the Issuer or any of its subsidiaries is subject; or (iii) in violation of any
law or statute or any judgment, order, rule or regulation of any court or
arbitrator or governmental or regulatory authority, except, in the case of
clauses (ii) and (iii) above, for any such default or violation that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

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(x)          Ernst & Young LLP, which has certified certain financial statements
of the Parent and its consolidated subsidiaries, is an independent registered
public accounting firm with respect to the Parent and its consolidated
subsidiaries within the applicable rules and regulations adopted by the
Commission and the Public Company Accounting Oversight Board (United States) and
as required by the Act.

 

(y)           Holdings, the Issuer and its subsidiaries have paid all federal,
state, local and foreign taxes required to be paid, and filed all tax returns
required to be filed, through the date hereof, except as would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect;
and except as otherwise disclosed, or incorporated by reference, in the Offering
Memorandum, there is no material tax deficiency that has been, or would
reasonably be expected to be, asserted against Holdings, the Issuer or any of
its subsidiaries or any of their respective properties or assets.

 

(z)            No labor disturbance by or dispute with employees of the Issuer
or any of its subsidiaries exists or, to the knowledge of the Issuer and the
Guarantors, is contemplated or threatened, and the Issuer and the Guarantors are
not aware of any existing or imminent labor disturbance by, or dispute with, the
employees of any of its or its subsidiaries’ principal suppliers, contractors or
customers, except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

 

(aa)           Holdings, the Issuer and its subsidiaries have insurance covering
their respective properties, operations, personnel and businesses, which
insurance is in amounts and insures against such losses and risks as are
customary for businesses such as those of Holdings, the Issuer and its
subsidiaries; and none of Holdings, the Issuer or any of its subsidiaries has
(i) received notice from any insurer or agent of such insurer that capital
improvements or other expenditures are required or necessary to be made in order
to continue such insurance or (ii) any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage at reasonable cost from similar insurers as may be
necessary to continue its business.

 

(bb)            No subsidiary of the Issuer or any Guarantor is currently
prohibited and, after giving effect to the Transactions, no subsidiary of the
Issuer or any Guarantor will be prohibited, directly or indirectly, under any
agreement or other instrument to which it is a party or is subject, from paying
any lawful dividends to the Issuer or any Guarantor or any other subsidiary
(except as may be limited by applicable laws of each subsidiary’s state of
incorporation or jurisdiction or organization, or by limited liability company
or similar laws), from making any other lawful distribution on such subsidiary’s
capital stock or similar ownership interests (except as may be limited by
applicable law), from repaying to the Issuer or any Guarantor or any other
subsidiary any loans or advances to such subsidiary from the Issuer or any
Guarantor or any other subsidiary or from transferring any of such subsidiary’s
properties or assets to the Issuer or any Guarantor or any other subsidiary of
the Issuer or any Guarantor, except as described in the Offering Memorandum or
provided pursuant to the Issuer’s senior secured credit facilities.

 

-10-

 

 

(cc)     Holdings, the Issuer and its subsidiaries possess all licenses,
certificates, permits and other authorizations issued by, and have made all
declarations and filings with, the appropriate federal, state, local or foreign
governmental or regulatory authorities that are necessary for the ownership or
lease of their respective properties or the conduct of their respective
businesses as described, or incorporated by reference, in the Offering
Memorandum, except where the failure to possess or make the same would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; and except as described, or incorporated by reference, in the
Offering Memorandum, none of Holdings, the Issuer or any of its subsidiaries has
received notice of any revocation or modification of any such license,
certificate, permit or authorization.

 

(dd)    The Parent and its consolidated subsidiaries maintain systems of
“internal control over financial reporting” (as defined in Rule 13a-15(f) of the
Exchange Act) that comply with the requirements of the Exchange Act and that
have been designed by, or under the supervision of, their respective principal
executive and principal financial officers, or persons performing similar
functions, 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, including,
but not limited to, internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization; (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences; and (v) the interactive data in
eXtensible Business Reporting Language incorporated by reference in the Offering
Memorandum fairly presents the information called for in all material respects
and has been prepared in accordance with the Commission’s rules and guidelines
applicable thereto. Based on the Parent’s most recent evaluation of its internal
controls over financial reporting pursuant to Rule 13a-15(c) of the Exchange
Act, except as disclosed, or incorporated by reference, in the Offering
Memorandum, there are no material weaknesses in the Issuer’s internal controls.
The Parent’s auditors and the Audit Committee of the Board of Directors of the
Parent have been advised of: (i) all significant deficiencies and material
weaknesses in the design or operation of internal controls over financial
reporting which have adversely affected or are reasonably likely to adversely
affect the Parent’s ability to record, process, summarize and report financial
information; and (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Parent’s
internal controls over financial reporting.

 

 -11- 

 

 

(ee)    (i) Holdings, the Issuer and its subsidiaries (x) are in compliance
with, and have not violated, any and all applicable federal, state, local and
foreign, laws, rules, regulations, decisions and orders relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (collectively, “Environmental
Laws”); (y) have received and are in compliance with all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses; and (z) have not received notice of any actual or
potential liability for the investigation or remediation of any disposal or
release of hazardous or toxic substances or wastes, pollutants or contaminants
at any location, and have no knowledge of any circumstance, event or condition
that would reasonably be expected to result in any such notice or liability, and
(ii) there are no costs or liabilities associated with Environmental Laws of or
relating to Holdings, the Issuer or its subsidiaries, except in the case of
either (i) or (ii) above, for any such failure to comply with, or failure to
receive required permits, licenses or approvals, or cost or liability, as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; and (iii) except as described in the Offering Memorandum, (x)
there are no proceedings that are pending, or that are known to the Issuer to be
contemplated, against Holdings, the Issuer or any of its subsidiaries under any
Environmental Laws in which a governmental entity is also a party, other than
such proceedings regarding which it is reasonably believed no monetary sanctions
of $100,000 or more will be imposed, (y) Holdings, the Issuer and its
subsidiaries are not aware of any issues regarding compliance with Environmental
Laws, or liabilities or other obligations under Environmental Laws or concerning
hazardous or toxic substances or wastes, pollutants or contaminants, that would
reasonably be expected to have a material effect on the capital expenditures,
earnings or competitive position of Holdings, the Issuer and its subsidiaries,
and (z) none of Holdings, the Issuer and its subsidiaries anticipates material
capital expenditures relating to any Environmental Laws.

 

(ff)     (i) Each employee benefit plan, within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), for
which the Issuer or any member of its “Controlled Group” (defined as any
organization which is a member of a controlled group of corporations within the
meaning of Section 414 of the Code), would have any liability (each, a “Plan”)
has been maintained in compliance with its terms and the requirements of any
applicable statutes, orders, rules and regulations, including but not limited to
ERISA and the Code; (ii) no prohibited transaction, within the meaning of
Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to
any Plan excluding transactions effected pursuant to a statutory or
administrative exemption; (iii) for each Plan that is subject to the funding
rules of Section 412 of the Code or Section 302 of ERISA, the minimum funding
standard of Section 412 of the Code and Section 302 of ERISA, as applicable, has
been satisfied (without taking into account any waiver thereof or extension of
any amortization period) and is reasonably expected to be satisfied in the
future (without taking into account any waiver thereof or extension of any
amortization period); (iv) except as otherwise disclosed, or incorporated by
reference, in the Offering Memorandum, the fair market value of the assets of
each Plan exceeds the present value of all benefits accrued under such Plan
(determined based on those assumptions used to fund such Plan); (v) no
“reportable event” (within the meaning of Section 4043(c) of ERISA) has occurred
or is reasonably expected to occur; and (vi) neither the Issuer nor any member
of the Controlled Group has incurred, nor reasonably expects to incur, any
liability under Title IV of ERISA (other than contributions to the Plan or
premiums to the PBGC, in the ordinary course and without default) in respect of
a Plan (including a “multiemployer plan,” within the meaning of Section
4001(a)(3) of ERISA), and except for where failure to comply with any of the
clauses (i) through (vi) of this paragraph would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.

 

 -12- 

 

 

(gg)   Holdings, the Issuer and its subsidiaries own or possess the right to use
all patents, patent applications, trademarks, service marks, trade names, domain
names, trade mark registrations, service mark registrations, copyrights,
licenses and know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures)
(collectively, “Intellectual Property”) material to the operation of the
business of Holdings, the Issuer and its subsidiaries, taken as a whole. Except
as disclosed, or incorporated by reference, in the Offering Memorandum,
Holdings, the Issuer and its subsidiaries have not received any notice of
infringement or conflict with the asserted rights of others or are aware of any
valid basis for same that would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

 

(hh)   Neither the issuance, sale and delivery of the Securities and, when
issued, the Guarantees, nor the application of the proceeds thereof by the
Issuer as described in the Offering Memorandum will violate Regulation T, U or X
of the Board of Governors of the Federal Reserve System, as the same is in
effect on the Closing Date.

 

(ii)      To the knowledge of the Issuer and the Guarantors, immediately after
the consummation of the Transactions and the other transactions contemplated by
this Agreement, (i) the fair value and present fair saleable value of the assets
of Holdings, the Issuer and its subsidiaries taken as a whole on a going concern
basis will exceed the sum of their stated liabilities and identified contingent
liabilities taken as a whole; and (ii) Holdings, the Issuer and its subsidiaries
on a consolidated basis will not be (a) left with unreasonably small capital
with which to carry on their business as it is proposed to be conducted,
(b) unable to pay their debts (contingent or otherwise) as they mature or
(c) otherwise insolvent.

 

(jj)      No forward-looking statement (within the meaning of Section 27A of the
Act and Section 21E of the Exchange Act) contained, or incorporated by
reference, in the Offering Memorandum has been made or reaffirmed without a
reasonable basis or has been disclosed other than in good faith. Nothing has
come to the attention of the Issuer that has caused the Issuer to believe that
the statistical and market-related data included, or incorporated by reference,
in the Offering Memorandum is not based on or derived from sources that are
reliable and accurate in all material respects.

 

(kk)    There are no stamp or other issuance or transfer taxes or duties or
other similar fees or charges imposed by any governmental authority required
under applicable law to be paid in connection with the execution and delivery of
this Agreement or the Indenture, the issuance or sale hereunder by the Issuer of
the Securities, or the issuance by the Guarantors of the Guarantees.

 

 -13- 

 

 

(ll)      The Parent and its consolidated subsidiaries maintain an effective
system of “disclosure controls and procedures” (as defined in Rule 13a-15(e) of
the Exchange Act) that complies with the requirements of the Exchange Act and
that has been designed to ensure that information required to be disclosed by
the Parent in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Commission’s rules and forms, including controls and procedures designed
to ensure that such information is accumulated and communicated to the Parent’s
management as appropriate to allow timely decisions regarding required
disclosure. The Parent and its consolidated subsidiaries have carried out
evaluations of the effectiveness of their disclosure controls and procedures as
required by Rule 13a-15 of the Exchange Act.

 

(mm)  None of Holdings, the Issuer or any of its subsidiaries, nor, to the
knowledge of the Issuer and the Guarantors, any director, officer, employee,
affiliate or other person associated with or acting on behalf of Holdings, the
Issuer or any of its subsidiaries has (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense relating to
political activity; (ii) made or taken an act in furtherance of an offer,
promise or authorization of any direct or indirect unlawful payment or benefit
to any foreign or domestic government official or employee, including of any
government-owned or controlled entity or of a public international organization,
or any person acting in an official capacity for or on behalf of any of the
foregoing, or any political party or party official or candidate for political
office; (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or any applicable law or regulation
implementing the OECD Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions, or committed an offence under
the Bribery Act 2010 of the United Kingdom, or any other applicable anti-bribery
or anti-corruption law; or (iv) made, offered, agreed, requested or taken an act
in furtherance of any unlawful bribe or other unlawful benefit, including,
without limitation, any rebate, payoff, influence payment, kickback or other
unlawful payment or benefit. Holdings, the Issuer and its subsidiaries have
instituted, maintain and enforce, and will continue to maintain and enforce
policies and procedures designed to promote and ensure compliance with all
applicable anti-bribery and anti-corruption laws.

 

(nn)    The operations of Holdings, the Issuer and its subsidiaries are and have
been conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements, including those of the Currency and
Foreign Transactions Reporting Act of 1970, as amended, the applicable money
laundering statutes of all jurisdictions where Holdings, the Issuer or any of
its subsidiaries conducts business, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued, administered or
enforced by any governmental agency (collectively, the “Anti-Money Laundering
Laws”), and no action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving Holdings, the Issuer or
any of its subsidiaries with respect to the Anti-Money Laundering Laws is
pending or, to the knowledge of the Issuer and the Guarantors, threatened.

 

 -14- 

 

 

(oo)    None of Holdings, the Issuer or any of its subsidiaries, nor, to the
knowledge of the Issuer and the Guarantors, any director, officer, employee,
agent, affiliate or other person associated with or acting on behalf of
Holdings, the Issuer or any of its subsidiaries is currently the subject or the
target of any sanctions administered or enforced by the U.S. government
(including, without limitation, the Office of Foreign Assets Control of the U.S.
Department of the Treasury or the U.S. Department of State and including,
without limitation, the designation as a “specially designated national” or
“blocked person”), the United Nations Security Council, the European Union, Her
Majesty’s Treasury or other relevant sanctions authority (collectively,
“Sanctions”), nor is Holdings, the Issuer, any of its subsidiaries located,
organized or resident in a country or territory that is the subject or target of
Sanctions, including, without limitation, Crimea region, Cuba, Iran, North Korea
and Syria (each, a “Sanctioned Country”); and the Issuer will not directly or
indirectly use the proceeds of the offering contemplated hereby, or lend,
contribute or otherwise make available such proceeds to any joint venture
partner or other person or entity, that to its and the Guarantors knowledge
intends to use such proceeds, or to any subsidiary (i) to fund any activities of
or business with any person, or in any country or territory, that, at the time
of such funding, is the subject of Sanctions or (ii) in any other manner that
will result in a violation by any person (including any person participating in
the transaction, whether as initial purchaser, advisor, investor or otherwise)
of Sanctions. For the past five years, Holdings, the Issuer and its subsidiaries
have not knowingly engaged in and are not now knowingly engaged in any dealings
or transactions with any person that at the time of the dealing or transaction
is or was the subject or the target of Sanctions or with any Sanctioned Country.

 

(pp)    Holdings, the Issuer and its subsidiaries’ information technology assets
and equipment, computers, systems, networks, hardware, software, websites,
applications, and databases (collectively, “IT Systems”) are adequate for, and
operate and perform in all material respects as required in connection with the
operation of the business of Holdings, the Issuer and its subsidiaries as
currently conducted. Holdings, the Issuer and its subsidiaries have implemented
and maintained commercially reasonable controls, policies, procedures, and
safeguards to maintain and protect their material confidential information and
the integrity, continuous operation and security of all material IT Systems and
material confidential data, including any of their material confidential data
maintained by a third party (including all personally identifiable data
(“Personal Data”)) used in connection with their businesses, and, to the
knowledge of the Issuer and the Guarantors, since June 21, 2016, there have been
no breaches to the confidentiality or integrity of Personal Data or unauthorized
uses of or accesses to Personal Data, except for those that have been remedied
without material cost or liability or the duty to notify any other person, nor
are any incidents under internal review or investigations relating to the same.
Holdings, the Issuer and its subsidiaries are presently in material compliance
with all applicable laws or statutes and all judgments, orders, rules and
regulations of any court or arbitrator or governmental or regulatory authority,
internal policies and contractual obligations relating to the privacy and
security of IT Systems and Personal Data and to the protection of such IT
Systems and Personal Data from unauthorized use, access, misappropriation or
modification.

 

Any certificate signed by any officer of the Issuer, the Guarantors or their
respective subsidiaries and delivered to the Initial Purchasers or counsel for
the Initial Purchasers in connection with the offering of the Securities and,
when issued, the Guarantees, shall be deemed a joint and several representation
and warranty by each of the Issuer, the Guarantors and their respective
subsidiaries, as to matters covered thereby, to each Initial Purchaser.

 

 -15- 

 

 

2.        Purchase and Sale. Subject to the terms and conditions and in reliance
upon the representations and warranties herein set forth, the Issuer agrees to
issue and sell to each Initial Purchaser, and each Initial Purchaser agrees,
severally and not jointly, to purchase from the Issuer, at a purchase price of
99.00% of the principal amount thereof, plus accrued interest, if any, from
October 1, 2020 to the Closing Date, the aggregate principal amount of
Securities set forth opposite such Initial Purchaser’s name in Schedule I
hereto.

 

3.        Delivery and Payment. Delivery of and payment for the Securities shall
be made at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue,
New York, New York 10017, at 10:00 A.M. New York City time on October 1, 2020 or
at such time on such later date not more than three Business Days after the
foregoing date as the Initial Purchasers shall designate, which date and time
may be postponed by agreement between the Initial Purchasers and the Issuer or
as provided in Section 9 hereof (such date and time of delivery and payment for
the Securities being herein called the “Closing Date”). Delivery of the
Securities shall be made to the Initial Purchasers for the respective accounts
of the several Initial Purchasers against payment by the several Initial
Purchasers of the purchase price thereof to or upon the order of the Issuer by
wire transfer payable in same-day funds to the account specified by the Issuer.
Delivery of the Securities shall be made through the facilities of The
Depository Trust Company unless the Initial Purchasers shall otherwise instruct.

 

4.        Offering by Initial Purchasers.

 

(a)      Each Initial Purchaser acknowledges that the Securities have not been
and will not be registered under the Act and may not be offered or sold within
the United States or to, or for the account or benefit of, U.S. persons, except
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Act.

 

(b)      Each Initial Purchaser, severally and not jointly, represents and
warrants to and agrees with the Issuer and the Guarantors, that:

 

(i)       it has not sold, and will not sell, any Securities within the United
States or to, or for the account or benefit of, U.S. persons as part of their
distribution at any time except to those persons whom it reasonably believes to
be “qualified institutional buyers” (as defined in Rule 144A under the Act) or
if any such person is buying for one or more institutional accounts for which
such person is acting as a fiduciary or agent, only when such person has
represented to it that each such account is a qualified institutional buyer to
whom notice has been given that such sale or delivery is being made in reliance
on Rule 144A and, in each case, in transactions in accordance with Rule 144A;

 

(ii)      it has not offered or sold, and will not offer or sell, any Securities
outside the United States (x) as part of their distribution at any time or
(y) otherwise until 40 days after the later of the commencement of the offering
and the Closing Date except in accordance with Rule 903 of Regulation S;

 

(iii)     neither it nor any person acting on its behalf has made or will make
offers or sales of the Securities in the United States by means of any form of
general solicitation or general advertising (within the meaning of Regulation D)
in the United States or in any manner involving a public offering within the
meaning of Section 4(a)(2) of the Act;

 

 -16- 

 

 

(iv)     in connection with each sale pursuant to Section 4(b)(i) hereof, it has
taken or will take reasonable steps to ensure that the purchaser of such
Securities is aware that such sale is being made in reliance on Rule 144A;

 

(v)       neither it, nor any of its Affiliates nor any person acting on its or
their behalf has engaged or will engage in any directed selling efforts (within
the meaning of Regulation S) with respect to the Securities;

 

(vi)     it has not entered and will not enter into any contractual arrangement
with any distributor (within the meaning of Regulation S) with respect to the
distribution of the Securities, except with its Affiliates or with the prior
written consent of the Issuer;

 

(vii)    it and its Affiliates and any person acting on its behalf have complied
and will comply with the offering restrictions requirement of Regulation S;

 

(viii)   at or prior to the confirmation of sale of Securities sold in reliance
of Regulation S (other than a sale of Securities pursuant to Section 4(b)(ii)
hereof), it shall have sent to each distributor, dealer or person receiving a
selling concession, fee or other remuneration that purchases Securities from it
during the distribution compliance period (within the meaning of Regulation S) a
confirmation or notice to substantially the following effect:

 

“The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933 (the “Act”) and may not be offered or sold within the
United States or to, or for the account or benefit of, U.S. persons (i) as part
of their distribution at any time or (ii) otherwise until 40 days after the
later of the commencement of the offering and the date of closing of the
offering, except in either case in accordance with Regulation S or Rule 144A
under the Act. Terms used in this paragraph have the meanings given to them by
Regulation S;” and

 

(xii)    it is an institutional “accredited investor” (as defined in 501(a) of
Regulation D).

 

5.        Agreements. The Issuer and the Guarantors agree, jointly and
severally, in each case with each Initial Purchaser as follows:

 

(a)       The Issuer will furnish to each Initial Purchaser and to counsel for
the Initial Purchasers, without charge, during the period referred to in
paragraph (c) below, as many copies of the Pricing Disclosure Package and Final
Memorandum and any amendments and supplements thereto as they may reasonably
request.

 

(b)       The Issuer and the Guarantors will not make any amendment or
supplement to the Pricing Disclosure Package and Final Memorandum or otherwise
distribute or refer to any written communication that constitutes an offer to
sell or a solicitation of an offer to buy the Securities (other than the Pricing
Disclosure Package, the Recorded Road Show and the Final Memorandum) that shall
be reasonably disapproved by the Representative after reasonable notice thereof.

 

 -17- 

 

 

(c)       (1) If at any time prior to the completion of the sale of the
Securities by the Initial Purchasers (as determined by the Representative, but
in no event more than 180 days after the date hereof), any event occurs as a
result of which, in the opinion of counsel for the Initial Purchasers, or
counsel for the Issuer, it is necessary to amend or supplement the Final
Memorandum, as then amended or supplemented, (i) in order that the Final
Memorandum would not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or (ii) comply
with applicable law, the Issuer will promptly (A) notify the Representative of
any such event; (B) subject to the requirements of paragraph (b) of this
Section 5, prepare an amendment or supplement that will correct such statement
or omission or effect such compliance; and (C) supply any supplemented or
amended Final Memorandum to the several Initial Purchasers and counsel for the
Initial Purchasers without charge in such quantities as they may reasonably
request and (2) if at any time prior to the Closing Date (i) any event shall
occur or condition shall exist as a result of which any of the Pricing
Disclosure Package as then amended or supplemented or the Recorded Road Show
would include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading or (ii) it is
necessary to amend or supplement any of the Pricing Disclosure Package or the
Recorded Road Show so that any of the Pricing Disclosure Package or the Recorded
Road Show, as the case may be, will comply with applicable law, the Issuer will
immediately notify the Initial Purchasers thereof and forthwith prepare and,
subject to paragraph (b) above, furnish to the Initial Purchasers such
amendments or supplements to any of the Pricing Disclosure Package or the
Recorded Road Show as may be necessary so that the statements in any of the
Pricing Disclosure Package or the Recorded Road Show as so amended or
supplemented do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading or so the
Pricing Disclosure Package or the Recorded Road Show will comply with applicable
law.

 

(d)       The Issuer will assist the Initial Purchasers in arranging, if
necessary, for the qualification of the Securities for sale by the Initial
Purchasers under the laws of such jurisdictions in the United States as the
Initial Purchasers may designate and will maintain such qualifications in effect
so long as required for the sale of the Securities; provided that in no event
shall the Issuer or any of the Guarantors be obligated to qualify to do business
in any jurisdiction where it is not now so qualified or to take any action that
would reasonably be expected to subject it to service of process in suits, other
than those arising out of the offering or sale of the Securities, in any
jurisdiction where it is not now so subject or to subject themselves to taxation
in any jurisdiction in which they are not otherwise so subject. The Issuer will
promptly advise the Initial Purchasers of the receipt by it or the Guarantors of
any notification with respect to the suspension of the qualification of the
Securities or the Guarantees for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose.

 

 -18- 

 

 

(e)      During the period from the Closing Date until one year after the
Closing Date, the Issuer will not, and will not permit any current or future
subsidiaries of either the Company or any other Affiliates controlled by the
Company or the Parent to, resell any Securities that have been acquired by any
of them except for Securities resold in a transaction registered under the Act.

 

(f)      The Issuer, the Guarantors and their Affiliates and any person acting
on their behalf will not make offers or sales of any security (as defined in the
Act), or solicit offers to buy any security, under circumstances that could be
integrated with the sale of the Securities in a manner that would reasonably be
expected to require the registration of the Securities under the Act.

 

(g)     The Issuer and its Affiliates and any person acting on their behalf will
not engage in any form of general solicitation or general advertising (within
the meaning of Regulation D) in connection with any offer or sale of the
Securities in the United States.

 

(h)      So long as any of the Securities are “restricted securities” within the
meaning of Rule 144(a)(3) under the Act, Holdings, the Issuer and its
subsidiaries will, unless they become subject to and comply with Section 13 or
15(d) of the Exchange Act or they or the Parent file the periodic reports
contemplated by such provisions pursuant to the terms of the Indenture, provide
to each holder of such restricted securities and to each prospective purchaser
(as designated by such holder) of such restricted securities, upon the request
of such holder or prospective purchaser, any information required to be provided
by Rule 144A(d)(4) under the Act (it being acknowledged and agreed that, prior
to the first date on which information is required to be provided under the
Indenture, the information contained, or incorporated by reference, in the Final
Memorandum is sufficient for this purpose).

 

(i)      The Issuer and its Affiliates and any person acting on their behalf
will not engage in any directed selling efforts with respect to the Securities,
and each of them will comply with the offering restrictions requirement of
Regulation S. Terms used in this paragraph have the meanings given to them by
Regulation S.

 

(j)       The Issuer will cooperate with the Initial Purchasers and use its
commercially reasonable efforts to permit the Securities to be eligible for
clearance and settlement through The Depository Trust Company.

 

(k)      The Issuer, the Guarantors and their Affiliates will not for a period
of 60 days following the Closing Date, without the prior written consent of the
Representative, offer, sell or contract to sell, pledge or otherwise dispose of
(or enter into any transaction that is designed to, or might reasonably be
expected to, result in the disposition (whether by actual disposition or
effective economic disposition due to cash settlement or otherwise) by the
Issuer, any of the Guarantors or any of their respective Affiliates or any
person in privity with the Issuer, any of the Guarantors or any of their
respective Affiliates), directly or indirectly, or announce the offering of, any
capital markets debt securities issued or guaranteed by the Issuer or any of the
Guarantors (other than the Securities and the Guarantees).

 

 -19- 

 

 

(l)       The Issuer and the Guarantors, jointly and severally, agree to pay the
costs and expenses relating to the following matters: (i) the fees of the
Trustee and the Collateral Agent (and their respective counsel); (ii) the
preparation, printing or reproduction of the Pricing Disclosure Package and the
Final Memorandum and each amendment or supplement to either of them; (iii) the
printing (or reproduction) and delivery (including postage, air freight charges
and charges for counting and packaging) of such copies of the Pricing Disclosure
Package and the Final Memorandum, and all amendments or supplements to either of
them, as may, in each case, be reasonably requested for use in connection with
the offering and sale of the Securities; (iv) any stamp or transfer taxes in
connection with the original issuance and sale of the Securities; (v) the
printing (or reproduction) and delivery of any blue sky memorandum to investors
in connection with the offering of the Securities; (vi) any registration or
qualification of the Securities for offer and sale under the securities or blue
sky laws of the several states and any other jurisdictions specified pursuant to
Section 5(d) (including filing fees and the reasonable fees and expenses of
counsel for the Initial Purchasers relating to such registration and
qualification); (vii) the approval of the Securities for book-entry transfer by
DTC; (viii) the “roadshow” and any other meetings with prospective investors in
the Securities; (ix) the fees and expenses of the Issuer’s accountants and the
fees and expenses of counsel (including local and special counsel) of the
Issuer; (x) the rating of the Securities by rating agencies; (xi) the fees and
expenses incurred with respect to creating, documenting and perfecting the
security interests in the Collateral as contemplated by the Collateral Documents
(including the related fees and expenses of counsel to the Initial Purchasers
for all periods prior to and after the Closing Date); and (xii) all other costs
and expenses incident to the performance by the Issuer of their obligations
hereunder.

 

(m)     The Issuer will use the proceeds from the sale of the Securities in the
manner described in the Pricing Disclosure Package and the Final Memorandum
under the caption “Use of Proceeds.”

 

(n)      The Issuer and the Guarantors jointly and severally acknowledge and
agree that each Initial Purchaser is acting solely in the capacity of an arm’s
length contractual counterparty to the Issuer and the Guarantors with respect to
the offering of Securities contemplated hereby (including in connection with
determining the terms of the offering) and not as a financial advisor or a
fiduciary to or an agent of the Issuer, any of the Guarantors or any other
person. Additionally, no Initial Purchaser is advising the Issuer, any of the
Guarantors or any other person as to any legal, tax, investment, accounting or
regulatory matters in any jurisdiction. The Issuer and the Guarantors shall
consult with their own advisors concerning such matters and shall be responsible
for making their own independent investigation and appraisal of the transactions
contemplated hereby, and the Initial Purchasers shall have no responsibility or
liability to the Issuer or any of the Guarantors with respect thereto. Any
review by the Initial Purchasers of the Issuer and the Guarantors, the
transactions contemplated hereby or other matters relating to such transactions
will be performed solely for the benefit of the Initial Purchasers and shall not
be on behalf of the Issuer or any of the Guarantors.

 

 -20- 

 

 

 

(o)           Prior to the completion of the resale of the Securities by the
Initial Purchasers to subsequent purchasers, the Parent shall file, on a timely
basis, with the Commission all reports and documents required to be filed under
Section 13(a), 13(c) or 15(d) of the Exchange Act.

 

(p)           The Issuer and each Guarantor (i) shall complete on or prior to
the Closing Date all filings and other similar actions required in connection
with the perfection of security interests in the Collateral as and to the extent
contemplated by the Indenture and the Collateral Documents and (ii) shall take
all actions necessary to maintain such security interests and to perfect
security interests in any Collateral acquired after the Closing Date, in each
case as and to the extent contemplated by the Indenture and the Collateral
Documents; provided if the certificated securities and instruments identified in
the Security Agreement as of the Closing Date are not located on or prior to the
Closing Date, the Issuer and Guarantor agree to deliver such certificated
securities and instruments to the Term Loan Collateral Agent pursuant to the
Collateral Documents and the Intercreditor Agreements as soon as commercially
reasonable, but in no event later than 90 days following the Closing Date.

 

(q)           The Issuer and each Guarantor, as applicable, shall use
commercially reasonable efforts to amend, supplement or otherwise modify the
Collateral Access Agreements (as defined in the Term Loan Credit Agreement) in
order to have the Term Loan Collateral Agent and Collateral Agent become parties
thereto, such amendment, supplement or other modification to be in form and
substance reasonably satisfactory to both the Term Loan Collateral Agent and the
Collateral Agent.

 

6.             Conditions to the Obligations of the Initial Purchasers. The
obligations of the Initial Purchasers to purchase the Securities shall be
subject to the accuracy of the representations and warranties of the Issuer and
the Guarantors contained herein at the Time of Sale and the Closing Date, to the
accuracy of the statements of the Issuer and the Guarantors made in any
certificates pursuant to the provisions hereof, to the performance by the Issuer
and the Guarantors of their obligations hereunder and to the following
additional conditions:

 

(a)           The Issuer shall have requested and caused (i) Ropes & Gray LLP,
counsel for the Issuer and those Guarantors organized or incorporated in the
State of Delaware, to furnish to the Initial Purchasers an opinion and negative
assurance statement dated the Closing Date in form and substance reasonably
satisfactory to the Initial Purchasers, (ii) Troutman Pepper Hamilton Sanders
LLP, Virginia counsel for Michaels Stores Card Services, LLC, to furnish to the
Initial Purchasers an opinion dated the Closing Date in form and substance
reasonably satisfactory to the Initial Purchasers and (iii) Jones Day, Ohio
counsel for those Guarantors organized or incorporated in the State of Ohio, to
furnish to the Initial Purchasers an opinion dated the Closing Date in form and
substance reasonably satisfactory to the Initial Purchasers.

 

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(b)           The Initial Purchasers shall have received from Simpson Thacher &
Bartlett LLP, counsel for the Initial Purchasers, such opinion and negative
assurance statement, each dated the Closing Date and addressed to the Initial
Purchasers, with respect to the issuance and sale of the Securities, the
Indenture, Pricing Disclosure Package and the Final Memorandum (as amended or
supplemented at the Closing Date) and other related matters as the Initial
Purchasers may reasonably require, and the Issuer and the Guarantors shall have
furnished to such counsel such documents as they reasonably request for the
purpose of enabling them to pass upon such matters.

 

(c)           The Issuer shall have furnished to the Initial Purchasers a
certificate, signed by (x) the chairman, chief executive officer, president or
vice president and (y) the chief financial officer, treasurer or principal
financial or accounting officer of the Issuer and the Guarantors, dated the
Closing Date, to the effect that the signers of such certificate have reviewed
the Pricing Disclosure Package and the Final Memorandum, any amendment or
supplement to the Pricing Disclosure Package and the Final Memorandum and this
Agreement and that:

 

(i)      the representations and warranties of the Issuer and the Guarantors in
this Agreement are true and correct in all material respects (except to the
extent already qualified by materiality, in which case such obligations shall be
subject to the accuracy of such representations and warranties in all respects)
at the Time of Sale and on the Closing Date, and the Issuer and the Guarantors
have complied in all material respects with all the agreements and satisfied all
the conditions on their part to be performed or satisfied hereunder at or prior
to the Closing Date; and

 

(ii)     since the date of the most recent financial statements included in the
Pricing Disclosure Package and the Final Memorandum (exclusive of any amendment
or supplement thereto), there has been no material adverse change in the
condition (financial or otherwise), business or results of operations of
Holdings, the Issuer and its subsidiaries, taken as a whole, except as set forth
in or contemplated in the Pricing Disclosure Package and the Final Memorandum
(exclusive of any amendment or supplement thereto).

 

(d)           The Issuer shall have requested and caused Ernst & Young LLP to
furnish to the Initial Purchasers a “comfort” letter, (i) at and dated as of the
date hereof with respect to the Pricing Disclosure Package and (ii) in
bring-down form at and dated as of the Closing Date with respect to the Final
Memorandum, each such letter in form and substance reasonably satisfactory to
the Initial Purchasers, confirming that they are independent auditors within the
meaning of the Exchange Act and the applicable published rules and regulations
thereunder and confirming certain matters with respect to the audited and
unaudited financial statements and other financial and accounting information
contained in the Pricing Disclosure Package and Final Memorandum, as applicable,
including any amendment or supplement thereto at the date of the applicable
letter.

 

-22-

 

 

(e)            Subsequent to the Time of Sale or, if earlier, the dates as of
which information is given in the Pricing Disclosure Package and the Final
Memorandum, there shall not have been any change or development in the condition
(financial or otherwise), business or results of operations of Holdings, the
Issuer and its subsidiaries, taken as a whole and after giving effect to the
Transactions, except as set forth in or contemplated in the Pricing Disclosure
Package and the Final Memorandum (exclusive of any amendment or supplement
thereto), the effect of which is, or would reasonably be expected to become, in
the judgment of the Representative, so material and adverse as to make it
impractical or inadvisable to proceed with the offering, sale or delivery of the
Securities on the terms and in the manner contemplated in the Pricing Disclosure
Package and the Final Memorandum.

 

(f)            At the Closing Date, the Issuer, the Guarantors and the Trustee
shall have entered into the Indenture and the Initial Purchasers shall have
received counterparts, conformed as executed thereof.

 

(g)           Subsequent to the date hereof, there shall not have been any
decrease in the rating of the Securities by any “nationally recognized
statistical rating organization” (as defined in Section 3(a)(62) of the Exchange
Act) or any notice given of any intended or potential decrease in any such
rating or of a possible change in any such rating that does not indicate the
direction of the possible change.

 

(h)           Prior to the Closing Date, the Issuer and the Guarantors shall
have furnished to the Initial Purchasers such further information, certificates
and documents as the Initial Purchasers may reasonably request, as set forth in
the closing memorandum relating to the Transactions.

 

(i)             Prior to the Closing Date, the Issuer and the Guarantors shall
have taken all action reasonably required to be taken by them to have the
Securities declared eligible for clearance and settlement through The Depository
Trust Company.

 

(j)            The Issuer shall have furnished to the Initial Purchasers
certificates of its chief financial officer with respect to certain financial
data (i) at and dated as of the date hereof with respect to the Pricing
Disclosure Package and (ii) at and dated as of the Closing Date with respect to
the Final Memorandum, in each case providing “management comfort” with respect
to such information, in form and substance reasonably satisfactory to the
Initial Purchasers.

 

(k)           The Initial Purchasers shall have received conformed counterparts
of the Security Agreement and each of the Intellectual Property Security
Agreements that shall have been executed and delivered by the requisite
signatories thereto, in form and substance reasonably satisfactory to the
Representative.

 

(l)            The Initial Purchasers shall have received conformed counterparts
of the Pari Passu Intercreditor Agreement, the ABL Intercreditor Agreement and
the ABL Intercreditor Joinder that shall have been executed and delivered by
duly authorized officers of each party thereto, and an acknowledgement thereof
by the Company, in each case, in form and substance reasonably satisfactory to
the Representative.

 

-23-

 

 

(m)          Except as otherwise contemplated by the Intellectual Property
Security Agreements and the Security Agreement, each document (including any
Uniform Commercial Code financing statement) required by the Intellectual
Property Security Agreements and the Security Agreement, or under law or
reasonably requested by the Representative, in each case, to be filed,
registered or recorded, or delivered for filing on or prior to the Closing Date,
including filings in the U.S. Patent and Trademark Office and the U.S. Copyright
Office, in order to create in favor of the Collateral Agent, for itself, the
Trustee, and for the benefit of the holders of the Securities, a perfected
first-priority lien and security interest in the Personal Property Collateral
constituting First Priority Collateral and a perfected second-priority lien and
security interest in the Personal Property Collateral constituting ABL Priority
Collateral, in each case, subject to Permitted Liens, that can be perfected by
the making of such filings, registrations or recordations, prior and superior to
the right of any other person (other than Permitted Liens), shall be executed
and in proper form for filing, registration or recordation.

 

All opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to the Initial
Purchasers and counsel for the Initial Purchasers.

 

The documents required to be delivered by this Section 6 will be available for
inspection at the office of Simpson Thacher & Bartlett LLP, 425 Lexington
Avenue, New York, New York 10017, on the Business Day prior to the Closing Date.

 

7.             Reimbursement of Expenses. If the sale of the Securities provided
for herein is not consummated because any condition to the obligations of the
Initial Purchasers set forth in Section 6 hereof is not satisfied, because of
any termination pursuant to Section 10 hereof or because of any refusal,
inability or failure on the part of the Issuer or the Guarantors to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by any of the Initial Purchasers, including as described in Section 9
hereof, the Issuer and the Guarantors will, jointly and severally, reimburse the
Initial Purchasers on behalf of the Initial Purchasers on demand for all
reasonable expenses (including reasonable fees and disbursements of Simpson
Thacher & Bartlett LLP) that shall have been incurred by them in connection with
the proposed purchase and sale of the Securities.

 

-24-

 

 

8.             Indemnification and Contribution.

 

(a)           The Issuer and the Guarantors jointly and severally agree to
indemnify and hold harmless each Initial Purchaser, the directors, officers and
Affiliates of each Initial Purchaser and each person who controls any Initial
Purchaser within the meaning of either the Act or the Exchange Act against any
and all losses, claims, damages or liabilities, joint or several, to which they
or any of them may become subject under the Act, the Exchange Act or other U.S.
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Pricing Disclosure Package,
Recorded Road Show (when taken together with the Preliminary Offering
Memorandum) or Final Memorandum or in any amendment or supplement thereto or in
any other written communication by the Issuer or a Guarantor that constitutes an
offer to sell or a solicitation of an offer to buy the Securities or arise out
of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and agree (subject to
the limitations set forth in the proviso to this sentence) to reimburse each
such indemnified party, as incurred, for any legal or other expenses reasonably
incurred by it in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Issuer and the
Guarantors will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made in
the Pricing Disclosure Package, the Recorded Road Show or Final Memorandum, or
in any amendment thereof or supplement thereto, in reliance upon and in
conformity with the Initial Purchaser Information. This indemnity agreement will
be in addition to any liability that the Issuer and the Guarantors may otherwise
have. The Issuer and the Guarantors shall not be liable under this Section 8 to
any indemnified party regarding any settlement or compromise or consent to the
entry of any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
is consented to by the Issuer, which consent shall not be unreasonably withheld.

 

(b)           Each Initial Purchaser severally, and not jointly, agrees to
indemnify and hold harmless (i) the Issuer and the Guarantors, (ii) each person,
if any, who controls (within the meaning of either the Act or the Exchange Act)
the Issuer or any of the Guarantors, and (iii) the directors and officers of the
Issuer and the Guarantors, to the same extent as the foregoing indemnity from
the Issuer and the Guarantors to each Initial Purchaser, but only with reference
to the Initial Purchaser Information provided by such Initial Purchaser. This
indemnity agreement will be in addition to any liability that any Initial
Purchaser may otherwise have. The Issuer acknowledges that the first sentence of
the third paragraph under the heading “Plan of Distribution” and the fourth and
fifth sentences of the third paragraph and the fourth paragraph under the
heading “Plan of Distribution—General” in the Preliminary Memorandum and the
Final Memorandum constitute the only information furnished in writing by or on
behalf of the Initial Purchasers for inclusion in the Pricing Disclosure
Package, the Recorded Road Show or the Final Memorandum or any other written
communication by the Issuer that constitutes an offer to sell or the
solicitation of an offer to buy the Securities (the “Initial Purchaser
Information”).

 

-25-

 

 

(c)           Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights or defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above, except as provided in paragraph (d)
below. The indemnifying party shall be entitled to appoint counsel (including
local counsel) of the indemnifying party’s choice at the indemnifying party’s
expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel,
other than local counsel if not appointed by the indemnifying party, retained by
the indemnified party or parties except as set forth below); provided, however,
that such counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party’s election to appoint counsel (including
local counsel) to represent the indemnified party in an action, the indemnified
party shall have the right to employ separate counsel (including local counsel),
and the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest (based on the advice of counsel to the indemnified party); (ii) such
action includes both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded (based on the advice of
counsel to the indemnified party) that there may be legal defenses available to
it and/or other indemnified parties that are different from or additional to
those available to the indemnifying party; (iii) the indemnifying party shall
not have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of the
institution of such action; or (iv) the indemnifying party shall authorize the
indemnified party to employ separate counsel at the expense of the indemnifying
party. It is understood and agreed that the indemnifying party shall not, in
connection with any proceeding or related proceeding in the same jurisdiction,
be liable for the reasonable fees and expenses of more than one separate firm
(in addition to any local counsel) for all indemnified parties. Any such
separate firm for any Initial Purchaser, its Affiliates, directors and officers
and any control persons of such Initial Purchaser shall be designated in writing
by the Representative, and any such separate firm for the Issuer or any of the
Guarantors, directors and officers and any control persons of the Issuer or any
of the Guarantors shall be designated in writing by the Issuer. An indemnifying
party will not, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim, action, suit
or proceeding) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party, in form and substance
reasonably satisfactory to such indemnified party, from all liability arising
out of such claim, action, suit or proceeding and does not include any statement
as to, or any admission of, fault, culpability or failure to act by or on behalf
of any indemnified party.

 

-26-

 

 

(d)           In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason (other than by virtue of the failure of an
indemnified party to notify the indemnifying party of its right to
indemnification pursuant to subsection (a) or (b) above, where such failure
materially prejudices the indemnifying party (through the forfeiture of
substantial rights or defenses)), the Issuer and the Guarantors, jointly and
severally on the one hand, and the Initial Purchasers, on the other hand,
severally agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending any loss, claim, damage, liability or action)
(collectively “Losses”) to which the Issuer or any Guarantor and one or more of
the Initial Purchasers may be subject in such proportion as is appropriate to
reflect the relative benefits received by the Issuer and the Guarantors, on the
one hand, and by the Initial Purchasers, on the other hand, from the offering of
the Securities. If the allocation provided by the immediately preceding sentence
is unavailable for any reason or not permitted by applicable law, the Issuer and
the Guarantors, jointly and severally, on the one hand, and the Initial
Purchasers, on the other hand, severally shall contribute in such proportion as
is appropriate to reflect not only such relative benefits but also the relative
fault of the Issuer and the Guarantors, on the one hand, and the Initial
Purchasers, on the other hand, in connection with the statements or omissions
that resulted in such Losses, as well as any other relevant equitable
considerations. Benefits received by the Issuer and the Guarantors shall be
deemed to be equal to the total net proceeds from the offering (before deducting
expenses) received by them, and benefits received by the Initial Purchasers
shall be deemed to be equal to the total purchase discounts and commissions.
Relative fault shall be determined by reference to, among other things, whether
any untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information provided by the
Issuer or any Guarantor, on the one hand, or the Initial Purchasers, on the
other hand, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission and any other equitable considerations appropriate in the
circumstances. The Issuer, the Guarantors and the Initial Purchasers agree that
it would not be just and equitable if the amount of such contribution were
determined by pro rata allocation or any other method of allocation that does
not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 8, in no case shall any Initial
Purchaser be responsible for any amount in excess of the purchase discount or
commission applicable to the Securities purchased by such Initial Purchaser
hereunder. Notwithstanding the provisions of this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Initial Purchasers’ obligations to
contribute pursuant to this Section 8 are several in proportion to their
respective purchase obligations hereunder and not joint. For purposes of this
Section 8, each person, if any, who controls an Initial Purchaser within the
meaning of either the Act or the Exchange Act and each director, officer,
employee, Affiliate and agent of an Initial Purchaser shall have the same rights
to contribution as such Initial Purchaser, and each person who controls the
Issuer or any Guarantor within the meaning of either the Act or the Exchange Act
and the respective officers and directors of the Issuer and the Guarantors shall
have the same rights to contribution as the Issuer and the Guarantors, subject
in each case to the applicable terms and conditions of this paragraph (d).

 

-27-

 

 

9.             Default by an Initial Purchaser. If any one or more Initial
Purchasers shall fail to purchase and pay for any of the Securities agreed to be
purchased by such Initial Purchaser hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Initial Purchasers shall be obligated severally to take
up and pay for (in the respective proportions that the principal amount of the
Securities set forth opposite their names in Schedule I hereto bears to the
aggregate principal amount of the Securities set forth opposite the names of all
the remaining Initial Purchasers) the Securities that the defaulting Initial
Purchaser or Initial Purchasers agreed but failed to purchase; provided,
however, that in the event that the aggregate principal amount of the Securities
that the defaulting Initial Purchaser or Initial Purchasers agreed but failed to
purchase shall exceed 10% of the aggregate principal amount of the Securities
set forth in Schedule I hereto, the Issuer shall be entitled to a period of 36
hours within which to procure another party or parties reasonably satisfactory
to the non-defaulting Initial Purchasers to purchase no less than the amount of
such unpurchased Securities that exceeds 10% of the principal amount thereof
upon such terms herein set forth. If, however, the Issuer shall not have
completed such arrangements within 36 hours after such default and the principal
amount of unpurchased Securities exceeds 10% of the principal amount of
Securities to be purchased on such date, then this Agreement will terminate
without liability as to the Securities to any non-defaulting Initial Purchaser
or the Issuer. In the event of a default by any Initial Purchaser as set forth
in this Section 9, the Closing Date shall be postponed for such period, not
exceeding five Business Days, to effect any changes that in the opinion of
counsel for the Issuer or counsel for the Initial Purchasers shall determine are
necessary in the Final Memorandum or in any other documents or arrangements may
be effected. Nothing contained in this Agreement shall relieve any defaulting
Initial Purchaser of its liability, if any, to the Issuer or any nondefaulting
Initial Purchaser for damages occasioned by its default hereunder.

 

10.           Termination. This Agreement shall be subject to termination in the
absolute discretion of the Representative, by notice given to the Issuer prior
to delivery of and payment for the Securities, if at any time prior to such time
(i) trading in any securities generally on the New York Stock Exchange or the
Nasdaq Stock Market shall have been suspended or materially limited or minimum
prices shall have been established on such exchange or the Nasdaq Stock Market;
(ii) trading of any securities issued or guaranteed by the Parent shall have
been suspended on any exchange or in any over-the-counter market; (iii) a
banking moratorium shall have been declared either by U.S. federal or New York
State authorities; or (iv) there shall have occurred any outbreak or escalation
of hostilities, declaration by the United States of a national emergency or war
or other calamity or crisis the effect of which on financial markets is such as
to make it, in the judgment of the Representative, impractical or inadvisable to
proceed with the offering, sale or delivery of the Securities as contemplated in
the Pricing Disclosure Package and the Final Memorandum.

 

11.           Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Issuer and the Guarantors or, with respect to Sections 5(f), (g) and (i) hereof,
their respective officers and of the Initial Purchasers set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of the Initial Purchasers or the Issuer
or any Guarantor, or any of the indemnified parties referred to in Section 8
hereof, and will survive delivery of and payment for the Securities. The
provisions of Sections 7 and 8 hereof shall survive the termination or
cancellation of this Agreement.

 

12.           Notices. All communications hereunder will be in writing and
effective only on receipt and, if sent to the Initial Purchasers, will be mailed
or delivered and confirmed to J.P. Morgan Securities LLC, 383 Madison Avenue,
New York, New York 10179, Attention: Ryan P. Griswold; or, if sent to the Issuer
or the Guarantors, will be mailed, delivered or faxed c/o Chief Financial
Officer (fax no.: (972) 409-1901) and confirmed to it at 8000 Bent Branch Drive,
Irving TX 75063 Attention: General Counsel (fax no.: (972) 409-1965). The Issuer
shall be entitled to act and rely upon any request, consent, notice or agreement
given or made on behalf of the Initial Purchasers by the Representative.

 

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13.           Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and at and after the Closing Date, the Issuer
and the Guarantors and their respective successors and the indemnified parties
referred to in Section 8 hereof and their respective successors and no other
person will have any right or obligation hereunder. No purchaser of Securities
from any Initial Purchaser shall be deemed to be a successor merely by reason of
such purchase.

 

14.           Applicable Law; Waiver of Jury Trial; Submission to Jurisdiction.
This Agreement and any claim, controversy or dispute relating to or arising out
of this Agreement will be governed by and construed in accordance with the laws
of the State of New York applicable to contracts made and to be performed within
the State of New York. THE PARTIES HERETO EACH HEREBY WAIVE ANY RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT. Any proceeding related to this Agreement or the transactions
contemplated hereby shall be exclusively commenced, prosecuted or continued in
any court of the State of New York located in the City and County of New York or
in the United States District Court for the Southern District of New York, and
the Issuer and the Guarantors hereby consent to the jurisdiction of such courts
and personal service with respect thereto.

 

15.           Counterparts. This Agreement may be signed in one or more
counterparts (which may be delivered in original form or facsimile or “pdf” file
thereof), each of which when so executed shall constitute an original and all of
which together shall constitute one and the same agreement. The words
“execution,” “executed,” “signed,” “signature,” “delivery,” and words of like
import in or relating to this Agreement or any document to be signed in
connection with this Agreement shall be deemed to include electronic signatures,
deliveries or the keeping of records in electronic form, each of which shall be
of the same legal effect, validity or enforceability as a manually executed
signature, physical delivery thereof or the use of a paper-based recordkeeping
system, as the case may be, and the parties hereto consent to conduct the
transactions contemplated hereunder by electronic means.

 

16.           Headings. The section headings used herein are for convenience
only and shall not affect the construction hereof.

 

17.           Definitions. The terms that follow, when used in this Agreement,
shall have the meanings indicated.

 

“Act” shall mean the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.

 

“Affiliate” shall have the meaning specified in Rule 501(b) of Regulation D.

 

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“Business Day” shall mean any day other than a Saturday, a Sunday or a legal
holiday or a day on which commercial banking institutions or trust companies are
authorized or required by law to close in New York City.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended.

 

“Commission” shall mean the Securities and Exchange Commission.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.

 

“Investment Company Act” shall mean the Investment Company Act of 1940, as
amended, and the rules and regulations of the Commission promulgated thereunder.

 

“Regulation D” shall mean Regulation D under the Act.

 

“Regulation S” shall mean Regulation S under the Act.

 

“Trust Indenture Act” shall mean the Trust Indenture Act of 1939, as amended,
and the rules and regulations of the Commission promulgated thereunder.

 

18.           Patriot Act. In accordance with the requirements of the USA
Patriot Act (Title III of Pub. L, 107-56 (signed into law October 26, 2001)),
the Initial Purchasers are required to obtain, verify and record information
that identifies their clients, which may include the name and address of their
clients, as well as other information that will allow the Initial Purchasers to
properly identify their clients.

 

19.           Recognition of the U.S. Special Resolution Regimes.

 

(a)           In the event that any Initial Purchaser that is a Covered Entity
becomes subject to a proceeding under a U.S. Special Resolution Regime, the
transfer from such Initial Purchaser of this Agreement, and any interest and
obligation in or under this Agreement, will be effective to the same extent as
the transfer would be effective under the U.S. Special Resolution Regime if this
Agreement, and any such interest and obligation, were governed by the laws of
the United States or a state of the United States.

 

(b)           In the event that any Initial Purchaser that is a Covered Entity
or a BHC Act Affiliate of such Initial Purchaser becomes subject to a proceeding
under a U.S. Special Resolution Regime, Default Rights under this Agreement that
may be exercised against such Initial Purchaser are permitted to be exercised to
no greater extent than such Default Rights could be exercised under the U.S.
Special Resolution Regime if this Agreement were governed by the laws of the
United States or a state of the United States.

 

“BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and
shall be interpreted in accordance with, 12 U.S.C. § 1841(k).

 

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“Covered Entity” means any of the following:

 

(i)            a “covered entity” as that term is defined in, and interpreted in
accordance with, 12 C.F.R. § 252.82(b);

 

(ii)           a “covered bank” as that term is defined in, and interpreted in
accordance with, 12 C.F.R. § 47.3(b); or

 

(iii)          a “covered FSI” as the term is defined in, and interpreted in
accordance with, 12 C.F.R. § 382.2(b).

 

“Default Right” has the meaning assigned to that term in, and shall be
interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as
applicable.

 

“U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance
Act and the regulations promulgated thereunder and (ii) Title II of the
Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations
promulgated thereunder.

 

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If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the Issuer,
the Guarantors and the several Initial Purchasers.

 

  Very truly yours,       MICHAELS STORES, INC.       By:/s/ Michael Diamond  
Name: Michael Diamond   Title:Executive Vice President & Chief Financial Officer
          MICHAELS funding, INC.       By:/s/ Michael Diamond   Name: Michael
Diamond   Title:Executive Vice President & Chief Financial Officer          
DARICE, INC.   DARICE IMPORTS, INC.   MICHAELS STORES PROCUREMENT COMPANY, INC.
      By:/s/ Michael Diamond   Name: Michael Diamond   Title: Executive Vice
President & Chief Financial Officer           ARTISTREE, INC.   MICHAELS FINANCE
COMPANY, INC.   MICHAELS STORES CARD SERVICES, LLC       By:/s/ Michael Diamond
  Name: Michael Diamond   Title: Executive Vice President & Chief Financial
Officer           LAMRITE WEST, INC.       By:/s/ Michael Diamond   Name:
Michael Diamond   Title: Executive Vice President & Chief Financial Officer

 

[Signature Page to Purchase Agreement]

 

 

 

 

The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.      J.P. MORGAN SECURITIES LLC      By: J.P. Morgan
Securities LLC       For itself, and the other several   Initial Purchasers
named   in Schedule I to the foregoing Agreement      By:/s/ Brandon Mallette 
 Name: Brandon Mallette   Title: Vice President 

 

[Signature Page to Purchase Agreement]

 

 

 

 

SCHEDULE I

 

Initial Purchasers 

Aggregate Principal Amount of

Securities To Be Purchased

  J.P. Morgan Securities LLC   $105,000,000  Wells Fargo Securities, LLC  
$60,375,000  BofA Securities, Inc.   $43,125,000  Truist Securities, Inc.  
$25,500,000  Goldman Sachs & Co. LLC   $17,625,000  Barclays Capital Inc.  
$17,625,000  Citizens Capital Markets, Inc.   $17,625,000  U.S. Bancorp
Investments, Inc.   $17,625,000  BMO Capital Markets Corp.   $17,625,000  Fifth
Third Securities, Inc.   $17,625,000  Credit Suisse Securities (USA) LLC  
$17,625,000  UBS Securities LLC   $17,625,000  Total   $375,000,000 

 

 

 

 

ANNEX A-1

 

Artistree, Inc., a Delaware corporation   Darice, Inc., an Ohio Corporation 
 Darice Imports, Inc., an Ohio Corporation   Lamrite West, Inc., an Ohio
Corporation   Michaels Finance Company, Inc., a Delaware corporation  Michaels
Stores Procurement Company, Inc., a Delaware corporation  Michaels Stores Card
Services, LLC, a Virginia limited liability company

 

 

 

 

ANNEX A-2

 

Artistree, Inc.   Artistree of Canada, ULC   Darice Global Sourcing S.à r.l. 
 Darice Holdings Company Ltd.   Darice Holdings I S.à r.l.   Darice Holdings II
S.à r.l.   Darice Imports, Inc.   Darice, Inc.   Darice International Sourcing
Group   Darice International Sourcing Holdings S.à r.l.   Darice (Ningbo)
Business Consulting Co. Ltd.   Darice Product Development, LLC   Lamrite West,
Inc.   Michaels Finance Company, Inc.   Michaels of Canada Holdings LP No. 1 
 Michaels of Canada Holdings LP No. 2   Michaels of Canada, ULC   Michaels of
Luxembourg S.à r.l.   Michaels Product Development, LLC   Michaels Stores Card
Services, LLC   Michaels Stores Procurement Company, Inc.   Michaels U.S.
Holdings 1, LLC   Michaels U.S. Holdings 2, LLC   Michaels International
Holdings, LLC   Michaels Hong Kong Holdings Limited   Michaels Urban Renewal
LLC 

 

 

 

 

ANNEX B

 

Preliminary Offering Memorandum Supplements

 

1.       Pricing Term Sheet, dated September 17, 2020