**Exhibit 4.4**

 

 

REGISTRATION RIGHTS AGREEMENT

 

Dated as of October 31, 2006

 

Among

 

MICHAELS STORES, INC.,

 

THE GUARANTORS LISTED ON SCHEDULE I HERETO

 

and

 

DEUTSCHE BANK SECURITIES INC.,

J.P. MORGAN SECURITIES INC.,

BANC OF AMERICA SECURITIES LLC

 

and

 

CREDIT SUISSE SECURITIES (USA) LLC

 

 

10% Senior Notes due 2014

 

 

----

 

TABLE OF CONTENTS

 
| ** ** |                              | **Page** |
|------------|-----------------------------------|----------|
|       |                              |     |
| 1.         | Definitions                       | 1        |
|       |                              |     |
| 2.         | Exchange Offer                    | 4        |
|       |                              |     |
| 3.         | Shelf Registration                | 8        |
|       |                              |     |
| 4.         | Additional Interest               | 9        |
|       |                              |     |
| 5.         | Registration Procedures           | 10       |
|       |                              |     |
| 6.         | Registration Expenses             | 17       |
|       |                              |     |
| 7.         | Indemnification and Contribution. | 17       |
|       |                              |     |
| 8.         | Rules 144 and 144A                | 21       |
|       |                              |     |
| 9.         | Underwritten Registrations        | 22       |
|       |                              |     |
| 10.        | Miscellaneous                     | 22       |

 

i

----

 

REGISTRATION RIGHTS AGREEMENT

 

ThisRegistration Rights Agreement (this “Agreement”) is dated as of October31, 2006, among MICHAELS STORES INC., a Delaware corporation (the “Issuer”),the guarantors listed on Schedule I hereto (the “Guarantors”) andDEUTSCHE BANK SECURITIES INC., J.P. MORGAN SECURITIES INC., BANC OF AMERICASECURITIES LLC and CREDIT SUISSE SECURITIES (USA) LLC (together, the “InitialPurchasers”).

 

ThisAgreement is entered into in connection with the Purchase Agreement, dated asof October 25, 2006 (the “Purchase Agreement”), by and among the Issuerand the Initial Purchasers, which provides for, among other things, the sale bythe Issuer to the Initial Purchasers of $750,000,000 aggregate principal amountof the Issuer’s 10% Senior Notes due 2014 (the “Notes”) and $400,000,000aggregate principal amount of the Issuer’s 11 3/8% Senior Subordinated Notesdue 2016 (the “Senior Subordinated Notes”). The Notes are issued underan indenture, dated as of the date hereof (as amended or supplemented from timeto time, the “Indenture”), among the Issuer, the Guarantors and WellsFargo Bank, National Association, as trustee (the “Trustee”). Pursuantto the Purchase Agreement and the Indenture, the Guarantors are required toguarantee (collectively, the “Guarantees”) the Issuer’s obligationsunder the Notes and the Indenture. References to the “Securities” shallmean, collectively, the Notes and the Guarantees. In order to induce theInitial Purchasers to enter into the Purchase Agreement, the Issuer has agreedto provide the registration rights set forth in this Agreement for the benefitof the Initial Purchasers and any subsequent holder or holders of theSecurities. The execution and delivery of this Agreement is a condition to theInitial Purchasers’ obligations under the Purchase Agreement.

 

Theparties hereby agree as follows:

 

# 1.                                       Definitions

 

Asused in this Agreement, the following terms shall have the following meanings:

 

Additional Interest:  See Section 4(a) hereof.

 

Advice:  See the last paragraph of Section 5hereof.

 

Agreement:  See the introductory paragraphs hereto.

 

Applicable Period:  See Section 2(b) hereof.

 

Business Day:  Shall have the meaning ascribed to such termin Rule 14d-1 under the Exchange Act.

 

Effectiveness Date:  With respect to any ShelfRegistration Statement, the 90th day after the Filing Date with respectthereto; provided, however, that if the Effectiveness Date wouldotherwise fall on a day that is not a Business Day, then the Effectiveness Dateshall be the next succeeding Business Day.

 

----

 

Effectiveness Period:  See Section 3(a) hereof.

 

Event Date:  See Section 4(b) hereof.

 

Exchange Act:  The Securities Exchange Act of 1934, asamended, and the rules and regulations of the SEC promulgated thereunder.

 

Exchange Notes:  See Section 2(a) hereof.

 

Exchange Offer:  See Section 2(a) hereof.

 

Exchange Offer Registration Statement:  SeeSection 2(a) hereof.

 

Exchange Securities:  See Section 2(a) hereof.

 

Filing Date:  The 90th day after the delivery of a ShelfNotice as required pursuant to Section 2(c) hereof; provided, however,that if the Filing Date would otherwise fall on a day that is not a BusinessDay, then the Filing Date shall be the next succeeding Business Day.

 

Guarantees:  See the introductory paragraphs hereto.

 

Guarantors:  See the introductory paragraphs hereto.

 

Holder:  Any holder of a Registrable Security orRegistrable Securities.

 

Indenture:  See the introductory paragraphs hereto.

 

Information:  See Section 5(n) hereof.

 

Initial Purchasers:  See the introductoryparagraphs hereto.

 

Initial Shelf Registration:  See Section 3(a) hereof.

 

Inspectors:  See Section 5(n) hereof.

 

Issue Date:  October 31, 2006, the date of originalissuance of the Notes.

 

Issuer:  See the introductory paragraphs hereto.

 

NASD:  See Section 5(r) hereof.

 

New Guarantees:  See Section 2(a) hereof.

 

Notes:  See the introductory paragraphs hereto.

 

Participant:  See Section 7(a) hereof.

 

2

----

 

Participating Broker-Dealer:  See Section 2(b) hereof.

 

Person:  An individual, trustee, corporation,partnership, limited liability company, joint stock company, trust,unincorporated association, union, business association, firm or other legalentity.

 

Private Exchange:  See Section 2(b) hereof.

 

Private Exchange Notes:  See Section 2(b) hereof.

 

Prospectus:  The prospectus included in any RegistrationStatement (including, without limitation, any prospectus subject to completionand a prospectus that includes any information previously omitted from aprospectus filed as part of an effective registration statement in relianceupon Rule 430A under the Securities Act and any term sheet filed pursuantto Rule 434 under the Securities Act), as amended or supplemented by anyprospectus supplement, and all other amendments and supplements to theProspectus, including post-effective amendments, and all material incorporatedby reference or deemed to be incorporated by reference in such Prospectus.

 

Purchase Agreement:  See the introductoryparagraphs hereof.

 

Records:  See Section 5(n) hereof.

 

Registrable Securities:  Each Security upon itsoriginal issuance and at all times subsequent thereto, each Exchange Securityas to which Section 2(c)(iv) hereof is applicable upon original issuanceand at all times subsequent thereto and each Private Exchange Note (and therelated Guarantees) upon original issuance thereof and at all times subsequentthereto, until, in each case, the earliest to occur of (i) a RegistrationStatement (other than, with respect to any Exchange Securities as to whichSection 2(c)(iv) hereof is applicable, the Exchange Offer RegistrationStatement) covering such Security, Exchange Security or Private Exchange Note(and the related Guarantees) has been declared effective by the SEC and suchSecurity, Exchange Security or such Private Exchange Note (and the relatedGuarantees), as the case may be, has been disposed of in accordance with sucheffective Registration Statement, (ii) such Security has been exchangedpursuant to the Exchange Offer for an Exchange Security or Exchange Securitiesthat may be resold without restriction under state and federal securities laws,(iii) such Security, Exchange Security or Private Exchange Note (and therelated Guarantees), as the case may be, ceases to be outstanding for purposesof the Indenture or (iv) such Security, Exchange Security or PrivateExchange Note (and the related Guarantees), as the case may be, may be resoldwithout restriction pursuant to Rule 144(k) (as amended or replaced) underthe Securities Act.

 

Registration Statement:  Any registration statement ofthe Issuer that covers any of the Securities, the Exchange Securities or thePrivate Exchange Notes (and the related Guarantees) filed with the SEC underthe Securities Act, including, in each case, the Prospectus, amendments andsupplements to such registration statement, including post-effectiveamendments, all exhibits, and all material incorporated by reference or deemedto be incorporated by reference in such registration statement.

 

Rule 144:  Rule 144 under the Securities Act.

 

Rule 144A:  Rule 144A under the Securities Act.

 

3

----

 

Rule 405:  Rule 405 under the Securities Act.

 

Rule 415:  Rule 415 under the Securities Act.

 

Rule 424:  Rule 424 under the Securities Act.

 

SEC:  The U.S. Securities and Exchange Commission.

 

Securities:  See the introductory paragraphs hereto.

 

Securities Act:  The Securities Act of 1933, as amended, andthe rules and regulations of the SEC promulgated thereunder.

 

Senior Subordinated Notes:  See the introductory paragraphshereto.

 

Shelf Notice:  See Section 2(c) hereof.

 

Shelf Registration:  See Section 3(b) hereof.

 

Shelf Registration Statement:  Any Registration Statementrelating to a Shelf Registration.

 

Shelf Suspension Period:  See Section 3(a) hereof.

 

Subordinated Discount Notes:  The Issuer’s 13% SubordinatedDiscount Notes due 2016.

 

Subsequent Shelf Registration:  See Section 3(b) hereof.

 

TIA:  The Trust Indenture Act of 1939, as amended.

 

Trustee:  The trustee under the Indenture and thetrustee under any indenture (if different) governing the Exchange Securitiesand Private Exchange Notes (and the related Guarantees).

 

Underwritten registration or underwritten offering:  Aregistration in which securities of the Issuer is sold to an underwriter forreoffering to the public.

 

Exceptas otherwise specifically provided, all references in this Agreement to acts,laws, statutes, rules, regulations, releases, forms, no-action letters andother regulatory requirements (collectively, “Regulatory Requirements”)shall be deemed to refer also to any amendments thereto and all subsequentRegulatory Requirements adopted as a replacement thereto having substantiallythe same effect therewith; provided that Rule 144 shall not bedeemed to amend or replace Rule 144A.

 

# 2.                                       Exchange Offer

#  

(a)                                  Unless the Exchange Offer would violateapplicable law or any applicable interpretation of the staff of the SEC, theIssuer and the Guarantors shall use their reasonable best efforts to file withthe SEC a Registration Statement (the “Exchange Offer Registration Statement”)on an appropriate

 

4

----

 

registrationform with respect to a registered offer (the “Exchange Offer”) toexchange any and all of the Registrable Securities for a like aggregateprincipal amount of debt securities of the Issuer (the “Exchange Notes”),guaranteed, to the extent applicable, on an unsecured senior basis by theGuarantors (the “New Guarantees” and, together with the Exchange Notes,the “Exchange Securities”), that are identical in all material respectsto the Notes, except that (i) the Exchange Notes shall contain norestrictive legend thereon, (ii) interest thereon shall accrue (A) fromthe later of (x) the last date on which interest was paid on such Notes or (y)if such Notes are surrendered for exchange on a date in a period that includesthe record date for an interest payment date to occur on or after the date ofsuch exchange and as to which interest on such Note will be paid, the date ofsuch interest payment date or (B) if no such interest has been paid, from theIssue Date and (iii) the Exchange Notes shall be entitled to the benefits ofthe Indenture or a trust indenture which is identical in all material respectsto the Indenture (other than such changes to the Indenture or any suchidentical trust indenture as are necessary to comply with the TIA) and which,in either case, has been qualified under the TIA. The Exchange Offer shallcomply with all applicable tender offer rules and regulations under the ExchangeAct and other applicable laws. The Issuer shall use its reasonable best effortsto (x) prepare and file with the SEC the Exchange Offer Registration Statementwith respect to the Exchange Offer; (y) keep the Exchange Offer open forat least 20 Business Days (or longer if required by applicable law) after thedate that notice of the Exchange Offer is mailed to Holders; and(z) consummate the Exchange Offer on or prior to the 360th day followingthe Issue Date.

 

EachHolder (including, without limitation, each Participating Broker-Dealer) thatparticipates in the Exchange Offer, as a condition to participation in theExchange Offer, will be required to represent to the Issuer in writing (whichmay be contained in the applicable letter of transmittal) that:  (i) any Exchange Securities acquired inexchange for Registrable Securities tendered are being acquired in the ordinarycourse of business; (ii) at the time of the commencement or consummationof the Exchange Offer such Holder has no arrangement or understanding with anyPerson to participate in the distribution (within the meaning of the SecuritiesAct) of the Exchange Securities in violation of the provisions of theSecurities Act; (iii) such Holder is not an “affiliate” (as defined inRule 405) of the Issuer or, if it is an affiliate of the Issuer, it willcomply with the registration and prospectus delivery requirements of theSecurities Act to the extent applicable and will provide information to beincluded in the Shelf Registration Statement in accordance with Section 5hereof in order to have their Securities included in the Shelf RegistrationStatement and benefit from the provisions regarding Additional Interest inSection 4 hereof; (iv) if such Holder is not a broker-dealer, suchHolder is not engaged in and does not intend to engage in a distribution of theExchange Securities; and (v) if such Holder is a ParticipatingBroker-Dealer, such Holder has acquired the Registrable Securities for its ownaccount in exchange for Securities that were acquired as a result ofmarket-making activities or other trading activities and that it will complywith the applicable provisions of the Securities Act (including, but notlimited to, the prospectus delivery requirements thereunder).

 

Uponconsummation of the Exchange Offer in accordance with this Section 2, theprovisions of this Agreement shall continue to apply, mutatismutandis,solely with respect to Registrable Securities that are Private Exchange Notes(and the related Guarantees), Exchange Securities as to whichSection 2(c)(iv) is applicable and Exchange Securities held byParticipating Broker-Dealers, and the Issuer shall have no further obligationto register Registrable Securities (other than Private Exchange Notes (and therelated Guarantees), Exchange Securities as to which clause 2(c)(iv)hereof applies and Exchange Securities held by Participating Broker-Dealers)pursuant to Section 3 hereof.

 

5

----

 

Nosecurities other than the Exchange Securities, the Senior Subordinated Notesand the Subordinated Discount Notes (and the related guarantees) shall beincluded in the Exchange Offer Registration Statement.

 

(b)                                 The Issuer shall include within theProspectus contained in the Exchange Offer Registration Statement a sectionentitled “Plan of Distribution,” which shall contain a summary statement of thepositions taken or policies made by the staff of the SEC with respect to thepotential “underwriter” status of any broker-dealer that is the “beneficial owner”(as defined in Rule 13d-3 under the Exchange Act) of Exchange Notesreceived by such broker-dealer in the Exchange Offer (a “ParticipatingBroker-Dealer”), whether such positions or policies have been publiclydisseminated by the staff of the SEC or such positions or policies representthe prevailing views of the staff of the SEC. Such “Plan of Distribution”section shall also expressly permit, to the extent permitted by applicablepolicies and regulations of the SEC, the use of the Prospectus by all ParticipatingBroker-Dealers, and include a statement describing the means by whichParticipating Broker-Dealers may resell the Exchange Securities in compliancewith the Securities Act.

 

TheIssuer shall use its reasonable best efforts to keep the Exchange OfferRegistration Statement effective and to amend and supplement the Prospectuscontained therein in order to permit such Prospectus to be lawfully deliveredby all Persons subject to the prospectus delivery requirements of theSecurities Act for such period of time as is necessary to comply withapplicable law in connection with any resale of the Exchange Securities; provided,however, that such period shall not be required to exceed 90 days, orsuch longer period if extended pursuant to the last paragraph of Section 6hereof (the “Applicable Period”).

 

If,prior to consummation of the Exchange Offer, the Initial Purchasers hold anyNotes acquired by them that have the status of an unsold allotment in theinitial distribution, the Issuer, upon the request of the Initial Purchasers,shall simultaneously with the delivery of the Exchange Notes issue and deliverto the Initial Purchasers, in exchange (the “Private Exchange”) for suchNotes held by any such Holder, a like principal amount of notes (the “PrivateExchange Notes”) of the Issuer, guaranteed by the Guarantors, that areidentical in all material respects to the Exchange Notes except for theplacement of a restrictive legend on such Private Exchange Notes. The PrivateExchange Notes shall be issued pursuant to the same indenture as the ExchangeNotes and bear the same CUSIP number as the Exchange Notes if permitted by theCUSIP Service Bureau.

 

Inconnection with the Exchange Offer, the Issuer shall:

 

(1)                                  mail, or cause to be mailed, to each Holderof record entitled to participate in the Exchange Offer a copy of theProspectus forming part of the Exchange Offer Registration Statement, togetherwith an appropriate letter of transmittal and related documents;

 

(2)                                  use their respective reasonable best effortsto keep the Exchange Offer open for not less than 20 Business Days from thedate that notice of the Exchange Offer is mailed to Holders (or longer ifrequired by applicable law);

 

(3)                                  utilize the services of a depositary for theExchange Offer with an address in the Borough of Manhattan, The City of NewYork or in Wilmington, Delaware;

 

6

----

 

(4)                                  permit Holders to withdraw tendered Notes atany time prior to the close of business, New York time, on the last BusinessDay on which the Exchange Offer remains open; and

 

(5)                                  otherwise comply in all material respectswith all laws, rules and regulations applicable to the Exchange Offer.

 

Assoon as practicable after the close of the Exchange Offer and any Private Exchange,the Issuer shall:

 

(1)                                  accept for exchange all RegistrableSecurities validly tendered and not validly withdrawn pursuant to the ExchangeOffer and any Private Exchange;

 

(2)                                  deliver to the Trustee for cancellation allRegistrable Securities so accepted for exchange; and

 

(3)                                  cause the Trustee to authenticate and deliverpromptly to each Holder of Notes, Exchange Notes or Private Exchange Notes, asthe case may be, equal in principal amount to the Notes of such Holder soaccepted for exchange; provided that, in the case of any Notes held inglobal form by a depositary, authentication and delivery to such depositary ofone or more replacement Notes in global form in an equivalent principal amountthereto for the account of such Holders in accordance with the Indenture shallsatisfy such authentication and delivery requirement.

 

TheExchange Offer and the Private Exchange shall not be subject to any conditions,other than that (i) the Exchange Offer or Private Exchange, as the casemay be, does not violate applicable law or any applicable interpretation of thestaff of the SEC; (ii) no action or proceeding shall have been institutedor threatened in any court or by any governmental agency which might materiallyimpair the ability of the Issuer to proceed with the Exchange Offer or thePrivate Exchange, and no material adverse development shall have occurred inany existing action or proceeding with respect to the Issuer; and(iii) all governmental approvals shall have been obtained, which approvalsthe Issuer deem necessary for the consummation of the Exchange Offer or PrivateExchange.

 

TheExchange Securities and the Private Exchange Notes (and related guarantees)shall be issued under (i) the Indenture or (ii) an indentureidentical in all material respects to the Indenture and which, in either case,has been qualified under the TIA or is exempt from such qualification and shallprovide that the Exchange Securities shall not be subject to the transferrestrictions set forth in the Indenture. The Indenture or such indenture shallprovide that the Exchange Notes, the Private Exchange Notes and the Notes shallvote and consent together on all matters as one class and that none of theExchange Notes, the Private Exchange Notes or the Notes will have the right tovote or consent as a separate class on any matter.

 

(c)                                  If, (i) because of any change in law orin currently prevailing interpretations of the staff of the SEC, the Issuer isnot permitted to effect the Exchange Offer, (ii) the Exchange Offer is notconsummated within 360 days of the Issue Date, (iii) any holder of PrivateExchange Notes so requests in writing to the Issuer at any time within 30 daysafter the consummation of the Exchange Offer, or (iv) in the case of anyHolder that participates in the Exchange Offer, such Holder does not receive

 

7

----

 

ExchangeSecurities on the date of the exchange that may be sold without restrictionunder state and federal securities laws (other than due solely to the status ofsuch Holder as an affiliate of the Issuer within the meaning of the SecuritiesAct) and so notifies the Issuer within 30 days after such Holder first becomesaware of such restrictions, in the case of each of clauses (i) to and including(iv) of this sentence, then the Issuer shall promptly deliver to the Trustee(to deliver to the Holders) written notice thereof (the “Shelf Notice”)and shall file a Shelf Registration pursuant to Section 3 hereof.

 

# 3.                                       ShelfRegistration

#  

Ifat any time a Shelf Notice is delivered as contemplated by Section 2(c)hereof, then:

 

## (a)                                  ShelfRegistration. The Issuer shall promptly file with the SEC aRegistration Statement for an offering to be made on a continuous basispursuant to Rule 415 covering all of the Registrable Securities (the “InitialShelf Registration”). The Issuer shall use its reasonable best efforts tofile with the SEC the Initial Shelf Registration on or prior to the Filing Date.The Initial Shelf Registration shall be on Form S-1 or another appropriateform permitting registration of such Registrable Securities for resale byHolders in the manner or manners designated by them (including, withoutlimitation, one or more underwritten offerings). The Issuer shall not permitany securities other than the Registrable Securities and the Guarantees, theSenior Subordinated Notes and the related guarantees and the SubordinatedDiscount Notes and the related guarantees to be included in the Initial ShelfRegistration or any Subsequent Shelf Registration (as defined below).

##  

TheIssuer shall use its respective reasonable best efforts to cause the ShelfRegistration to be declared effective under the Securities Act on or prior tothe Effectiveness Date and to keep the Initial Shelf Registration continuouslyeffective under the Securities Act until the earliest of (i) the date that istwo years from the Issue Date (ii) such shorter period ending when allRegistrable Securities covered by the Initial Shelf Registration have been soldin the manner set forth and as contemplated in the Initial Shelf Registrationor, if applicable, a Subsequent Shelf Registration or (iii) the date upon whichall Registrable Securities become eligible for resale without regard to volume,manner of sale or other restrictions contained in Rule 144(k) (the “EffectivenessPeriod”); provided, however, that the Effectiveness Period inrespect of the Initial Shelf Registration shall be extended to the extentrequired to permit dealers to comply with the applicable prospectus deliveryrequirements of Rule 174 under the Securities Act and as otherwise providedherein. Notwithstanding anything to the contrary in this Agreement, at anytime, the Issuer may delay the filing of any Initial Shelf RegistrationStatement or delay or suspend the effectiveness thereof, for a reasonableperiod of time, but not in excess of 60 consecutive days or more than three (3)times during any calendar year (each, a “Shelf Suspension Period”), ifthe Board of Directors of the Issuer determines reasonably and in good faith thatthe filing of any such Initial Shelf Registration Statement or the continuingeffectiveness thereof would require the disclosure of non-public materialinformation that, in the reasonable judgment of the Board of Directors of theIssuer, would be detrimental to the Issuer if so disclosed or would otherwisematerially adversely affect a financing, acquisition, disposition, merger orother material transaction or such action is required by applicable law.

 

## (b)                                 Withdrawal ofStop Orders; Subsequent Shelf Registrations. If the Initial ShelfRegistration or any Subsequent Shelf Registration ceases to be effective forany reason at any time during the Effectiveness Period (other than because ofthe sale of all of the Securities registered thereunder), the Issuer shall useits reasonable best efforts to obtain the prompt withdrawal of any ordersuspending the

 

8

----

 

## effectiveness thereof, andin any event shall file an additional Shelf Registration Statement pursuant toRule 415 covering all of the Registrable Securities covered by and not soldunder the Initial Shelf Registration or an earlier Subsequent ShelfRegistration (each, a “Subsequent Shelf Registration”). If a SubsequentShelf Registration is filed, the Issuer shall use its reasonable best effortsto cause the Subsequent Shelf Registration to be declared effective under theSecurities Act as soon as practicable after such filing and to keep suchsubsequent Shelf Registration continuously effective for a period equal to thenumber of days in the Effectiveness Period less the aggregate number of daysduring which the Initial Shelf Registration or any Subsequent ShelfRegistration was previously continuously effective. As used herein the term “ShelfRegistration” means the Initial Shelf Registration and any Subsequent ShelfRegistration.

##  

## (c)                                  Supplements andAmendments. The Issuer shall promptly supplement and amend theShelf Registration if required by the rules, regulations or instructionsapplicable to the registration form used for such Shelf Registration, ifrequired by the Securities Act, or if reasonably requested by the Holders of amajority in aggregate principal amount of the Registrable Securities (or theircounsel) covered by such Registration Statement with respect to the informationincluded therein with respect to one or more of such Holders, or, if reasonablyrequested by any underwriter of such Registrable Securities, with respect tothe information included therein with respect to such underwriter.

##  

# 4.                                       AdditionalInterest

#  

(a)                                  The Issuer and the Initial Purchasers agreethat the Holders will suffer damages if the Issuer fails to fulfill itsobligations under Section 2 or Section 3 hereof and that it would notbe feasible to ascertain the extent of such damages with precision. Accordingly,the Issuer agrees to pay as liquidated damages, additional interest on theNotes (“Additional Interest”) if (A) the Issuer has neither (i)exchanged Exchange Securities for all Securities validly tendered in accordancewith the terms of the Exchange Offer nor (ii) had a Shelf RegistrationStatement declared effective, in either case on or prior to the 360th day afterthe Issue Date, (B) notwithstanding clause (A), the Issuer is required to filea Shelf Registration Statement and such Shelf Registration Statement is notdeclared effective on or prior to the 360th day after the date such ShelfRegistration Statement filing was requested or required or (C), ifapplicable, a Shelf Registration has been declared effective and such ShelfRegistration ceases to be effective at any time during the Effectiveness Period(other than because of the sale of all of the Securities registeredthereunder), and then Additional Interest shall accrue on the principal amountof the Registrable Securities at a rate of 0.25% per annum (which rate will beincreased by an additional 0.25% per annum for each subsequent 90 day periodthat such Additional Interest continues to accrue, provided that the rate atwhich such Additional Interest accrues may in no event exceed 1.00% per annum)(such Additional Interest to be calculated by the Issuer) commencing on the(x) 361st day after the Issue Date, in the case of (A) above, (y) the361st day after the date such Shelf Registration Statement filing was requestedor required in the case of (B) above or (z) the day such Shelf Registrationceases to be effective in the case of (C) above; provided, however,that upon the exchange of the Exchange Securities for all Securitiestendered (in the case of clause (A) of this Section 4), upon theeffectiveness of the applicable Shelf Registration Statement (in the case of(B) of this Section 4), or upon the effectiveness of the applicable ShelfRegistration Statement which had ceased to remain effective (in the case of (C)of this Section 4), Additional Interest on the Registrable Securities inrespect of which such events relate as a result of such clause (or the relevantsubclause thereof), as the case may be, shall cease to accrue. Notwithstandingany other provisions of this Section 4, the Issuer shall not be obligated topay Additional Interest provided in Sections 4(a)(B) during a Shelf SuspensionPeriod permitted by Section 3(a) hereof.

 

9

----

 

(b)                                 The Issuer shall notify the Trustee withinone business day after each and every date on which an event occurs in respectof which Additional Interest is required to be paid (an “Event Date”). Anyamounts of Additional Interest due pursuant to (a) of this Section 4 willbe payable in cash semiannually on each May 1 and November 1 (to the holders ofrecord on the April 15 and October 15 immediately preceding such dates),commencing with the first such date occurring after any such AdditionalInterest commences to accrue. The amount of Additional Interest will bedetermined by the Issuer by multiplying the applicable Additional Interest rateby the principal amount of the Registrable Securities, multiplied by afraction, the numerator of which is the number of days such Additional Interestrate was applicable during such period (determined on the basis of a360 day year comprised of twelve 30 day months and, in the case of apartial month, the actual number of days elapsed), and the denominator of whichis 360.

 

# 5.                                       RegistrationProcedures

#  

Inconnection with the filing of any Registration Statement pursuant toSection 2 or 3 hereof, the Issuer shall effect such registrations topermit the sale of the securities covered thereby in accordance with theintended method or methods of disposition thereof, and pursuant thereto and inconnection with any Registration Statement filed by the Issuer hereunder theIssuer shall:

 

## (a)                                  Prepare andfile with the SEC (prior to the applicable Filing Date in the case of a ShelfRegistration), a Registration Statement or Registration Statements asprescribed by Section 2 or 3 hereof, and use its reasonable best effortsto cause each such Registration Statement to become effective and remaineffective as provided herein; provided, however, that if (1) suchfiling is pursuant to Section 3 hereof or (2) a Prospectus containedin the Exchange Offer Registration Statement filed pursuant to Section 2hereof is required to be delivered under the Securities Act by anyParticipating Broker-Dealer who seeks to sell Exchange Securities during theApplicable Period relating thereto from whom the Issuer has received priorwritten notice that it will be a Participating Broker-Dealer in the ExchangeOffer, before filing any Registration Statement or Prospectus or any amendmentsor supplements thereto, the Issuer shall furnish to and afford counsel for theHolders of the Registrable Securities covered by such Registration Statement(with respect to a Registration Statement filed pursuant to Section 3hereof) or counsel for such Participating Broker-Dealer (with respect to anysuch Registration Statement), as the case may be, and counsel to the managingunderwriters, if any, a reasonable opportunity to review copies of all suchdocuments (including copies of any documents to be incorporated by referencetherein and all exhibits thereto) proposed to be filed (in each case at leastthree Business Days prior to such filing). The Issuer shall not file anyRegistration Statement or Prospectus or any amendments or supplements theretoif the Holders of a majority in aggregate principal amount of the RegistrableSecurities covered by such Registration Statement, their counsel, or themanaging underwriters, if any, shall reasonably object.

##  

## (b)                                 Prepare andfile with the SEC such amendments and post-effective amendments to each ShelfRegistration Statement or Exchange Offer Registration Statement, as the casemay be, as may be necessary to keep such Registration Statement continuouslyeffective for the Effectiveness Period, the Applicable Period or untilconsummation of the Exchange Offer, as the case may be; cause the relatedProspectus to be supplemented by any Prospectus supplement required byapplicable law, and as so supplemented to be filed pursuant to Rule 424;and comply with the provisions of the Securities Act and the Exchange Actapplicable to it with respect to the disposition of all securities covered bysuch Registration Statement as so amended or in such Prospectus as sosupplemented and with respect to the subsequent

 

10

----

 

## resale of any securitiesbeing sold by an Participating Broker-Dealer covered by any such Prospectus inall material respects. The Issuer shall be deemed not to have used itsreasonable best efforts to keep a Registration Statement effective if itvoluntarily takes any action that is reasonably expected to result in sellingHolders of the Registrable Securities covered thereby or ParticipatingBroker-Dealers seeking to sell Exchange Securities not being able to sell suchRegistrable Securities or such Exchange Securities during that period unlesssuch action is required by applicable law or permitted by this Agreement.

 

## (c)                                  If (1) aShelf Registration is filed pursuant to Section 3 hereof or (2) aProspectus contained in the Exchange Offer Registration Statement filedpursuant to Section 2 hereof is required to be delivered under theSecurities Act by any Participating Broker-Dealer who seeks to sell ExchangeSecurities during the Applicable Period relating thereto from whom the Issuerhas received written notice that it will be a Participating Broker-Dealer inthe Exchange Offer, notify the selling Holders of Registrable Securities (withrespect to a Registration Statement filed pursuant to Section 3 hereof),or each such Participating Broker-Dealer (with respect to any such RegistrationStatement), as the case may be, their counsel and the managing underwriters, ifany, promptly (but in any event within three Business Days), and confirm suchnotice in writing, (i) when a Prospectus or any Prospectus supplement orpost-effective amendment has been filed, and, with respect to a RegistrationStatement or any post-effective amendment, when the same has become effectiveunder the Securities Act (including in such notice a written statement that anyHolder may, upon request, obtain, at the sole expense of the Issuer, oneconformed copy of such Registration Statement or post-effective amendmentincluding financial statements and schedules, documents incorporated or deemedto be incorporated by reference and exhibits), (ii) of the issuance by theSEC of any stop order suspending the effectiveness of a Registration Statementor of any order preventing or suspending the use of any preliminary prospectusor the initiation of any proceedings for that purpose, (iii) if at anytime when a prospectus is required by the Securities Act to be delivered inconnection with sales of the Registrable Securities or resales of ExchangeSecurities by Participating Broker-Dealers the representations and warrantiesof the Issuer contained in any agreement (including any underwriting agreement)contemplated by Section 5(m) hereof cease to be true and correct,(iv) of the receipt by the Issuer of any notification with respect to thesuspension of the qualification or exemption from qualification of aRegistration Statement or any of the Registrable Securities or the ExchangeSecurities to be sold by any Participating Broker-Dealer for offer or sale inany jurisdiction, or the initiation or threatening of any proceeding for suchpurpose, (v) of the happening of any event, the existence of any conditionor any information becoming known that makes any statement made in suchRegistration Statement or related Prospectus or any document incorporated ordeemed to be incorporated therein by reference untrue in any material respector that requires the making of any changes in or amendments or supplements tosuch Registration Statement, Prospectus or documents so that, in the case ofthe Registration Statement, it will not contain any untrue statement of amaterial fact or omit to state any material fact required to be stated thereinor necessary to make the statements therein not misleading, and that in thecase of the Prospectus, it will not contain any untrue statement of a materialfact or omit to state any material fact required to be stated therein ornecessary to make the statements therein, in the light of the circumstancesunder which they were made, not misleading, and (vi) of the Issuer’sdetermination that a post-effective amendment to a Registration Statement wouldbe appropriate.

##  

## (d)                                 Use itsreasonable best efforts to prevent the issuance of any order suspending theeffectiveness of a Registration Statement or of any order preventing or suspendingthe use of a Prospectus or suspending the qualification (or exemption fromqualification) of any of the Registrable Securities or the Exchange Securitiesto be sold by any Participating Broker-Dealer, for sale in any jurisdiction.

 

11

----

 

## (e)                                  If a ShelfRegistration is filed pursuant to Section 3 and if requested during theEffectiveness Period by the managing underwriter or underwriters (if any) orthe Holders of a majority in aggregate principal amount of the RegistrableSecurities being sold in connection with an underwritten offering, (i) aspromptly as practicable incorporate in a prospectus supplement orpost-effective amendment such information as the managing underwriter orunderwriters (if any), such Holders or counsel for either of them reasonablyrequest to be included therein, (ii) make all required filings of suchprospectus supplement or such post-effective amendment as soon as practicableafter the Issuer has received notification of the matters to be incorporated insuch prospectus supplement or post-effective amendment, and(iii) supplement or make amendments to such Registration Statement.

 

## (f)                                    If (1) aShelf Registration is filed pursuant to Section 3 hereof, or (2) aProspectus contained in the Exchange Offer Registration Statement filedpursuant to Section 2 hereof is required to be delivered under theSecurities Act by any Participating Broker-Dealer who seeks to sell ExchangeSecurities during the Applicable Period, furnish to each selling Holder ofRegistrable Securities (with respect to a Registration Statement filed pursuantto Section 3 hereof) and to each such Participating Broker-Dealer who sorequests (with respect to any such Registration Statement) and to theirrespective counsel and each managing underwriter, if any, at the sole expenseof the Issuer, one conformed copy of the Registration Statement or RegistrationStatements and each post-effective amendment thereto, including financialstatements and schedules, and, if requested, all documents incorporated ordeemed to be incorporated therein by reference and all exhibits.

 

## (g)                                 If (1) aShelf Registration is filed pursuant to Section 3 hereof, or (2) aProspectus contained in the Exchange Offer Registration Statement filed pursuantto Section 2 hereof is required to be delivered under the Securities Actby any Participating Broker-Dealer who seeks to sell Exchange Securities duringthe Applicable Period, deliver to each selling Holder of Registrable Securities(with respect to a Registration Statement filed pursuant to Section 3hereof), or each such Participating Broker-Dealer (with respect to any suchRegistration Statement), as the case may be, their respective counsel, and theunderwriters, if any, at the sole expense of the Issuer, as many copies of theProspectus or Prospectuses (including each form of preliminary prospectus) andeach amendment or supplement thereto and any documents incorporated byreference therein as such Persons may reasonably request; and, subject to the lastparagraph of this Section 5, the Issuer hereby consents to the use of suchProspectus and each amendment or supplement thereto by each of the sellingHolders of Registrable Securities or each such Participating Broker-Dealer, asthe case may be, and the underwriters or agents, if any, and dealers, if any,in connection with the offering and sale of the Registrable Securities coveredby, or the sale by Participating Broker-Dealers of the Exchange Securitiespursuant to, such Prospectus and any amendment or supplement thereto.

 

## (h)                                 Prior to anypublic offering of Registrable Securities or any delivery of a Prospectuscontained in the Exchange Offer Registration Statement by any ParticipatingBroker-Dealer who seeks to sell Exchange Securities during the ApplicablePeriod, use its reasonable best efforts to register or qualify, and tocooperate with the selling Holders of Registrable Securities or each suchParticipating Broker-Dealer, as the case may be, the managing underwriter orunderwriters, if any, and their respective counsel in connection with theregistration or qualification (or exemption from such registration orqualification) of such Registrable Securities for offer and sale under thesecurities or Blue Sky laws of such jurisdictions within the United States asany selling Holder, Participating Broker-Dealer, or the managing underwriter orunderwriters reasonably request in writing; provided, however,that where Exchange Securities

 

12

----

 

## held by ParticipatingBroker-Dealers or Registrable Securities are offered other than through anunderwritten offering, the Issuer agrees to cause its counsel to perform BlueSky investigations and file registrations and qualifications required to befiled pursuant to this Section 5(h), keep each such registration orqualification (or exemption therefrom) effective during the period suchRegistration Statement is required to be kept effective and do any and allother acts or things necessary or advisable to enable the disposition in suchjurisdictions of the Exchange Securities held by Participating Broker-Dealersor the Registrable Securities covered by the applicable Registration Statement;provided, however, that the Issuer shall not be required to(A) qualify generally to do business in any jurisdiction where it is notthen so qualified, (B) take any action that would subject it to generalservice of process in any such jurisdiction where it is not then so subject or(C) subject itself to taxation in excess of a nominal dollar amount in anysuch jurisdiction where it is not then so subject.

##  

## (i)                                     If a ShelfRegistration is filed pursuant to Section 3 hereof, cooperate with theselling Holders of Registrable Securities and the managing underwriter orunderwriters, if any, to facilitate the timely preparation and delivery ofcertificates representing Registrable Securities to be sold, which certificatesshall not bear any restrictive legends and shall be in a form eligible fordeposit with The Depository Trust Company; and enable such RegistrableSecurities to be in such denominations (subject to applicable requirementscontained in the Indenture) and registered in such names as the managingunderwriter or underwriters, if any, or Holders may request.

##  

## (j)                                     Use itsreasonable best efforts to cause the Registrable Securities covered by theRegistration Statement to be registered with or approved by such other U.S.governmental agencies or authorities as may be necessary to enable the selleror sellers thereof or the underwriter or underwriters, if any, to consummatethe disposition of such Registrable Securities, except as may be requiredsolely as a consequence of the nature of such selling Holder’s business, inwhich case the Issuer will cooperate in all respects with the filing of suchRegistration Statement and the granting of such approvals.

##  

## (k)                                  If (1) aShelf Registration is filed pursuant to Section 3 hereof, or (2) aProspectus contained in the Exchange Offer Registration Statement filedpursuant to Section 2 hereof is required to be delivered under theSecurities Act by any Participating Broker-Dealer who seeks to sell ExchangeSecurities during the Applicable Period, upon the occurrence of any eventcontemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicableprepare and (subject to Section 5(a) hereof) file with the SEC, at thesole expense of the Issuer, a supplement or post-effective amendment to theRegistration Statement or a supplement to the related Prospectus or anydocument incorporated therein by reference, or file any other required documentso that, as thereafter delivered to the purchasers of the RegistrableSecurities being sold thereunder (with respect to a Registration Statementfiled pursuant to Section 3 hereof) or to the purchasers of the ExchangeSecurities to whom such Prospectus will be delivered by a ParticipatingBroker-Dealer (with respect to any such Registration Statement), any suchProspectus will not contain an untrue statement of a material fact or omit tostate a material fact required to be stated therein or necessary to make thestatements therein, in the light of the circumstances under which they weremade, not misleading.

##  

## (l)                                     Prior to theeffective date of the first Registration Statement relating to the RegistrableSecurities, (i) provide the Trustee with certificates for the RegistrableSecurities in a form eligible for deposit with The Depository Trust Company and(ii) provide a CUSIP number for the Registrable Securities.

 

13

----

 

## (m)                               In connectionwith any underwritten offering of Registrable Securities pursuant to a ShelfRegistration, enter into an underwriting agreement as is customary inunderwritten offerings of debt securities similar to the Securities (including,without limitation, a customary condition to the obligations of theunderwriters that the underwriters shall have received “cold comfort” lettersand updates thereof in form, scope and substance reasonably satisfactory to themanaging underwriter or underwriters from the independent certified publicaccountants of the Issuer (and, if necessary, any other independent certifiedpublic accountants of the Issuer, or of any business acquired by the Issuer,for which financial statements and financial data are, or are required to be,included or incorporated by reference in the Registration Statement), addressedto each of the underwriters, such letters to be in customary form and coveringmatters of the type customarily covered in “cold comfort” letters in connectionwith underwritten offerings of debt securities similar to the Securities), andtake all such other actions as are reasonably requested by the managingunderwriter or underwriters in order to expedite or facilitate the registrationor the disposition of such Registrable Securities and, in such connection,(i) make such representations and warranties to, and covenants with, theunderwriters with respect to the business of the Issuer (including any acquiredbusiness, properties or entity, if applicable), and the Registration Statement,Prospectus and documents, if any, incorporated or deemed to be incorporated byreference therein, in each case, as are customarily made by issuers tounderwriters in underwritten offerings of debt securities similar to the Securities,and confirm the same in writing if and when requested; (ii) obtain thewritten opinions of counsel to the Issuer, and written updates thereof in form,scope and substance reasonably satisfactory to the managing underwriter orunderwriters, addressed to the underwriters covering the matters customarilycovered in opinions reasonably requested in underwritten offerings; and(iii) if an underwriting agreement is entered into, the same shall containindemnification provisions and procedures no less favorable to the sellers andunderwriters, if any, than those set forth in Section 7 hereof (or suchother provisions and procedures reasonably acceptable to Holders of a majorityin aggregate principal amount of Registrable Securities covered by such RegistrationStatement and the managing underwriter or underwriters or agents, if any). Theabove shall be done at each closing under such underwriting agreement, or asand to the extent required thereunder.

 

## (n)                                 If (1) aShelf Registration is filed pursuant to Section 3 hereof, or (2) aProspectus contained in the Exchange Offer Registration Statement filedpursuant to Section 2 hereof is required to be delivered under theSecurities Act by any Participating Broker-Dealer who seeks to sell ExchangeSecurities during the Applicable Period, make available for inspection by anyInitial Purchaser, any selling Holder of such Registrable Securities being sold(with respect to a Registration Statement filed pursuant to Section 3hereof), or each such Participating Broker-Dealer, as the case may be, anyunderwriter participating in any such disposition of Registrable Securities, ifany, and any attorney, accountant or other agent retained by any such sellingHolder or each such Participating Broker-Dealer (with respect to any suchRegistration Statement), as the case may be, or underwriter (any such InitialPurchasers, Holders, Participating Broker-Dealers, underwriters, attorneys,accountants or agents, collectively, the “Inspectors”), upon writtenrequest, at the offices where normally kept, during reasonable business hours,all pertinent financial and other records, pertinent corporate documents andinstruments of the Issuer and subsidiaries of the Issuer (collectively, the “Records”),as shall be reasonably necessary to enable them to exercise any applicable duediligence responsibilities, and cause the officers, directors and employees ofthe Issuer and any of its subsidiaries to supply all information (“Information”)reasonably requested by any such Inspector in connection with such duediligence responsibilities. Each Inspector shall agree in writing that it willkeep the Records and Information confidential, to use the Information only fordue diligence purposes, to abstain from using the Information as the basis forany market transactions in

 

14

----

 

## Securities of the Issuer andthat it will not disclose any of the Records or Information that the Issuerdetermines, in good faith, to be confidential and notifies the Inspectors inwriting are confidential unless (i) the disclosure of such Records orInformation is necessary to avoid or correct a misstatement or omission in suchRegistration Statement or Prospectus, (ii) the release of such Records orInformation is ordered pursuant to a subpoena or other order from a court ofcompetent jurisdiction, (iii) disclosure of such Records or Information isnecessary or advisable, in the opinion of counsel for any Inspector, inconnection with any action, claim, suit or proceeding, directly or indirectly,involving or potentially involving such Inspector and arising out of, basedupon, relating to, or involving this Agreement or the Purchase Agreement, orany transactions contemplated hereby or thereby or arising hereunder or thereunder,or (iv) the information in such Records or Information has been madegenerally available to the public other than by an Inspector or an “affiliate”(as defined in Rule 405) thereof; provided, however, thatprior notice shall be provided as soon as practicable to the Issuer of thepotential disclosure of any information by such Inspector pursuant toclauses (ii) or (iii) of this sentence to permit the Issuer to obtain aprotective order (or waive the provisions of this paragraph (n)) and thatsuch Inspector shall take such actions as are reasonably necessary to protectthe confidentiality of such information (if practicable) to the extent suchaction is otherwise not inconsistent with, an impairment of or in derogation ofthe rights and interests of the Holder or any Inspector.

 

## (o)                                 Provide anindenture trustee for the Registrable Securities or the Exchange Securities, asthe case may be, and cause the Indenture or the trust indenture provided for inSection 2(a) hereof, as the case may be, to be qualified under the TIA notlater than the effective date of the first Registration Statement relating tothe Registrable Securities; and in connection therewith, cooperate with thetrustee under any such indenture and the Holders of the Registrable Securities,to effect such changes (if any) to such indenture as may be required for suchindenture to be so qualified in accordance with the terms of the TIA; andexecute, and use its commercially reasonable best efforts to cause such trusteeto execute, all documents as may be required to effect such changes, and allother forms and documents required to be filed with the SEC to enable suchindenture to be so qualified in a timely manner.

##  

## (p)                                 Comply in allmaterial respects with all applicable rules and regulations of the SEC and makegenerally available to its securityholders with regard to any applicableRegistration Statement, a consolidated earning statement satisfying theprovisions of Section 11(a) of the Securities Act and Rule 158thereunder (or any similar rule promulgated under the Securities Act) no laterthan 45 days after the end of any fiscal quarter (or 90 days afterthe end of any 12-month period if such period is a fiscal year)(i) commencing at the end of any fiscal quarter in which RegistrableSecurities are sold to underwriters in a firm commitment or best effortsunderwritten offering and (ii) if not sold to underwriters in such anoffering, commencing on the first day of the first fiscal quarter of theIssuer, after the effective date of a Registration Statement, which statementsshall cover said 12-month periods; provided that this requirement shall bedeemed satisfied by the Issuer complying with Section 4.02 of the Indenture.

##  

## (q)                                 Uponconsummation of the Exchange Offer or a Private Exchange, obtain an opinion ofcounsel to the Issuer, in a form customary for underwritten transactions,addressed to the Trustee for the benefit of all Holders of RegistrableSecurities participating in the Exchange Offer or the Private Exchange, as thecase may be, that the Exchange Securities or Private Exchange Notes, as thecase may be, the related guarantees and the related indenture constitute legal,valid and binding obligations of the Issuer, enforceable against the Issuer inaccordance with their respective terms, subject to customary exceptions andqualifications. If the Exchange Offer or a Private Exchange is to beconsummated, upon

 

15

----

 

## delivery of the RegistrableSecurities by Holders to the Issuer (or to such other Person as directed by theIssuer), in exchange for the Exchange Securities or the Private Exchange Notes(and the related guarantees), as the case may be, the Issuer shall mark, orcause to be marked, on such Registrable Securities that such RegistrableSecurities are being cancelled in exchange for the Exchange Securities or thePrivate Exchange Notes (and the related guarantees), as the case may be; in noevent shall such Registrable Securities be marked as paid or otherwisesatisfied.

 

## (r)                                    Use reasonableefforts to cooperate with each seller of Registrable Securities covered by anyRegistration Statement and each underwriter, if any, participating in thedisposition of such Registrable Securities and their respective counsel inconnection with any filings required to be made with the National Associationof Securities Dealers, Inc. (the “NASD”).

##  

## (s)                                  Use itsrespective reasonable best efforts to take all other steps reasonably necessaryto effect the registration of the Exchange Securities and/or RegistrableSecurities covered by a Registration Statement contemplated hereby.

##  

TheIssuer may require each seller of Registrable Securities as to which anyregistration is being effected to furnish to the Issuer such informationregarding such seller and the distribution of such Registrable Securities asthe Issuer may, from time to time, reasonably request. The Issuer may excludefrom such registration the Registrable Securities of any seller so long as suchseller fails to furnish such information within a reasonable time afterreceiving such request. Each seller as to which any Shelf Registration is beingeffected agrees to furnish promptly to the Issuer all information required tobe disclosed in order to make the information previously furnished to the Issuerby such seller not materially misleading.

 

Ifany such Registration Statement refers to any Holder by name or otherwise asthe holder of any securities of the Issuer, then such Holder shall have theright to require (i) the insertion therein of language, in form andsubstance reasonably satisfactory to such Holder, to the effect that theholding by such Holder of such securities is not to be construed as arecommendation by such Holder of the investment quality of the securitiescovered thereby and that such holding does not imply that such Holder willassist in meeting any future financial requirements of the Issuer, or(ii) in the event that such reference to such Holder by name or otherwiseis not required by the Securities Act or any similar federal statute then inforce, the deletion of the reference to such Holder in any amendment orsupplement to the Registration Statement filed or prepared subsequent to thetime that such reference ceases to be required.

 

EachHolder of Registrable Securities and each Participating Broker-Dealer agrees byits acquisition of such Registrable Securities or Exchange Securities to besold by such Participating Broker-Dealer, as the case may be, that, upon actualreceipt of any notice from the Issuer of the happening of any event of the kinddescribed in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, suchHolder will forthwith discontinue disposition of such Registrable Securitiescovered by such Registration Statement or Prospectus or Exchange Securities tobe sold by such Holder or Participating Broker-Dealer, as the case may be,until such Holder’s or Participating Broker-Dealer’s receipt of the copies ofthe supplemented or amended Prospectus contemplated by Section 5(k)hereof, or until it is advised in writing (the “Advice”) by the Issuerthat the use of the applicable Prospectus may be resumed, and has receivedcopies of any amendments or supplements thereto. In the event that the Issuershall give any such notice, each of the Applicable Period and the EffectivenessPeriod shall be extended by the number of days during such

 

16

----

 

periodsfrom and including the date of the giving of such notice to and including thedate when each seller of Registrable Securities covered by such RegistrationStatement or Exchange Securities to be sold by such ParticipatingBroker-Dealer, as the case may be, shall have received (x) the copies ofthe supplemented or amended Prospectus contemplated by Section 5(k) hereofor (y) the Advice.

 

# 6.                                       RegistrationExpenses

#  

Allfees and expenses incident to the performance of or compliance with thisAgreement by the Issuer of its obligations under Sections 2, 3, 5 and 8 shallbe borne by the Issuer, whether or not the Exchange Offer RegistrationStatement or any Shelf Registration Statement is filed or becomes effective orthe Exchange Offer is consummated, including, without limitation, (i) allregistration and filing fees (including, without limitation, (A) fees withrespect to filings required to be made with the NASD in connection with anunderwritten offering and (B) fees and expenses of compliance with statesecurities or Blue Sky laws (including, without limitation, reasonable fees anddisbursements of counsel in connection with Blue Sky qualifications of theRegistrable Securities or Exchange Securities and determination of theeligibility of the Registrable Securities or Exchange Securities for investmentunder the laws of such jurisdictions in the United States (x) where the holdersof Registrable Securities are located, in the case of the Exchange Securities,or (y) as provided in Section 5(h) hereof, in the case of RegistrableSecurities or Exchange Securities to be sold by a Participating Broker-Dealerduring the Applicable Period)), (ii) printing expenses, including, withoutlimitation, printing prospectuses if the printing of prospectuses is requestedby the managing underwriter or underwriters, if any, by the Holders of amajority in aggregate principal amount of the Registrable Securities includedin any Registration Statement or in respect of Registrable Securities orExchange Securities to be sold by any Participating Broker-Dealer during theApplicable Period, as the case may be, (iii) fees and expenses of theTrustee, any exchange agent and their counsel, (iv) fees and disbursementsof counsel for the Issuer and, in the case of a Shelf Registration, reasonablefees and disbursements of one special counsel for all of the sellers ofRegistrable Securities selected by the Holder of a majority in aggregateprincipal amount of Registrable Securities covered by such Shelf Registration(which counsel shall be reasonably satisfactory to the Issuer) exclusive of anycounsel retained pursuant to Section 7 hereof), (v) fees and disbursementsof all independent certified public accountants referred to in Section 5(m)hereof (including, without limitation, the expenses of any “cold comfort”letters required by or incident to such performance), (vi) rating agencyfees, if any, and any fees associated with making the Registrable Securities orExchange Securities eligible for trading through The Depository Trust Company,(vii) Securities Act liability insurance, if the Issuer desires suchinsurance, (viii) fees and expenses of all other Persons retained by theIssuer, (ix) internal expenses of the Issuer (including, withoutlimitation, all salaries and expenses of officers and employees of the Issuerperforming legal or accounting duties), (x) the expense of any annualaudit, (xi) any fees and expenses incurred in connection with the listingof the securities to be registered on any securities exchange, and theobtaining of a rating of the securities, in each case, if applicable and(xii) the expenses relating to printing, word processing and distributingall Registration Statements, underwriting agreements, indentures and any otherdocuments necessary in order to comply with this Agreement.

 

# 7.                                       Indemnificationand Contribution.

#  

(a)                                  The Issuer and the Guarantors jointly andseverally agree, to indemnify and hold harmless each Holder of RegistrableSecurities and each Participating Broker-Dealer selling Exchange Securitiesduring the Applicable Period, and each Person, if any, who controls such Personor its affiliates

 

17

----

 

withinthe meaning of Section 15 of the Act or Section 20 of the Exchange Act (each, a“Participant”) against any losses, claims,damages or liabilities, joint or several, to which any Participant may becomesubject under the Securities Act, the Exchange Act or otherwise, insofar as anysuch losses, claims, damages or liabilities (or actions in respect thereof)arise out of or are based upon:

 

(i)                  anyuntrue statement or alleged untrue statement of any material fact contained inany Registration Statement (or any amendment thereto) or Prospectus (as amendedor supplemented if the Issuer shall have furnished any amendments orsupplements thereto) or any preliminary prospectus; or

 

(ii)               theomission or alleged omission to state, in any Registration Statement (or anyamendment thereto) or Prospectus (as amended or supplemented if the Issuershall have furnished any amendments or supplements thereto) or any preliminaryprospectus or any other document or any amendment or supplement thereto, amaterial fact required to be stated therein or necessary to make the statementstherein not misleading,

 

except,in each case, insofar as such losses, claims, damages or liabilities arearising out of or based upon any untrue statement or omission or alleged untruestatement or omission made in reliance upon and in conformity with anyinformation relating to any Initial Purchaser or any Holder furnished to theIssuer in writing through the Initial Purchasers or any selling Holderexpressly for use therein;

 

andagree (subject to the limitations set forth in the proviso to this sentence) toreimburse, as incurred, the Participant for any reasonable legal or otherexpenses incurred by the Participant in connection with investigating,defending against or appearing as a third-party witness in connection with anysuch loss, claim, damage, liability or action; provided, however,neither the Issuer nor the Guarantors will be liable in any such case to theextent that any such loss, claim, damage, or liability arises out of or isbased upon any untrue statement or alleged untrue statement or omission oralleged omission made in any Registration Statement (or any amendment thereto)or Prospectus (as amended or supplemented if the Issuer shall have furnishedany amendments or supplements thereto) or any preliminary prospectus or anyamendment or supplement thereto in reliance upon and in conformity with writteninformation relating to any Participant furnished to the Issuer by suchParticipant specifically for use therein. The indemnity provided for in thisSection 7 will be in addition to any liability that the Issuer mayotherwise have to the indemnified parties. The Issuer and the Guarantors shallnot be liable under this Section 7 to any indemnified party regarding anysettlement or compromise or consent to the entry of any judgment with respectto any pending or threatened claim, action, suit or proceeding in respect ofwhich indemnification or contribution may be sought hereunder (whether or notthe indemnified parties are actual or potential parties to such claim oraction) unless such settlement, compromise or consent is consented to by theIssuer and the Guarantors, which consent shall not be unreasonably withheld.

 

(b)                                 Each Participant, severally and not jointly,agrees to indemnify and hold harmless the Issuer, the Guarantors, theirrespective directors (or equivalent), their respective officers who sign anyRegistration Statement and each person, if any, who controls the Issuer withinthe meaning of Section 15 of the Act or Section 20 of the Exchange Actagainst any losses, claims, damages or liabilities to which the Issuer, theGuarantors or any such director, officer or controlling person may becomesubject under the Act, the Exchange Act or otherwise, insofar as such losses,claims, damages or liabilities (or

 

18

----

 

actionsin respect thereof) arise out of or are based upon (i) any untruestatement or alleged untrue statement of any material fact contained in any RegistrationStatement or Prospectus, any amendment or supplement thereto, or anypreliminary prospectus, or (ii) the omission or the alleged omission tostate therein a material fact necessary to make the statements therein notmisleading, in each case to the extent, but only to the extent, that suchuntrue statement or alleged untrue statement or omission or alleged omissionwas made in reliance upon and in conformity with written information concerningsuch Participant, furnished to the Issuer by or on behalf of such Participant,specifically for use therein; and subject to the limitation set forthimmediately preceding this clause, will reimburse, as incurred, any reasonablelegal or other expenses incurred by the Issuer, the Guarantors or any such director,officer or controlling person in connection with investigating or defendingagainst or appearing as a third party witness in connection with any such loss,claim, damage, liability or action in respect thereof. The indemnity providedfor in this Section 7 will be in addition to any liability that theParticipants may otherwise have to the indemnified parties. The Participantsshall not be liable under this Section 7 to any indemnified party regarding anysettlement or compromise or consent to the entry of any judgment with respectto any pending or threatened claim, action, suit or proceeding in respect ofwhich indemnification or contribution may be sought hereunder (whether or notthe indemnified parties are actual or potential parties to such claim oraction) unless such settlement, compromise or consent is consented to by theParticipants, which consent shall not be unreasonably withheld. The Issuer andthe Guarantors shall not, without the prior written consent of suchParticipant, effect any settlement or compromise of any pending or threatenedproceeding in respect of which such Participant is or could have been a party,or indemnity could have been sought hereunder by such Participant, unless suchsettlement (A) includes an unconditional written release of suchParticipant, in form and substance reasonably satisfactory to such Participant,from all liability on claims that are the subject matter of such proceeding and(B) does not include any statement as to an admission of fault, culpability or failureto act by or on behalf of such Participant.

 

(c)                                  Promptly after receipt by an indemnifiedparty under this Section 7 of notice of the commencement of any action,such indemnified party will, if a claim in respect thereof is to be madeagainst the indemnifying party under this Section 7, notify the indemnifyingparty of the commencement thereof in writing; but the omission to so notify theindemnifying party (i) will not relieve it from any liability underparagraph (a) or (b) above unless and to the extent it did not otherwise learnof such action and such failure results in the forfeiture by the indemnifyingparty of substantial rights and defenses and (ii) will not, in any event,relieve the indemnifying party from any obligations to any indemnified partyother than the indemnification obligation provided in paragraphs (a) and (b)above. The indemnifying party shall be entitled to appoint counsel (includinglocal counsel) of the indemnifying party’s choice at the indemnifying party’sexpense to represent the indemnified party in any action for whichindemnification is sought (in which case the indemnifying party shall notthereafter be responsible for the fees and expenses of any separate counsel,other than local counsel if not appointed by the indemnifying party, retainedby the indemnified party or parties except as set forth below); provided,however, that such counsel shall be reasonably satisfactory to theindemnified party. Notwithstanding the indemnifying party’s election to appointcounsel (including local counsel) to represent the indemnified party in anaction, the indemnified party shall have the right to employ separate counsel(including local counsel), and the indemnifying party shall bear the reasonablefees, costs and expenses of such separate counsel if (i) the use ofcounsel chosen by the indemnifying party to represent the indemnified partywould present such counsel with a conflict of interest (based on the advice ofcounsel to the indemnified person); (ii) such action includes both theindemnified party and the indemnifying party and the indemnified party shallhave reasonably concluded (based on the advice of counsel to the indemnified person)that there may be legal

 

19

----

 

defensesavailable to it and/or other indemnified parties that are different from oradditional to those available to the indemnifying party; (iii) theindemnifying party shall not have employed counsel reasonably satisfactory tothe indemnified party to represent the indemnified party within a reasonabletime after notice of the institution of such action; or (iv) theindemnifying party shall authorize the indemnified party to employ separatecounsel at the expense of the indemnifying party. It is understood and agreed thatthe indemnifying person shall not, in connection with any proceeding orseparate but related or substantially similar proceedings in the samejurisdiction arising out of the same general allegations or circumstances, beliable for the reasonable fees and expenses of more than one separate firm (inaddition to any local counsel) representing the indemnified parties underparagraph (a) or paragraph (b) of this Section 7, as the case may be, who areparties to such action or actions. Any such separate firm for any Participantsshall be designated in writing by Participants who sold a majority in interestof the Registrable Securities and Exchange Securities sold by all suchParticipants in the case of paragraph (a) of this Section 7 or the Issuer inthe case of paragraph (b) of this Section 7. In the event that any Participantsare indemnified persons collectively entitled, in connection with a proceedingor separate but related or substantially similar proceedings in a singlejurisdiction, to the payment of fees and expenses of a single separate firmunder this Section 7(c), and any such Participants cannot agree to amutually acceptable separate firm to act as counsel thereto, then such separatefirm for all such Indemnified Persons shall be designated in writing byParticipants who sold a majority in interest of the Registrable Securities andExchange Securities sold by all such Participants. An indemnifying party willnot, without the prior written consent of the indemnified parties, settle orcompromise or consent to the entry of any judgment with respect to any pendingor threatened claim, action, suit or proceeding in respect of whichindemnification or contribution may be sought hereunder (whether or not theindemnified parties are actual or potential parties to such claim or action)unless such settlement, compromise or consent includes an unconditional releaseof each indemnified party from all liability arising out of such claim, action,suit or proceeding and does not include any statement as to, or any admissionof, fault, culpability or failure to act by or on behalf of any indemnifiedparty. All fees and expenses reimbursed pursuant to this paragraph (c) shall bereimbursed as they are incurred.

 

(d)                                 After notice from the indemnifying party tosuch indemnified party of its election so to assume the defense thereof andapproval by such indemnified party of counsel appointed to defend such action,the indemnifying party will not be liable to such indemnified party under thisSection 7 for any legal or other expenses, other than reasonable costs ofinvestigation, subsequently incurred by such indemnified party in connectionwith the defense thereof, unless (i) the indemnified party shall haveemployed separate counsel in accordance with the third sentence of paragraph(c) of this Section 7 or (ii) the indemnifying party has authorized in writingthe employment of counsel for the indemnified party at the expense of theindemnifying party. After such notice from the indemnifying party to suchindemnified party, the indemnifying party will not be liable for the costs andexpenses of any settlement of such action effected by such indemnified partywithout the prior written consent of the indemnifying party (which consentshall not be unreasonably withheld), unless such indemnified party waived inwriting its rights under this Section 7, in which case the indemnifiedparty may effect such a settlement without such consent.

 

(e)                                  In circumstances in which the indemnityagreement provided for in the preceding paragraphs of this Section 7 isunavailable to, or insufficient to hold harmless, an indemnified party inrespect of any losses, claims, damages or liabilities (or actions in respectthereof) (other than by virtue of the failure of an indemnified party to notifythe indemnifying party of its right to indemnification pursuant

 

20

----

 

toparagraph (a) or (b) of this Section 7, where such failure materiallyprejudices the indemnifying party (through the forfeiture of substantial rightsor defenses)), each indemnifying party, in order to provide for just andequitable contribution, shall contribute to the amount paid or payable by suchindemnified party as a result of such losses, claims, damages or liabilities(or actions in respect thereof) in such proportion as is appropriate to reflect(i) the relative benefits received by the indemnifying party or parties on theone hand and the indemnified party on the other from the offering of theSecurities or (ii) if the allocation provided by the foregoing clause (i) isnot permitted by applicable law, not only such relative benefits but also therelative fault of the indemnifying party or parties on the one hand and theindemnified party on the other in connection with the statements or omissionsor alleged statements or omissions that resulted in such losses, claims,damages or liabilities (or actions in respect thereof). The relative benefitsreceived by the Issuer and the Guarantors on the one hand and such Participanton the other shall be deemed to be in the same proportion that the total netproceeds from the offering (before deducting expenses) of the Securitiesreceived by the Issuer bear to the total discounts and commissions received bysuch Participant in connection with the sale of the Securities (or if suchParticipant did not receive discounts or commissions, the value or receivingthe Securities). The relative fault of the parties shall be determined byreference to, among other things, whether the untrue or alleged untruestatement of a material fact or the omission or alleged omission to state amaterial fact relates to information supplied by the Issuer on the one hand, orthe Participants on the other, the parties’ relative intent, knowledge, accessto information and opportunity to correct or prevent such statement or omissionor alleged statement or omission, and any other equitable considerationsappropriate in the circumstances. The parties agree that it would not beequitable if the amount of such contribution were determined by pro rata or percapita allocation or by any other method of allocation that does not take intoaccount the equitable considerations referred to in the first sentence of thisparagraph (e). Notwithstanding any other provision of this paragraph (e), noParticipant shall be obligated to make contributions hereunder that in theaggregate exceed the total discounts, commissions and other compensation or netproceeds on the sale of Securities received by such Participant in connectionwith the sale of the Securities, less the aggregate amount of any damages thatsuch Participant has otherwise been required to pay by reason of the untrue oralleged untrue statements or the omissions or alleged omissions to state amaterial fact, and no person guilty of fraudulent misrepresentation (within themeaning of Section 11(f) of the Act) shall be entitled to contributionfrom any person who was not guilty of such fraudulent misrepresentation. Forpurposes of this paragraph (d), each person, if any, who controls a Participantwithin the meaning of Section 15 of the Act or Section 20 of theExchange Act shall have the same rights to contribution as the Participants,and each director of the Issuer and the Guarantors, each officer of the Issuerand the Guarantors and each person, if any, who controls the Issuer and theGuarantors within the meaning of Section 15 of the Act or Section 20of the Exchange Act, shall have the same rights to contribution as the Issuer.

 

# 8.                                       Rules 144 and144A

#  

TheIssuer covenants and agrees that it will use reasonable best efforts to filethe reports required to be filed by it under the Securities Act and theExchange Act and the rules and regulations adopted by the SEC thereunder in atimely manner in accordance with the requirements of the Securities Act and theExchange Act and, if at any time the Issuer is not required to file suchreports, the Issuer will, upon the request of any Holder or beneficial owner ofRegistrable Securities, make available such information necessary to permitsales pursuant to Rule 144A. The Issuer further covenants and agrees, forso long as any Registrable Securities remain outstanding that it will take suchfurther action as any Holder of Registrable Securities may reasonably request,all to the extent required from time to time to enable such

 

21

----

 

holderto sell Registrable Securities without registration under the Securities Actwithin the limitation of the exemptions provided by Rule 144(k) under theSecurities Act and Rule 144A unless the Issuer is then subject to Section13 or 15(d) of the Exchange Act and reports filed thereunder satisfy theinformation requirements of Rule 144A then in effect.

 

# 9.                                       UnderwrittenRegistrations

#  

TheIssuer shall not be required to assist in an underwritten offering unlessrequested by the Holders of a majority in aggregate principal amount of theRegistrable Securities. If any of the Registrable Securities covered by anyShelf Registration are to be sold in an underwritten offering, the investmentbanker or investment bankers and manager or managers that will manage theoffering will be selected by the Holders of a majority in aggregate principalamount of such Registrable Securities included in such offering and shall bereasonably acceptable to the Issuer.

 

NoHolder of Registrable Securities may participate in any underwrittenregistration hereunder unless such Holder (a) agrees to sell such Holder’sRegistrable Securities on the basis provided in any underwriting arrangementsapproved by the Persons entitled hereunder to approve such arrangements and(b) completes and executes all questionnaires, powers of attorney,indemnities, underwriting agreements and other documents required under theterms of such underwriting arrangements.

 

# 10.                                 Miscellaneous

#  

(a)                                  No Inconsistent Agreements. The Issuer has not as of the date hereof,and the Issuer shall not, after the date of this Agreement, enter into anyagreement with respect to any of its securities that is inconsistent with therights granted to the Holders of Registrable Securities in this Agreement orotherwise conflicts with the provisions hereof. The rights granted to theHolders hereunder do not in any way conflict with and are not inconsistent withthe rights granted to the holders of the Issuer other issued and outstandingsecurities under any such agreements. The Issuer will not enter into anyagreement (other than the Registration Rights Agreements dated as of the datehereof in respect of the Senior Subordinated Notes and the SubordinatedDiscount Notes) with respect to any of its securities which will grant to anyPerson piggy-back registration rights with respect to any RegistrationStatement.

 

(b)                                 Adjustments Affecting Registrable Securities. The Issuer shall not, directly orindirectly, take any action with respect to the Registrable Securities as aclass that would adversely affect the ability of the Holders of RegistrableSecurities to include such Registrable Securities in a registration undertakenpursuant to this Agreement.

 

(c)                                  Amendments and Waivers. The provisions of this Agreement may not beamended, modified or supplemented, and waivers or consents to departures fromthe provisions hereof may not be given, otherwise than with the prior writtenconsent of (I) the Issuer, and (II) (A) the Holders of not lessthan a majority in aggregate principal amount of the then outstandingRegistrable Securities and (B) in circumstances that would adverselyaffect the Participating Broker-Dealers, the Participating Broker-Dealersholding not less than a majority in aggregate principal amount of the ExchangeNotes held by all Participating Broker-Dealers; provided, however,that Section 7 and this Section 10(c) may not be amended, modified orsupplemented without the prior written consent of each Holder and eachParticipating Broker-Dealer (including any person who was a Holder orParticipating Broker-Dealer of Registrable

 

22

----

 

Securitiesor Exchange Securities, as the case may be, disposed of pursuant to anyRegistration Statement) affected by any such amendment, modification orsupplement. Notwithstanding the foregoing, a waiver or consent to depart fromthe provisions hereof with respect to a matter that relates exclusively to therights of Holders of Registrable Securities whose securities are being soldpursuant to a Registration Statement and that does not directly or indirectlyaffect, impair, limit or compromise the rights of other Holders of RegistrableSecurities may be given by Holders of at least a majority in aggregateprincipal amount of the Registrable Securities being sold pursuant to suchRegistration Statement.

 

(d)                                 Notices. All notices and other communications (including, without limitation,any notices or other communications to the Trustee) provided for or permittedhereunder shall be made in writing by hand-delivery, registered first-classmail, next-day air courier or facsimile:

 

(i)                                     if to a Holder of the Registrable Securitiesor any Participating Broker-Dealer, at the most current address of such Holderor Participating Broker-Dealer, as the case may be, set forth on the records ofthe registrar under the Indenture, with a copy in like manner to the InitialPurchasers as follows:

 
|   |   | Deutsche Bank Securities Inc.                                                |
|--------|--------|------------------------------------------------------------------------------|
|   |   | 60 Wall Street                                                               |
|   |   | New York, New York 10005                                                     |
|   |   | Facsimile No.: (646) 324-7554                                           |
|   |   | Attention: Corporate Finance Department                                      |
|   |   |                                                                         |
|   |   | with a copy to:                                                              |
|   |   |                                                                         |
|   |   | Cahill Gordon & Reindel LLP                                              |
|   |   | 80 Pine Street                                                               |
|   |   | New York, New York 10005                                                     |
|   |   | Facsimile No.: (212) 269-5420                                                |
|   |   | Attention: William B. Gannett, Esq.                                          |
|   |   |                                                                         |
|   | (ii)   | if  to the Initial Purchasers, at the address specified in Section 10(d)(i); |
|   |   |                                                                         |
|   | (iii)  | if to the Issuer, at the address as follows:                                 |
|   |   |                                                                         |
|   |   | Michaels Stores, Inc.                                                        |
|   |   | 8000 Bent Branch Drive                                                       |
|   |   | Irving, Texas 75063                                                          |
|   |   | Facsimile No.: (972) 409-1965                                                |
|   |   | Attention: General Counsel                                                   |
|   |   |                                                                         |
|   |   | with a copy to:                                                              |
|   |   |                                                                         |
|   |   | Ropes & Gray LLP                                                         |
|   |   | One International Place                                                      |

 

23

----

 
|   |   | Boston MA 02110                |
|--------|--------|--------------------------------|
|   |   | Facsimile No.: (617) 951-7050  |
|   |   | Attention: Byung W. Choi, Esq. |

 

Allsuch notices and communications shall be deemed to have been duly given:  when delivered by hand, if personallydelivered; five Business Days after being deposited in the mail, postageprepaid, if mailed; one Business Day after being timely delivered to a next-dayair courier; and upon written confirmation, if sent by facsimile.

 

Copiesof all such notices, demands or other communications shall be concurrentlydelivered by the Person giving the same to the Trustee at the address and inthe manner specified in such Indenture.

 

(e)                                  Successors and Assigns. This Agreement shall inure to the benefitof and be binding upon the successors and assigns of each of the partieshereto, the Holders and the Participating Broker-Dealers; provided, however,that nothing herein shall be deemed to permit any assignment, transfer or otherdisposition of Registrable Securities in violation of the terms of the PurchaseAgreement or the Indenture.

 

(f)                                    Counterparts. This Agreement may be executed in anynumber of counterparts and by the parties hereto in separate counterparts, eachof which when so executed shall be deemed to be an original and all of whichtaken together shall constitute one and the same agreement.

 

(g)                                 Headings. The headings in this Agreement are for convenience of reference onlyand shall not limit or otherwise affect the meaning hereof.

 

(h)                                 **Governing Law****. THIS AGREEMENT SHALL BEGOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,AS APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEWYORK. EACH OF THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANYACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THISAGREEMENT.**

 

(i)                                     Severability. If any term, provision, covenant orrestriction of this Agreement is held by a court of competent jurisdiction tobe invalid, illegal, void or unenforceable, the remainder of the terms,provisions, covenants and restrictions set forth herein shall remain in fullforce and effect and shall in no way be affected, impaired or invalidated, andthe parties hereto shall use their best efforts to find and employ analternative means to achieve the same or substantially the same result as thatcontemplated by such term, provision, covenant or restriction. It is herebystipulated and declared to be the intention of the parties that they would haveexecuted the remaining terms, provisions, covenants and restrictions withoutincluding any of such that may be hereafter declared invalid, illegal, void orunenforceable.

 

(j)                                     Notes Held by the Issuer or Its Affiliates. Whenever the consent or approval of Holdersof a specified percentage of Registrable Securities is required hereunder,Registrable Securities held by the Issuer or its affiliates (as such term isdefined in Rule 405 under the Securities Act) shall not

 

24

----

 

becounted in determining whether such consent or approval was given by theHolders of such required percentage.

 

(k)                                  Third-Party Beneficiaries. Holders of Registrable Securities andParticipating Broker-Dealers are intended third-party beneficiaries of thisAgreement, and this Agreement may be enforced by such Persons.

 

(l)                                     Entire Agreement. This Agreement, together with the PurchaseAgreement and the Indenture, is intended by the parties as a final andexclusive statement of the agreement and understanding of the parties hereto inrespect of the subject matter contained herein and therein and any and allprior oral or written agreements, representations, or warranties, contracts,understandings, correspondence, conversations and memoranda between the Holderson the one hand and the Issuer on the other, or between or among any agents,representatives, parents, subsidiaries, affiliates, predecessors in interest orsuccessors in interest with respect to the subject matter hereof and thereofare merged herein and replaced hereby.

 

25

----

 

INWITNESS WHEREOF, the parties have executed this Agreement as of the date firstwritten above.

 

 
|   | MICHAELS  STORES, INC. |
|--------|------------------------|
|   |                   |   |
|   |                   |   |
|   | By:                    | /s/ Lisa K. Klinger |   |
|   |                   | Name:  Lisa K. Klinger |
|   |                   | Title:  Vice President – Treasurer          and Investor Relations |
|   |                   |   |
|   |                   |   |
|   |                   | AARON  BROTHERS, INC. |
|   |                   | MICHAELS  FINANCE COMPANY, INC. |
|   |                   | MICHAELS  STORES PROCUREMENT |
|   |                   | COMPANY, INC. |
|   |                   | MICHAELS  OF CANADA, ULC |
|   |                   | MICHAELS  STORES CARD SERVICES, LLC |
|   |                   | ARTISTREE,  INC. |
|   |                   |   |
|   |                   |   |
|   | By:                    | /s/ Lisa K. Klinger |   |
|   |                   | Name:  Lisa K. Klinger |
|   |                   | Title:  Vice President and Treasurer |

 

 

Signature Page to Registration Rights Agreement

 

----

 
| The  foregoing Agreement is hereby       |                      |
|------------------------------------------|---------------------------|
| confirmed  and accepted as of the        |                      |
| date  first above written.               |                      |
|                                     |                      |
| DEUTSCHE BANK SECURITIES INC.            |                      |
| J.P. MORGAN SECURITIES INC.              |                      |
| BANC OF AMERICA SECURITIES LLC           |                      |
| CREDIT  SUISSE SECURITIES (USA) LLC      |                      |
|                                     |                      |
|                                     |                      |
| By:   Deutsche Bank Securities Inc. |                      |
|                                     |                      |
|                                     |
| By:                                      | /s/  Edwin Roland         |   |
|                                     | Name:  Edwin Roland       |   |
|                                     | Title:  Managing Director |   |
|                                     |                      |   |
| By:                                      | /s/  Stephen R. Lapidus   |   |
|                                     | Name:  Stephen R. Lapidus |   |
|                                     | Title:  Director          |   |
|                                          |                           |  |  |

 

Foritself and the other several Initial Purchasers.

 

 

Signature Page to Registration RightsAgreement

 

----

 

SCHEDULE I

 

**THE GUARANTORS**

 

AARONBROTHERS, INC.

MICHAELSFINANCE COMPANY, INC.

MICHAELSSTORES PROCUREMENT COMPANY, INC.

MICHAELSOF CANADA, ULC

MICHAELSSTORES CARD SERVICES, LLC

ARTISTREE,INC.

 

----