**Exhibit 4.6**

 

 

 

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

 

 

13% Subordinated Discount Notes due 2016

 

 

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TABLE OF CONTENTS

 
|   |                             | **Page** |
|--------|----------------------------------|----------|
|   |                             |     |
| 1.     | Definitions                      | 1        |
|   |                             |     |
| 2.     | Exchange Offer                   | 5        |
|   |                             |     |
| 3.     | Shelf Registration               | 8        |
|   |                             |     |
| 4.     | Additional Interest              | 9        |
|   |                             |     |
| 5.     | Registration Procedures          | 10       |
|   |                             |     |
| 6.     | Registration Expenses            | 17       |
|   |                             |     |
| 7.     | Indemnification and Contribution | 18       |
|   |                             |     |
| 8.     | Rules 144 and 144A               | 22       |
|   |                             |     |
| 9.     | Underwritten Registrations       | 22       |
|   |                             |     |
| 10.    | Miscellaneous                    | 22       |

 

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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 27, 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 $469,449,000 aggregate principal amountat maturity of the Issuer’s 13% Subordinated Discount Notes due 2016 (the “Notes”).The Notes are issued under an indenture, dated as of the date hereof (asamended or supplemented from time to time, the “Indenture”), among theIssuer, the Guarantors and Wells Fargo Bank, National Association, as trustee(the “Trustee”). Pursuant to the Purchase Agreement and the Indenture,the Guarantors are required to guarantee (collectively, the “Guarantees”)the Issuer’s obligations under the Notes and the Indenture. References to the “Securities”shall mean, 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:

 

Accreted Value:As defined in the Indenture.

 

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.

 

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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.

 

Full Accretion Date:  See Section 4(b) hereof.

 

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.

 

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Participant:  See Section 7(a) hereof.

 

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 the Prospectus,including post-effective amendments, and all material incorporated by referenceor 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.

 

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

 

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 Notes:  $750,000,000 aggregate principal amount ofthe Issuer’s 10% Senior Notes due 2014.

 

Senior Subordinated Notes:  $400,000,000 aggregateprincipal amount of the Issuer’s 11 3/8% Senior Subordinated Notes due 2016.

 

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.

 

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 and otherregulatory requirements (collectively, “Regulatory Requirements”) shallbe deemed to refer also to any amendments thereto and all subsequent RegulatoryRequirements adopted as a replacement thereto having substantially the sameeffect therewith; provided that Rule 144 shall not be deemed toamend or replace Rule 144A.

 

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# 2.             Exchange Offer

#  

(a)           Unless the Exchange Offer would violate applicable law or anyapplicable interpretation of the staff of the SEC, the Issuer and theGuarantors shall use their reasonable best efforts to file with the SEC aRegistration Statement (the “Exchange Offer Registration Statement”) onan appropriate registration form with respect to a registered offer (the “ExchangeOffer”) to exchange any and all of the Registrable Securities for a likeaggregate principal amount at maturity of debt securities of the Issuer (the “ExchangeNotes”), guaranteed, to the extent applicable, on an unsecured subordinatedbasis by the Guarantors (the “New Guarantees” and, together with theExchange Notes, the “Exchange Securities”), that are identical in allmaterial respects to the Notes, except that (i) the Exchange Notes shallcontain no restrictive legend thereon, (ii) if the exchange takes placeafter the Full Accretion Date, interest thereon shall accrue (A) from the laterof (x) the last date on which interest was paid on such Notes or (y) if suchNotes are surrendered for exchange on a date in a period that includes therecord date for an interest payment date to occur on or after the date of suchexchange and as to which interest on such Note will be paid, the date of suchinterest payment date or (B) if no such interest has been paid, from the IssueDate and (iii) the Exchange Notes shall be entitled to the benefits of theIndenture or a trust indenture which is identical in all material respects tothe Indenture (other than such changes to the Indenture or any such identicaltrust indenture as are necessary to comply with the TIA) and which, in eithercase, has been qualified under the TIA. The Exchange Offer shall comply withall applicable tender offer rules and regulations under the Exchange Act andother applicable laws. The Issuer shall use its reasonable best efforts to (x)prepare and file with the SEC the Exchange Offer Registration Statement withrespect to the Exchange Offer; (y) keep the Exchange Offer open for atleast 20 Business Days (or longer if required by applicable law) after the datethat notice of the Exchange Offer is mailed to Holders; and (z) consummatethe 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

 

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Securitiesthat are Private Exchange Notes (and the related Guarantees), ExchangeSecurities as to which Section 2(c)(iv) is applicable and ExchangeSecurities held by Participating Broker-Dealers, and the Issuer shall have nofurther obligation to register Registrable Securities (other than PrivateExchange Notes (and the related Guarantees), Exchange Securities as to whichclause 2(c)(iv) hereof applies and Exchange Securities held byParticipating Broker-Dealers) pursuant to Section 3 hereof.

 

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

 

(b)           The Issuer shall include within the Prospectus contained in theExchange Offer Registration Statement a section entitled “Plan ofDistribution,” which shall contain a summary statement of the positions takenor policies made by the staff of the SEC with respect to the potential“underwriter” status of any broker-dealer that is the “beneficial owner” (asdefined in Rule 13d-3 under the Exchange Act) of Exchange Notes receivedby such broker-dealer in the Exchange Offer (a “Participating Broker-Dealer”),whether such positions or policies have been publicly disseminated by the staffof the SEC or such positions or policies represent the prevailing views of thestaff of the SEC. Such “Plan of Distribution” section shall also expresslypermit, to the extent permitted by applicable policies and regulations of theSEC, the use of the Prospectus by all Participating Broker-Dealers, and includea statement describing the means by which Participating Broker-Dealers mayresell the Exchange Securities in compliance with 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 at maturity of notes(the “Private Exchange Notes”) of the Issuer, guaranteed by theGuarantors, that are identical in all material respects to the Exchange Notesexcept for the placement of a restrictive legend on such Private Exchange Notes.The Private Exchange Notes shall be issued pursuant to the same indenture asthe Exchange Notes and bear the same CUSIP number as the Exchange Notes ifpermitted by the CUSIP Service Bureau.

 

Inconnection with the Exchange Offer, the Issuer shall:

 

(1)           mail,or cause to be mailed, to each Holder of record entitled to participate in theExchange Offer a copy of the Prospectus forming part of the Exchange OfferRegistration Statement, together with an appropriate letter of transmittal andrelated documents;

 

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(2)           usetheir respective reasonable best efforts to keep the Exchange Offer open fornot less than 20 Business Days from the date that notice of the Exchange Offeris mailed to Holders (or longer if required by applicable law);

 

(3)           utilizethe services of a depositary for the Exchange Offer with an address in theBorough of Manhattan, The City of New York or in Wilmington, Delaware;

 

(4)           permitHolders to withdraw tendered Notes at any time prior to the close of business,New York time, on the last Business Day on which the Exchange Offer remainsopen; and

 

(5)           otherwisecomply in all material respects with all laws, rules and regulations applicableto the Exchange Offer.

 

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

 

(1)           acceptfor exchange all Registrable Securities validly tendered and not validlywithdrawn pursuant to the Exchange Offer and any Private Exchange;

 

(2)           deliverto the Trustee for cancellation all Registrable Securities so accepted forexchange; and

 

(3)           causethe Trustee to authenticate and deliver promptly to each Holder of Notes,Exchange Notes or Private Exchange Notes, as the case may be, equal inprincipal amount at maturity to the Notes of such Holder so accepted forexchange; provided that, in the case of any Notes held in global form bya depositary, authentication and delivery to such depositary of one or morereplacement Notes in global form in an equivalent principal amount at maturitythereto 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

 

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Notes,the Private Exchange Notes or the Notes will have the right to vote or consentas a separate class on any matter.

 

(c)           If, (i) because of any change in law or in currently prevailinginterpretations of the staff of the SEC, the Issuer is not permitted to effectthe Exchange Offer, (ii) the Exchange Offer is not consummated within360 days of the Issue Date, (iii) any holder of Private Exchange Notes sorequests in writing to the Issuer at any time within 30 days after theconsummation of the Exchange Offer, or (iv) in the case of any Holder thatparticipates in the Exchange Offer, such Holder does not receive 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)           Shelf Registration. The Issuershall promptly file with the SEC a Registration Statement for an offering to bemade on a continuous basis pursuant to Rule 415 covering all of the RegistrableSecurities (the “Initial Shelf Registration”). The Issuer shall use itsreasonable best efforts to file with the SEC the Initial Shelf Registration onor prior to the Filing Date. The Initial Shelf Registration shall be onForm S-1 or another appropriate form permitting registration of suchRegistrable Securities for resale by Holders in the manner or mannersdesignated by them (including, without limitation, one or more underwrittenofferings). The Issuer shall not permit any securities other than theRegistrable Securities and the Guarantees, the Senior Subordinated Notes andthe related guarantees and the Senior Notes and the related guarantees to beincluded in the Initial Shelf Registration 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  becomeeligible for resale without regard to volume, manner of sale or otherrestrictions contained in Rule 144(k) (the “Effectiveness Period”); provided,however, that the Effectiveness Period in respect of the Initial ShelfRegistration shall be extended to the extent required to permit dealers tocomply with the applicable prospectus delivery requirements of Rule 174 underthe Securities Act and as otherwise provided herein. Notwithstanding anythingto the contrary in this Agreement, at any time, the Issuer may delay the filingof any Initial Shelf Registration Statement or delay or suspend theeffectiveness thereof, for a reasonable period of time, but not in excess of 60consecutive days or more than three (3) times during any calendar year (each, a“Shelf Suspension Period”), if the Board of Directors of the Issuerdetermines reasonably and in good faith that the filing of any such InitialShelf Registration Statement or the continuing effectiveness thereof wouldrequire the disclosure of non-public material information that,

 

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inthe reasonable judgment of the Board of Directors of the Issuer, would bedetrimental to the Issuer if so disclosed or would otherwise materiallyadversely affect a financing, acquisition, disposition, merger or othermaterial transaction or such action is required by applicable law.

 

## (b)           Withdrawal of Stop 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 effectiveness thereof, and in any event shall file an additionalShelf Registration Statement pursuant to Rule 415 covering all of theRegistrable Securities covered by and not sold under the Initial ShelfRegistration or an earlier Subsequent Shelf Registration (each, a “SubsequentShelf Registration”). If a Subsequent Shelf Registration is filed, theIssuer shall use its reasonable best efforts to cause the Subsequent ShelfRegistration to be declared effective under the Securities Act as soon aspracticable after such filing and to keep such subsequent Shelf Registrationcontinuously effective for a period equal to the number of days in theEffectiveness Period less the aggregate number of days during which the InitialShelf Registration or any Subsequent Shelf Registration was previouslycontinuously effective. As used herein the term “Shelf Registration”means the Initial Shelf Registration and any Subsequent Shelf Registration.

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## (c)           Supplements and Amendments. The Issuershall promptly supplement and amend the Shelf Registration if required by therules, regulations or instructions applicable to the registration form used forsuch Shelf Registration, if required by the Securities Act, or if reasonablyrequested by the Holders of a majority in aggregate principal amount atmaturity of the Registrable Securities (or their counsel) covered by suchRegistration Statement with respect to the information included therein withrespect to one or more of such Holders, or, if reasonably requested by anyunderwriter of such Registrable Securities, with respect to the informationincluded therein with respect to such underwriter.

 

# 4.             AdditionalInterest

 

(a)           The Issuer and the Initial Purchasers agree that the Holders willsuffer damages if the Issuer fails to fulfill its obligations underSection 2 or Section 3 hereof and that it would not be feasible toascertain the extent of such damages with precision. Accordingly, the Issueragrees to pay as liquidated damages, additional interest on the Notes (“AdditionalInterest”) if (A) the Issuer has neither (i) exchanged ExchangeSecurities for all Securities validly tendered in accordance with the terms ofthe Exchange Offer nor (ii) had a Shelf Registration Statement declaredeffective, in either case on or prior to the 360th day after the Issue Date,(B) notwithstanding clause (A), the Issuer is required to file a ShelfRegistration Statement and such Shelf Registration Statement is not declared effectiveon or prior to the 360th day after the date such Shelf Registration Statementfiling was requested or required or (C), if applicable, a ShelfRegistration has been declared effective and such Shelf Registration ceases tobe effective at any time during the Effectiveness Period (other than because ofthe sale of all of the Securities registered thereunder), and then AdditionalInterest shall accrue on the average Accreted Value of the RegistrableSecurities during the first 90 days thereafter at a rate of 0.25% per annum(which rate will be increased by an additional 0.25% per annum of the averageAccreted Value during such 90 day period for each subsequent 90 day period thatsuch Additional Interest continues to accrue, provided that the rate at whichsuch Additional Interest accrues may in no event exceed 1.00% per annum of theaverage Accreted Value for any such 90 day period but that AdditionalInterest shall always be calculated on the average Accreted Value for a 90 dayperiod) (such Additional Interest to be calculated by the Issuer) commencing

 

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onthe (x) 361st day after the Issue Date, in the case of (A) above, (y)the 361st day after the date such Shelf Registration Statement filing wasrequested or required in the case of (B) above or (z) the day such ShelfRegistration ceases to be effective in the case of (C) above; provided,however, that upon the exchange of the Exchange Securities for allSecurities tendered (in the case of clause (A) of this Section 4), uponthe effectiveness of the applicable Shelf Registration Statement (in the caseof (B) of this Section 4), or upon the effectiveness of the applicableShelf Registration Statement which had ceased to remain effective (in the caseof (C) of this Section 4), Additional Interest on the RegistrableSecurities in respect of which such events relate as a result of such clause(or the relevant subclause thereof), as the case may be, shall cease to accrue.Notwithstanding any other provisions of this Section 4, the Issuer shall not beobligated to pay Additional Interest provided in Sections 4(a)(B) during aShelf Suspension Period permitted by Section 3(a) hereof.

 

(b)           The Issuer shall notify the Trustee within one business day after eachand every date on which an event occurs in respect of which Additional Interestis required to be paid (an “Event Date”). Any amounts of AdditionalInterest due pursuant to this Section 4 shall be (i) if such AdditionalInterest accrued on or prior to November 1, 2011 (the “Full Accretion Date”),added to the Accreted Value of each applicable Security and (ii) if after theFull Accretion Date, paid in cash semiannually on each May 1 and November 1 (tothe holders of record on the April 15 and October 15, as applicable,immediately preceding such dates), in each case, payable by the Issuer to theTrustee, on behalf of the holders of the relevant Securities, commencing withthe first such interest payment date occurring after any such AdditionalInterest commences to accrue. The amount of Additional Interest will bedetermined by multiplying the applicable Additional Interest rate by theAccreted Value of the Registrable Securities, multiplied by a fraction, thenumerator of which is the number of days such Additional Interest wereapplicable during such period (determined on the basis of a 360 day yearcomprised of twelve 30 day months and, in the case of a partial month, theactual number of days elapsed), and the denominator of which is 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 and file with theSEC (prior to the applicable Filing Date in the case of a Shelf Registration),a Registration Statement or Registration Statements as prescribed bySection 2 or 3 hereof, and use its reasonable best efforts to cause eachsuch Registration Statement to become effective and remain effective asprovided herein; provided, however, that if (1) such filingis pursuant to Section 3 hereof or (2) a Prospectus contained in theExchange Offer Registration Statement filed pursuant to Section 2 hereofis required to be delivered under the Securities Act by any ParticipatingBroker-Dealer who seeks to sell Exchange Securities during the ApplicablePeriod relating thereto from whom the Issuer has received prior written noticethat it will be a Participating Broker-Dealer in the Exchange Offer, beforefiling any Registration Statement or Prospectus or any amendments orsupplements 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,

 

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## 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 at maturity of theRegistrable Securities covered by such Registration Statement, their counsel,or the managing underwriters, if any, shall reasonably object.

##  

## (b)           Prepare and file with theSEC such amendments and post-effective amendments to each Shelf RegistrationStatement or Exchange Offer Registration Statement, as the case may be, as maybe necessary to keep such Registration Statement continuously effective for theEffectiveness Period, the Applicable Period or until consummation of theExchange Offer, as the case may be; cause the related Prospectus to besupplemented by any Prospectus supplement required by applicable law, and as sosupplemented to be filed pursuant to Rule 424; and comply with theprovisions of the Securities Act and the Exchange Act applicable to it withrespect to the disposition of all securities covered by such RegistrationStatement as so amended or in such Prospectus as so supplemented and withrespect to the subsequent resale of any securities being sold by anParticipating Broker-Dealer covered by any such Prospectus in all materialrespects. The Issuer shall be deemed not to have used its reasonable bestefforts to keep a Registration Statement effective if it voluntarily takes anyaction that is reasonably expected to result in selling Holders of theRegistrable Securities covered thereby or Participating Broker-Dealers seekingto sell Exchange Securities not being able to sell such Registrable Securitiesor such Exchange Securities during that period unless such action is requiredby applicable law or permitted by this Agreement.

##  

## (c)           If (1) a ShelfRegistration is filed pursuant to Section 3 hereof or (2) a Prospectuscontained in the Exchange Offer Registration Statement filed pursuant toSection 2 hereof is required to be delivered under the Securities Act byany Participating Broker-Dealer who seeks to sell Exchange Securities duringthe Applicable Period relating thereto from whom the Issuer has receivedwritten notice that it will be a Participating Broker-Dealer in the ExchangeOffer, notify the selling Holders of Registrable Securities (with respect to aRegistration Statement filed pursuant to Section 3 hereof), or each suchParticipating Broker-Dealer (with respect to any such Registration Statement),as the case may be, their counsel and the managing underwriters, if any,promptly (but in any event within three Business Days), and confirm such noticein 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

 

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## condition or any informationbecoming known that makes any statement made in such Registration  Statement or related Prospectus or anydocument incorporated or deemed to be incorporated therein by reference untruein any material respect or that requires the making of any changes in oramendments or supplements to such Registration Statement, Prospectus ordocuments so that, in the case of the Registration Statement, it will notcontain any untrue statement of a material fact or omit to state any materialfact required to be stated therein or necessary to make the statements thereinnot misleading, and that in the case of the Prospectus, it will not contain anyuntrue statement of a material fact or omit to state any material fact requiredto be stated therein or necessary to make the statements therein, in the lightof the circumstances under which they were made, not misleading, and(vi) of the Issuer’s determination that a post-effective amendment to aRegistration Statement would be appropriate.

##  

## (d)           Use its reasonable bestefforts to prevent the issuance of any order suspending the effectiveness of aRegistration Statement or of any order preventing or suspending the use of aProspectus or suspending the qualification (or exemption from qualification) ofany of the Registrable Securities or the Exchange Securities to be sold by anyParticipating Broker-Dealer, for sale in any jurisdiction.

##  

## (e)           If a Shelf Registration isfiled pursuant to Section 3 and if requested during the EffectivenessPeriod by the managing underwriter or underwriters (if any) or the Holders of amajority in aggregate principal amount at maturity 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 or underwriters(if any), such Holders or counsel for either of them reasonably request to beincluded therein, (ii) make all required filings of such prospectussupplement or such post-effective amendment as soon as practicable after theIssuer has received notification of the matters to be incorporated in suchprospectus supplement or post-effective amendment, and (iii) supplement ormake amendments to such Registration Statement.

##  

## (f)            If (1) a ShelfRegistration is filed pursuant to Section 3 hereof, or (2) a Prospectuscontained in the Exchange Offer Registration Statement filed pursuant toSection 2 hereof is required to be delivered under the Securities Act byany Participating Broker-Dealer who seeks to sell Exchange Securities duringthe Applicable Period, furnish to each selling Holder of Registrable Securities(with respect to a Registration Statement filed pursuant to Section 3hereof) and to each such Participating Broker-Dealer who so requests (withrespect to any such Registration Statement) and to their respective counsel andeach managing underwriter, if any, at the sole expense of the Issuer, oneconformed copy of the Registration Statement or Registration Statements andeach post-effective amendment thereto, including financial statements andschedules, and, if requested, all documents incorporated or deemed to beincorporated therein by reference and all exhibits.

 

## (g)           If (1) a ShelfRegistration 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, deliver to each selling Holder ofRegistrable Securities (with respect to a Registration Statement filed pursuantto Section 3 hereof), or each such Participating Broker-Dealer (withrespect to any such Registration Statement), as the case may be, theirrespective counsel, and the underwriters, if any, at the sole expense of theIssuer, as many copies of the Prospectus or Prospectuses (including each formof preliminary prospectus) and each amendment or supplement thereto and anydocuments incorporated by reference therein as such Persons may reasonablyrequest; and, subject to the

 

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## last paragraph of thisSection 5, the Issuer hereby consents to the use of such Prospectus andeach amendment or supplement thereto by each of the selling Holders ofRegistrable Securities or each such Participating Broker-Dealer, as the casemay be, and the underwriters or agents, if any, and dealers, if any, inconnection with the offering and sale of the Registrable Securities covered by,or the sale by Participating Broker-Dealers of the Exchange Securities pursuantto, such Prospectus and any amendment or supplement thereto.

 

## (h)           Prior to any public offeringof Registrable Securities or any delivery of a Prospectus contained in theExchange Offer Registration Statement by any Participating Broker-Dealer whoseeks to sell Exchange Securities during the Applicable Period, use itsreasonable best efforts to register or qualify, and to cooperate with theselling Holders of Registrable Securities or each such ParticipatingBroker-Dealer, as the case may be, the managing underwriter or underwriters, ifany, and their respective counsel in connection with the registration orqualification (or exemption from such registration or qualification) of suchRegistrable Securities for offer and sale under the securities or Blue Sky lawsof such jurisdictions within the United States as any selling Holder,Participating Broker-Dealer, or the managing underwriter or underwritersreasonably request in writing; provided, however, that whereExchange Securities held by Participating Broker-Dealers or RegistrableSecurities are offered other than through an underwritten offering, the Issueragrees to cause its counsel to perform Blue Sky investigations and fileregistrations and qualifications required to be filed pursuant to thisSection 5(h), keep each such registration or qualification (or exemptiontherefrom) effective during the period such Registration Statement is requiredto be kept effective and do any and all other acts or things necessary or advisableto enable the disposition in such jurisdictions of the Exchange Securities heldby Participating Broker-Dealers or the Registrable Securities covered by theapplicable Registration Statement; provided, however, that theIssuer shall not be required to (A) qualify generally to do business inany jurisdiction where it is not then so qualified, (B) take any actionthat would subject it to general service of process in any such jurisdictionwhere it is not then so subject or (C) subject itself to taxation inexcess of a nominal dollar amount in any such jurisdiction where it is not thenso subject.

##  

## (i)            If a Shelf Registration isfiled pursuant to Section 3 hereof, cooperate with the selling Holders of  Registrable Securities and the managingunderwriter or underwriters, if any, to facilitate the timely preparationand  delivery of certificatesrepresenting Registrable Securities to be sold, which certificates shall notbear any restrictive legends and shall be in a form eligible for deposit withThe Depository Trust Company; and enable such Registrable Securities to be insuch denominations (subject to applicable requirements contained in theIndenture) and registered in such names as the managing underwriter orunderwriters, if any, or Holders may request.

##  

## (j)            Use its reasonable bestefforts to cause the Registrable Securities covered by the RegistrationStatement to be registered with or approved by such other U.S. governmentalagencies or authorities as may be necessary to enable the seller or sellers thereofor the underwriter or underwriters, if any, to consummate the disposition ofsuch Registrable Securities, except as may be required solely as a consequenceof the nature of such selling Holder’s business, in which case the Issuer willcooperate in all respects with the filing of such Registration Statement andthe granting of such approvals.

##  

## (k)           If (1) a ShelfRegistration 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 Exchange

 

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## Securities during theApplicable Period, upon the occurrence of any event contemplated byparagraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepareand (subject to Section 5(a) hereof) file with the SEC, at the soleexpense 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 the effective dateof the first Registration Statement relating to the Registrable Securities,(i) provide the Trustee with certificates for the Registrable Securitiesin a form eligible for deposit with The Depository Trust Company and(ii) provide a CUSIP number for the Registrable Securities.

##  

## (m)          In connection with anyunderwritten 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 theSecurities, and confirm the same in writing if and when requested;(ii) obtain the written opinions of counsel to the Issuer, and writtenupdates thereof in form, scope and substance reasonably satisfactory to themanaging underwriter or underwriters, addressed to the underwriters coveringthe matters customarily covered in opinions reasonably requested inunderwritten offerings; and (iii) if an underwriting agreement is enteredinto, the same shall contain indemnification provisions and procedures no lessfavorable to the sellers and underwriters, if any, than those set forth inSection 7 hereof (or such other provisions and procedures reasonablyacceptable to Holders of a majority in aggregate principal amount at maturityof Registrable Securities covered by such Registration Statement and themanaging underwriter or underwriters or agents, if any). The above shall bedone at each closing under such underwriting agreement, or as and to the extentrequired thereunder.

 

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## (n)           If (1) a ShelfRegistration 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 the SecuritiesAct by any Participating Broker-Dealer who seeks to sell Exchange Securitiesduring the Applicable Period, make available for inspection by any InitialPurchaser, any selling Holder of such Registrable Securities being sold (withrespect to a Registration Statement filed pursuant to Section 3 hereof),or each such Participating Broker-Dealer, as the case may be, any underwriterparticipating in any such disposition of Registrable Securities, if any, andany attorney, accountant or other agent retained by any such selling Holder oreach such Participating Broker-Dealer (with respect to any such RegistrationStatement), as the case may be, or underwriter (any such Initial Purchasers,Holders, Participating Broker-Dealers, underwriters, attorneys, accountants oragents, collectively, the “Inspectors”), upon written request, at theoffices where normally kept, during reasonable business hours, all pertinentfinancial and other records, pertinent corporate documents and instruments ofthe 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 Securities of the Issuer and that it will notdisclose any of the Records or Information that the Issuer determines, in goodfaith, to be confidential and notifies the Inspectors in writing areconfidential unless (i) the disclosure of such Records or Information isnecessary to avoid or correct a misstatement or omission in such RegistrationStatement or Prospectus, (ii) the release of such Records or Informationis ordered pursuant to a subpoena or other order from a court of competentjurisdiction, (iii) disclosure of such Records or Information is necessaryor advisable, in the opinion of counsel for any Inspector, in connection with anyaction, claim, suit or proceeding, directly or indirectly, involving orpotentially involving such Inspector and arising out of, based upon, relatingto, or involving this Agreement or the Purchase Agreement, or any transactionscontemplated 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 an indenture trusteefor the Registrable Securities or the Exchange Securities, as the 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.

 

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## (p)           Comply in all materialrespects 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)           Upon consummation of theExchange Offer or a Private Exchange, obtain an opinion of counsel to theIssuer, in a form customary for underwritten transactions, addressed to theTrustee for the benefit of all Holders of Registrable Securities participatingin the Exchange Offer or the Private Exchange, as the case may be, that theExchange Securities or Private Exchange Notes, as the case may be, the relatedguarantees and the related indenture constitute legal, valid and bindingobligations of the Issuer, enforceable against the Issuer in accordance withtheir respective terms, subject to customary exceptions and qualifications. Ifthe Exchange Offer or a Private Exchange is to be consummated, upon delivery ofthe Registrable Securities by Holders to the Issuer (or to such other Person asdirected by the Issuer), in exchange for the Exchange Securities or the PrivateExchange Notes (and the related guarantees), as the case may be, the Issuershall mark, or cause to be marked, on such Registrable Securities that suchRegistrable Securities are being cancelled in exchange for the ExchangeSecurities or the Private Exchange Notes (and the related guarantees), as thecase may be; in no event shall such Registrable Securities be marked as paid orotherwise satisfied.

##  

## (r)            Use reasonable efforts tocooperate 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 its respectivereasonable best efforts to take all other steps reasonably necessary to effectthe registration of the Exchange Securities and/or Registrable Securitiescovered 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 theIssuer by 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 the

 

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holdingby such Holder of such securities is not to be construed as a recommendation bysuch Holder of the investment quality of the securities covered thereby andthat such holding does not imply that such Holder will assist in meeting anyfuture financial requirements of the Issuer, or (ii) in the event thatsuch reference to such Holder by name or otherwise is not required by theSecurities Act or any similar federal statute then in force, the deletion ofthe reference to such Holder in any amendment or supplement to the RegistrationStatement filed or prepared subsequent to the time that such reference ceasesto 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 periods from andincluding the date of the giving of such notice to and including the date wheneach seller of Registrable Securities covered by such Registration Statement orExchange Securities to be sold by such Participating Broker-Dealer, as the casemay be, shall have received (x) the copies of the supplemented or amendedProspectus contemplated by Section 5(k) hereof or (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 theholders of Registrable Securities are located, in the case of the ExchangeSecurities, or (y) as provided in Section 5(h) hereof, in the case ofRegistrable Securities or Exchange Securities to be sold by a ParticipatingBroker-Dealer during the Applicable Period)), (ii) printing expenses,including, without limitation, printing prospectuses if the printing ofprospectuses is requested by the managing underwriter or underwriters, if any,by the Holders of a majority in aggregate principal amount at maturity of theRegistrable Securities included in any Registration Statement or in respect ofRegistrable Securities or Exchange Securities to be sold by any ParticipatingBroker-Dealer during the Applicable Period, as the case may be, (iii) feesand expenses of the Trustee, any exchange agent and their counsel,(iv) fees and disbursements of counsel for the Issuer and, in the case ofa Shelf Registration, reasonable fees and disbursements of one special counselfor all of the sellers of Registrable Securities selected by the Holder of amajority in aggregate principal amount at maturity of Registrable Securitiescovered by such Shelf Registration (which counsel shall be reasonablysatisfactory to the

 

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Issuer)exclusive of any counsel retained pursuant to Section 7 hereof), (v) feesand disbursements of all independent certified public accountants referred toin Section 5(m) hereof (including, without limitation, the expenses of any“cold comfort” letters required by or incident to such performance),(vi) rating agency fees, if any, and any fees associated with making theRegistrable Securities or Exchange Securities eligible for trading through TheDepository Trust Company, (vii) Securities Act liability insurance, if theIssuer desires such insurance, (viii) fees and expenses of all otherPersons retained by the Issuer, (ix) internal expenses of the Issuer(including, without limitation, all salaries and expenses of officers and employeesof the Issuer performing legal or accounting duties), (x) the expense ofany annual audit, (xi) any fees and expenses incurred in connection withthe listing of the securities to be registered on any securities exchange, andthe obtaining 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 and severally agree, to indemnifyand hold harmless each Holder of Registrable Securities and each ParticipatingBroker-Dealer selling Exchange Securities during the Applicable Period, andeach Person, if any, who controls such Person or its affiliates within themeaning 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 the extentthat any such loss, claim, damage, or liability arises out of or is based uponany untrue statement or alleged untrue statement or omission or alleged omissionmade in any

 

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RegistrationStatement (or any amendment thereto) or Prospectus (as amended or supplementedif the Issuer shall have furnished any amendments or supplements thereto) orany preliminary prospectus or any amendment or supplement thereto in relianceupon and in conformity with written information relating to any Participantfurnished to the Issuer by such Participant specifically for use therein. Theindemnity provided for in this Section 7 will be in addition to anyliability that the Issuer may otherwise have to the indemnified parties. TheIssuer and the Guarantors shall not be liable under this Section 7 to anyindemnified party regarding any settlement or compromise or consent to theentry of any judgment with respect to any pending or threatened claim, action,suit or proceeding in respect of which indemnification or contribution may besought hereunder (whether or not the indemnified parties are actual orpotential parties to such claim or action) unless such settlement, compromiseor consent is consented to by the Issuer and the Guarantors, which consentshall not be unreasonably withheld.

 

(b)           Each Participant, severally and not jointly, agrees to indemnify andhold harmless the Issuer, the Guarantors, their respective directors (orequivalent), their respective officers who sign any Registration Statement andeach person, if any, who controls the Issuer within the meaning of Section 15of the Act or Section 20 of the Exchange Act against any losses, claims,damages or liabilities to which the Issuer, the Guarantors or any such director,officer or controlling person may become subject under the Act, the ExchangeAct or otherwise, insofar as such losses, claims, damages or liabilities (oractions in respect thereof) arise out of or are based upon (i) any untruestatement or alleged untrue statement of any material fact contained in anyRegistration Statement or Prospectus, any amendment or supplement thereto, orany preliminary prospectus, or (ii) the omission or the alleged omissionto state 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 suchdirector, officer or controlling person in connection with investigating ordefending against or appearing as a third party witness in connection with anysuch loss, claim, damage, liability or action in respect thereof. The indemnityprovided for in this Section 7 will be in addition to any liability thatthe Participants may otherwise have to the indemnified parties. TheParticipants shall not be liable under this Section 7 to any indemnified partyregarding any settlement or compromise or consent to the entry of any judgmentwith respect to any pending or threatened claim, action, suit or proceeding inrespect of which indemnification or contribution may be sought hereunder(whether or not the indemnified parties are actual or potential parties to suchclaim or action) unless such settlement, compromise or consent is consented toby the Participants, which consent shall not be unreasonably withheld. TheIssuer and the 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 orfailure to act by or on behalf of such Participant.

 

(c)           Promptly after receipt by an indemnified party under thisSection 7 of notice of the commencement of any action, such indemnifiedparty will, if a claim in respect thereof is to be made against theindemnifying party under this Section 7, notify the indemnifying party of thecommencement

 

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thereofin writing; but the omission to so notify the indemnifying party (i) willnot relieve it from any liability under paragraph (a) or (b) above unless andto the extent it did not otherwise learn of such action and such failureresults in the forfeiture by the indemnifying party of substantial rights anddefenses and (ii) will not, in any event, relieve the indemnifying partyfrom any obligations to any indemnified party other than the indemnificationobligation provided in paragraphs (a) and (b) above. The indemnifying partyshall be entitled to appoint counsel (including local counsel) of theindemnifying party’s choice at the indemnifying party’s expense to representthe indemnified party in any action for which indemnification is sought (inwhich case the indemnifying party shall not thereafter be responsible for thefees and expenses of any separate counsel, other than local counsel if notappointed by the indemnifying party, retained by the indemnified party orparties except as set forth below); provided, however, that suchcounsel shall be reasonably satisfactory to the indemnified party. Notwithstandingthe indemnifying party’s election to appoint counsel (including local counsel)to represent the indemnified party in an action, the indemnified party shallhave the right to employ separate counsel (including local counsel), and theindemnifying party shall bear the reasonable fees, costs and expenses of suchseparate counsel if (i) the use of counsel chosen by the indemnifyingparty to represent the indemnified party would present such counsel with a conflictof interest (based on the advice of counsel to the indemnified person);(ii) such action includes both the indemnified party and the indemnifyingparty and the indemnified party shall have reasonably concluded (based on theadvice of counsel to the indemnified person) that there may be legal 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 agreedthat the 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 are partiesto such action or actions. Any such separate firm for any Participants shall bedesignated in writing by Participants who sold a majority in interest of theRegistrable Securities and Exchange Securities sold by all such Participants inthe case of paragraph (a) of this Section 7 or the Issuer in the case ofparagraph (b) of this Section 7. In the event that any Participants areindemnified persons collectively entitled, in connection with a proceeding orseparate 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.

 

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(d)           After notice from the indemnifying party to such indemnified party ofits election so to assume the defense thereof and approval by such indemnifiedparty of counsel appointed to defend such action, the indemnifying party willnot be liable to such indemnified party under this Section 7 for any legalor other expenses, other than reasonable costs of investigation, subsequentlyincurred by such indemnified party in connection with the defense thereof,unless (i) the indemnified party shall have employed separate counsel inaccordance with the third sentence of paragraph (c) of this Section 7 or (ii)the indemnifying party has authorized in writing the employment of counsel forthe indemnified party at the expense of the indemnifying party. After suchnotice from the indemnifying party to such indemnified party, the indemnifyingparty will not be liable for the costs and expenses of any settlement of suchaction effected by such indemnified party without the prior written consent ofthe indemnifying party (which consent shall not be unreasonably withheld),unless such indemnified party waived in writing its rights under thisSection 7, in which case the indemnified party may effect such a settlementwithout such consent.

 

(e)           In circumstances in which the indemnity agreement provided for in thepreceding paragraphs of this Section 7 is unavailable to, or insufficientto hold harmless, an indemnified party in respect of any losses, claims,damages or liabilities (or actions in respect thereof) (other than by virtue ofthe failure of an indemnified party to notify the indemnifying party of itsright to indemnification pursuant to paragraph (a) or (b) of this Section 7,where such failure materially prejudices the indemnifying party (through theforfeiture of substantial rights or defenses)), each indemnifying party, inorder to provide for just and equitable contribution, shall contribute to theamount paid or payable by such indemnified party as a result of such losses,claims, damages or liabilities (or actions in respect thereof) in suchproportion as is appropriate to reflect (i) the relative benefits received bythe indemnifying party or parties on the one hand and the indemnified party onthe other from the offering of the Securities or (ii) if the allocationprovided by the foregoing clause (i) is not permitted by applicable law, notonly such relative benefits but also the relative fault of the indemnifyingparty or parties on the one hand and the indemnified party on the other inconnection with the statements or omissions or alleged statements or omissionsthat resulted in such losses, claims, damages or liabilities (or actions inrespect thereof). The relative benefits received by the Issuer and theGuarantors on the one hand and such Participant on the other shall be deemed tobe in the same proportion that the total net proceeds from the offering (beforededucting expenses) of the Securities received by the Issuer bear to the totaldiscounts (other than original issue discount (assuming an accreted value onOctober 31, 2006 of $532.54 per $1,000 principal amount at maturity), whichshall not constitute a discount for such purposes) 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 (other than original issue discount(assuming an accreted value on October 31, 2006 of $532.54 per $1,000 principalamount at maturity), which shall not constitute a discount for such purposes),commissions and other

 

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compensationor net proceeds on the sale of Securities received by such Participant inconnection with the sale of the Securities, less the aggregate amount of anydamages that such Participant has otherwise been required to pay by reason ofthe untrue or alleged untrue statements or the omissions or alleged omissionsto state a material fact, and no person guilty of fraudulent misrepresentation(within the meaning of Section 11(f) of the Act) shall be entitled tocontribution from any person who was not guilty of such fraudulentmisrepresentation. For purposes of this paragraph (d), each person, if any, whocontrols a Participant within the meaning of Section 15 of the Act orSection 20 of the Exchange Act shall have the same rights to contributionas the Participants, and each director of the Issuer and the Guarantors, eachofficer of the Issuer and the Guarantors and each person, if any, who controlsthe Issuer and the Guarantors within the meaning of Section 15 of the Actor Section 20 of the Exchange Act, shall have the same rights tocontribution 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 holder to sellRegistrable Securities without registration under the Securities Act within thelimitation of the exemptions provided by Rule 144(k) under the SecuritiesAct and Rule 144A unless the Issuer is then subject to Section 13 or 15(d)of the Exchange Act and reports filed thereunder satisfy the informationrequirements 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 atmaturity of the Registrable Securities. If any of the Registrable Securitiescovered by any Shelf Registration are to be sold in an underwritten offering,the investment banker or investment bankers and manager or managers that willmanage the offering will be selected by the Holders of a majority in aggregateprincipal amount at maturity of such Registrable Securities included in suchoffering and shall be reasonably 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

 

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thatis inconsistent with the rights granted to the Holders of RegistrableSecurities in this Agreement or otherwise conflicts with the provisions hereof.The rights granted to the Holders hereunder do not in any way conflict with andare not inconsistent with the rights granted to the holders of the Issuer otherissued and outstanding securities under any such agreements. The Issuer willnot enter into any agreement (other than the Registration Rights Agreementdated as of the date hereof in respect of the Senior Subordinated Notes and theRegistration Rights Agreement dated as of the date hereof in respect of theSenior 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 at maturity of the thenoutstanding Registrable Securities and (B) in circumstances that wouldadversely affect the Participating Broker-Dealers, the ParticipatingBroker-Dealers holding not less than a majority in aggregate principal amountat maturity of the Exchange Notes held by all Participating Broker-Dealers; provided,however, that Section 7 and this Section 10(c) may not beamended, modified or supplemented without the prior written consent of eachHolder and each Participating Broker-Dealer (including any person who was aHolder or Participating Broker-Dealer of Registrable Securities or ExchangeSecurities, as the case may be, disposed of pursuant to any RegistrationStatement) affected by any such amendment, modification or supplement. Notwithstandingthe foregoing, a waiver or consent to depart from the provisions hereof withrespect to a matter that relates exclusively to the rights of Holders ofRegistrable Securities whose securities are being sold pursuant to aRegistration Statement and that does not directly or indirectly affect, impair,limit or compromise the rights of other Holders of Registrable Securities maybe given by Holders of at least a majority in aggregate principal amount atmaturity of the Registrable Securities being sold pursuant to such RegistrationStatement.

 

(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 aHolder of the Registrable Securities or any Participating Broker-Dealer, at themost current address of such Holder or Participating Broker-Dealer, as the casemay be, set forth on the records of the registrar under the Indenture, with acopy in like manner to the Initial Purchasers as follows:

 
|   | Deutsche Bank Securities Inc.           |
|--------|-----------------------------------------|
|   | 60 Wall Street                          |
|   | New York, New York 10005                |
|   | Facsimile No.: (646) 324-7554      |
|   | Attention: Corporate Finance Department |

 

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|   |   | 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                                                      |
|   |   | 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.

 

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(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 BE GOVERNEDBY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, ASAPPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK. EACHOF THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION,PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.**

 

(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 be counted indetermining whether such consent or approval was given by the Holders of suchrequired 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.

 

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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 |
|                                                  |
|                                                  |
| For  itself and the other several Initial Purchasers. |

 

Signature Page to Registration RightsAgreement

 

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SCHEDULE I

 

**THE GUARANTORS**

 

AARONBROTHERS, INC.

MICHAELSFINANCE COMPANY, INC.

MICHAELSSTORES PROCUREMENT COMPANY, INC. MICHAELS OF CANADA, ULCMICHAELS STORES CARD SERVICES, LLCARTISTREE, INC.

 

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