**Exhibit 4.5**

 

 

 

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

 

 

11 3/8% Senior Subordinated Notes due 2016

 

 

 

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TABLE OF CONTENTS

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

 

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REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”)is dated as of October 31, 2006, among MICHAELS STORES INC., a Delawarecorporation (the “Issuer”), the guarantors listed on Schedule Ihereto (the “Guarantors”) and DEUTSCHE BANK SECURITIES INC., J.P. MORGANSECURITIES INC., BANC OF AMERICA SECURITIES LLC and CREDIT SUISSE SECURITIES(USA) LLC (together, the “Initial Purchasers”).

 

This Agreement is entered into in connection withthe Purchase Agreement, dated as of October 25, 2006 (the “PurchaseAgreement”), by and among the Issuer and the Initial Purchasers, whichprovides for, among other things, the sale by the Issuer to the InitialPurchasers of $750,000,000 aggregate principal amount of the Issuer’s 10%Senior Notes due 2014 (the “Senior Notes”) and $400,000,000 aggregateprincipal amount of the Issuer’s 11 3/8% Senior Subordinated Notes due 2016(the “Notes”).  The Notes areissued under an indenture, dated as of the date hereof (as amended or supplementedfrom time to time, the “Indenture”), among the Issuer, the Guarantorsand Wells Fargo Bank, National Association, as trustee (the “Trustee”).  Pursuant to the Purchase Agreement and theIndenture, the Guarantors are required to guarantee (collectively, the “Guarantees”)the Issuer’s obligations under the Notes and the Indenture.  References to the “Securities” shallmean, collectively, the Notes and the Guarantees. In order to induce the InitialPurchasers to enter into the Purchase Agreement, the Issuer has agreed toprovide the registration rights set forth in this Agreement for the benefit ofthe Initial Purchasers and any subsequent holder or holders of theSecurities.  The execution and deliveryof this Agreement is a condition to the Initial Purchasers’ obligations underthe Purchase Agreement.

 

The parties hereby agree as follows:

 

1.             Definitions

 

As used in this Agreement, the following terms shallhave the following meanings:

 

Additional Interest:  SeeSection 4(a) hereof.

 

Advice:  See the last paragraph ofSection 5 hereof.

 

Agreement:  See the introductoryparagraphs hereto.

 

Applicable Period:  SeeSection 2(b) hereof.

 

Business Day: Shall have the meaning ascribed to such term in Rule 14d-1 under the ExchangeAct.

 

Effectiveness Date:  Withrespect to any Shelf Registration Statement, the 90th day after the Filing Datewith respect thereto; provided, however, that if theEffectiveness Date would otherwise fall on a day that is not a Business Day,then the Effectiveness Date shall be the next succeeding Business Day.

 

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Effectiveness Period:  SeeSection 3(a) hereof.

 

Event Date:  See Section 4(b) hereof.

 

Exchange Act:  TheSecurities Exchange Act of 1934, as amended, and the rules and regulations ofthe SEC promulgated thereunder.

 

Exchange Notes:  SeeSection 2(a) hereof.

 

Exchange Offer:  SeeSection 2(a) hereof.

 

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

 

Exchange Securities:  SeeSection 2(a) hereof.

 

Filing Date:  The 90th day after thedelivery of a Shelf Notice as required pursuant to Section 2(c) hereof; provided,however, that if the Filing Date would otherwise fall on a day that isnot a Business Day, then the Filing Date shall be the next succeeding BusinessDay.

 

Guarantees:  See the introductoryparagraphs hereto.

 

Guarantors:  See the introductory paragraphshereto.

 

Holder:  Any holder of a RegistrableSecurity or Registrable Securities.

 

Indenture:  See the introductoryparagraphs hereto.

 

Information:  See Section 5(n) hereof.

 

Initial Purchasers:  Seethe introductory paragraphs hereto.

 

Initial Shelf Registration:  SeeSection 3(a) hereof.

 

Inspectors:  See Section 5(n) hereof.

 

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

 

Issuer:  See the introductoryparagraphs hereto.

 

NASD:  See Section 5(r) hereof.

 

New Guarantees:  SeeSection 2(a) hereof.

 

Notes:  See the introductoryparagraphs hereto.

 

Participant:  See Section 7(a) hereof.

 

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Participating Broker-Dealer:  SeeSection 2(b) hereof.

 

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

 

Private Exchange:  SeeSection 2(b) hereof.

 

Private Exchange Notes:  SeeSection 2(b) hereof.

 

Prospectus:  The prospectus included in anyRegistration Statement (including, without limitation, any prospectus subjectto completion and a prospectus that includes any information previously omittedfrom a prospectus filed as part of an effective registration statement inreliance upon Rule 430A under the Securities Act and any term sheet filedpursuant to Rule 434 under the Securities Act), as amended or supplementedby any prospectus 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:  Seethe introductory paragraphs hereof.

 

Records:  See Section 5(n) hereof.

 

Registrable Securities:  EachSecurity upon its original issuance and at all times subsequent thereto, each ExchangeSecurity as to which Section 2(c)(iv) hereof is applicable upon originalissuance and at all times subsequent thereto and each Private Exchange Note(and the related Guarantees) upon original issuance thereof and at all timessubsequent thereto, until, in each case, the earliest to occur of (i) aRegistration Statement (other than, with respect to any Exchange Securities asto which Section 2(c)(iv) hereof is applicable, the Exchange OfferRegistration Statement) covering such Security, Exchange Security or PrivateExchange Note (and the related Guarantees) has been declared effective by theSEC and such Security, Exchange Security or such Private Exchange Note (and therelated Guarantees), as the case may be, has been disposed of in accordancewith such effective Registration Statement, (ii) such Security has beenexchanged pursuant to the Exchange Offer for an Exchange Security or ExchangeSecurities that may be resold without restriction under state and federal securitieslaws, (iii) such Security, Exchange Security or Private Exchange Note (andthe related Guarantees), as the case may be, ceases to be outstanding forpurposes of the Indenture or (iv) such Security, Exchange Security orPrivate Exchange Note (and the related Guarantees), as the case may be, may beresold without restriction pursuant to Rule 144(k) (as amended orreplaced) under the Securities Act.

 

Registration Statement:  Anyregistration statement of the Issuer that covers any of the Securities, theExchange Securities or the Private Exchange Notes (and the related Guarantees)filed with the SEC under the Securities Act, including, in each case, theProspectus, amendments and supplements to such registration statement,including post-effective amendments, all exhibits, and all material incorporatedby reference or deemed to be incorporated by reference in such registrationstatement.

 

Rule 144:  Rule 144 under theSecurities Act.

 

Rule 144A:  Rule 144A under theSecurities Act.

 

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Rule 405:  Rule 405 under theSecurities Act.

 

Rule 415:  Rule 415 under theSecurities Act.

 

Rule 424:  Rule 424 under theSecurities Act.

 

SEC:  The U.S. Securities andExchange Commission.

 

Securities:  See the introductoryparagraphs hereto.

 

Securities Act:  TheSecurities Act of 1933, as amended, and the rules and regulations of the SECpromulgated thereunder.

 

Senior Notes:  Seethe introductory paragraphs hereto.

 

Shelf Notice:  SeeSection 2(c) hereof.

 

Shelf Registration:  SeeSection 3(b) hereof.

 

Shelf Registration Statement:  AnyRegistration Statement relating to a Shelf Registration.

 

Shelf Suspension Period:  SeeSection 3(a) hereof.

 

Subordinated Discount Notes:  TheIssuer’s 13% Subordinated Discount Notes due 2016.

 

Subsequent Shelf Registration:  SeeSection 3(b) hereof.

 

TIA:  The Trust Indenture Act of1939, as amended.

 

Trustee:  The trustee under theIndenture and the trustee under any indenture (if different) governing theExchange Securities and 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.

 

Except as otherwise specifically provided, allreferences in this Agreement to acts, laws, statutes, rules, regulations, releases,forms, no-action letters and other regulatory requirements (collectively, “RegulatoryRequirements”) shall be deemed to refer also to any amendments thereto andall subsequent Regulatory Requirements adopted as a replacement thereto havingsubstantially the same effect therewith; provided that Rule 144shall not be deemed to amend or replace Rule 144A.

 

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

 

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## registrationform with respect to a registered offer (the “Exchange Offer”) toexchange any and all of the Registrable Securities for a like aggregateprincipal amount of debt securities of the Issuer (the “Exchange Notes”),guaranteed, to the extent applicable, on an unsecured senior subordinated basisby the Guarantors (the “New Guarantees” and, together with the ExchangeNotes, the “Exchange Securities”), that are identical in all materialrespects to the Notes, except that (i) the Exchange Notes shall contain norestrictive legend thereon, (ii) interest thereon shall accrue (A) fromthe later of (x) the last date on which interest was paid on such Notes or (y)if such Notes are surrendered for exchange on a date in a period that includesthe record date for an interest payment date to occur on or after the date ofsuch exchange and as to which interest on such Note will be paid, the date ofsuch interest payment date or (B) if no such interest has been paid, from theIssue Date and (iii) the Exchange Notes shall be entitled to the benefits ofthe Indenture or a trust indenture which is identical in all material respectsto the Indenture (other than such changes to the Indenture or any suchidentical trust indenture as are necessary to comply with the TIA) and which,in either case, has been qualified under the TIA.  The Exchange Offer shall comply with allapplicable tender offer rules and regulations under the Exchange Act and otherapplicable laws.  The Issuer shall useits reasonable best efforts to (x) prepare and file with the SEC the ExchangeOffer Registration Statement with respect to the Exchange Offer; (y) keepthe Exchange Offer open for at least 20 Business Days (or longer if required byapplicable law) after the date that notice of the Exchange Offer is mailed toHolders; and (z) consummate the Exchange Offer on or prior to the 360thday following the Issue Date. 

##  

Each Holder (including, without limitation, eachParticipating Broker-Dealer) that participates in the Exchange Offer, as acondition to participation in the Exchange Offer, will be required to representto the Issuer in writing (which may be contained in the applicable letter of transmittal)that:  (i) any Exchange Securitiesacquired in exchange for Registrable Securities tendered are being acquired inthe ordinary course of business; (ii) at the time of the commencement orconsummation of the Exchange Offer such Holder has no arrangement orunderstanding with any Person to participate in the distribution (within themeaning of the Securities Act) of the Exchange Securities in violation of theprovisions of the Securities Act; (iii) such Holder is not an “affiliate”(as defined in Rule 405) of the Issuer or, if it is an affiliate of theIssuer, it will comply with the registration and prospectus delivery requirementsof the Securities Act to the extent applicable and will provide information tobe included in the Shelf Registration Statement in accordance withSection 5 hereof in order to have their Securities included in the ShelfRegistration Statement and benefit from the provisions regarding AdditionalInterest in Section 4 hereof; (iv) if such Holder is not abroker-dealer, such Holder is not engaged in and does not intend to engage in adistribution of the Exchange Securities; and (v) if such Holder is aParticipating Broker-Dealer, such Holder has acquired the RegistrableSecurities for its own account in exchange for Securities that were acquired asa result of market-making activities or other trading activities and that itwill comply with the applicable provisions of the Securities Act (including,but not limited to, the prospectus delivery requirements thereunder).

 

Upon consummation of the Exchange Offer inaccordance with this Section 2, the provisions of this Agreement shall continueto apply, mutatismutandis, solely with respect to Registrable 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.

 

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No securities other than the Exchange Securities,the Senior Notes and the Subordinated Discount Notes (and the relatedguarantees) shall be included in the Exchange Offer Registration Statement. 

 

## (b)           The Issuer shall include within the Prospectus contained in theExchange Offer Registration Statement a section entitled “Plan of Distribution,”which shall contain a summary statement of the positions taken or policies madeby the staff of the SEC with respect to the potential “underwriter” status ofany broker-dealer that is the “beneficial owner” (as defined in Rule 13d-3under the Exchange Act) of Exchange Notes received by such broker-dealer in theExchange Offer (a “Participating Broker-Dealer”), whether such positionsor policies have been publicly disseminated by the staff of the SEC or suchpositions or policies represent the prevailing views of the staff of theSEC.  Such “Plan of Distribution” sectionshall also expressly permit, to the extent permitted by applicable policies andregulations of the SEC, the use of the Prospectus by all ParticipatingBroker-Dealers, and include a statement describing the means by whichParticipating Broker-Dealers may resell the Exchange Securities in compliancewith the Securities Act.

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The Issuer shall use its reasonable best efforts tokeep the Exchange Offer Registration Statement effective and to amend andsupplement the Prospectus contained therein in order to permit such Prospectusto be lawfully delivered by all Persons subject to the prospectus deliveryrequirements of the Securities Act for such period of time as is necessary tocomply with applicable law in connection with any resale of the ExchangeSecurities; provided, however, that such period shall not berequired to exceed 90 days, or such longer period if extended pursuant to thelast paragraph of Section 6 hereof (the “Applicable Period”).

 

If, prior to consummation of the Exchange Offer, theInitial Purchasers hold any Notes acquired by them that have the status of anunsold allotment in the initial distribution, the Issuer, upon the request ofthe Initial Purchasers, shall simultaneously with the delivery of the ExchangeNotes issue and deliver to the Initial Purchasers, in exchange (the “PrivateExchange”) for such Notes held by any such Holder, a like principal amountof 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 ExchangeNotes.  The Private Exchange Notes shallbe issued pursuant to the same indenture as the Exchange Notes and bear thesame CUSIP number as the Exchange Notes if permitted by the CUSIP ServiceBureau.

 

In connection with the Exchange Offer, the Issuershall:

 

### (1)           mail, or cause to be mailed, to each Holder of record entitled toparticipate in the Exchange Offer a copy of the Prospectus forming part of theExchange Offer Registration Statement, together with an appropriate letter oftransmittal and related documents;

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### (2)           use their respective reasonable best efforts to keep the Exchange Offeropen for not less than 20 Business Days from the date that notice of theExchange Offer is mailed to Holders (or longer if required by applicable law);

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### (3)           utilize the services of a depositary for the Exchange Offer with anaddress in the Borough of Manhattan, The City of New York or in Wilmington, Delaware;

 

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### (4)           permit Holders to withdraw tendered Notes at any time prior to theclose of business, New York time, on the last Business Day on which theExchange Offer remains open; and

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### (5)           otherwise comply in all material respects with all laws, rules andregulations applicable to the Exchange Offer.

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As soon as practicable after the close of theExchange Offer and any Private Exchange, the Issuer shall:

 

### (1)           accept for exchange all Registrable Securities validly tendered and notvalidly withdrawn pursuant to the Exchange Offer and any Private Exchange;

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### (2)           deliver to the Trustee for cancellation all Registrable Securities soaccepted for exchange; and

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### (3)           cause the Trustee to authenticate and deliver promptly to each Holderof Notes, Exchange Notes or Private Exchange Notes, as the case may be, equalin principal amount to the Notes of such Holder so accepted for exchange; providedthat, in the case of any Notes held in global form by a depositary, authenticationand delivery to such depositary of one or more replacement Notes in global formin an equivalent principal amount thereto for the account of such Holders inaccordance with the Indenture shall satisfy such authentication and deliveryrequirement.

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The Exchange Offer and the Private Exchange shallnot be subject to any conditions, other than that (i) the Exchange Offeror Private Exchange, as the case may be, does not violate applicable law or anyapplicable interpretation of the staff of the SEC; (ii) no action orproceeding shall have been instituted or threatened in any court or by anygovernmental agency which might materially impair the ability of the Issuer toproceed with the Exchange Offer or the Private Exchange, and no materialadverse development shall have occurred in any existing action or proceedingwith respect to the Issuer; and (iii) all governmental approvals shallhave been obtained, which approvals the Issuer deem necessary for theconsummation of the Exchange Offer or Private Exchange.

 

The Exchange Securities and the Private ExchangeNotes (and related guarantees) shall be issued under (i) the Indenture or(ii) an indenture identical in all material respects to the Indenture andwhich, in either case, has been qualified under the TIA or is exempt from suchqualification and shall provide that the Exchange Securities shall not besubject to the transfer restrictions set forth in the Indenture.  The Indenture or such indenture shall providethat the Exchange Notes, the Private Exchange Notes and the Notes shall voteand consent together on all matters as one class and that none of the ExchangeNotes, the Private Exchange Notes or the Notes will have the right to vote orconsent as 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 the consummationof the Exchange Offer, or (iv) in the case of any Holder that participatesin the Exchange Offer, such Holder does not receive Exchange

 

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## Securitieson the date of the exchange that may be sold without restriction under stateand federal securities laws (other than due solely to the status of such Holderas an affiliate of the Issuer within the meaning of the Securities Act) and sonotifies the Issuer within 30 days after such Holder first becomes aware ofsuch restrictions, in the case of each of clauses (i) to and including (iv) ofthis sentence, then the Issuer shall promptly deliver to the Trustee (todeliver to the Holders) written notice thereof (the “Shelf Notice”) andshall file a Shelf Registration pursuant to Section 3 hereof.

##  

3.             Shelf Registration

 

If at any time a Shelf Notice is delivered ascontemplated by Section 2(c) hereof, then:

 

(a)           Shelf Registration.  TheIssuer shall promptly file with the SEC a Registration Statement for an offeringto be made on a continuous basis pursuant to Rule 415 covering all of the RegistrableSecurities (the “Initial Shelf Registration”).  The Issuer shall use its reasonable bestefforts to file with the SEC the Initial Shelf Registration on or prior to theFiling Date.  The Initial ShelfRegistration shall be on Form S-1 or another appropriate form permittingregistration of such Registrable Securities for resale by Holders in the manneror manners designated by them (including, without limitation, one or moreunderwritten offerings).  The Issuershall not permit any securities other than the Registrable Securities and theGuarantees, the Senior Notes and the related guarantees and the SubordinatedDiscount Notes and the related guarantees to be included in the Initial ShelfRegistration or any Subsequent Shelf Registration (as defined below).

 

The Issuer shall use itsrespective reasonable best efforts to cause the Shelf Registration to bedeclared effective under the Securities Act on or prior to the EffectivenessDate and to keep the Initial Shelf Registration continuously effective underthe Securities Act until the earliest of (i) the date that is two years fromthe Issue Date (ii) such shorter period ending when all Registrable Securitiescovered by the Initial Shelf Registration have been sold in the manner setforth and as contemplated in the Initial Shelf Registration or, if applicable,a Subsequent Shelf Registration or (iii) the date upon which all RegistrableSecurities become eligible for resale without regard to volume, manner of saleor other restrictions contained in Rule 144(k) (the “Effectiveness Period”);provided, however, that the Effectiveness Period in respect ofthe Initial Shelf Registration shall be extended to the extent required topermit dealers to comply with the applicable prospectus delivery requirementsof Rule 174 under the Securities Act and as otherwise provided herein.  Notwithstanding anything to the contrary inthis Agreement, at any time, the Issuer may delay the filing of any InitialShelf Registration Statement or delay or suspend the effectiveness thereof, fora reasonable period of time, but not in excess of 60 consecutive days or morethan three (3) times during any calendar year (each, a “Shelf SuspensionPeriod”), if the Board of Directors of the Issuer determines reasonably andin good faith that the filing of any such Initial Shelf Registration Statementor the continuing effectiveness thereof would require the disclosure ofnon-public material information that, in the reasonable judgment of the Boardof Directors of the Issuer, would be detrimental to the Issuer if so disclosedor would otherwise materially adversely affect a financing, acquisition,disposition, merger or other material transaction or such action is required byapplicable law.

 

(b)           Withdrawal of Stop Orders; Subsequent ShelfRegistrations.  If the Initial Shelf Registration or any SubsequentShelf Registration ceases to be effective for any reason at any time during theEffectiveness Period (other than because of the sale of all of the Securitiesregistered thereunder), the Issuer shall use its reasonable best efforts toobtain the prompt withdrawal of any order suspending the

 

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effectiveness thereof, andin any event shall file an additional Shelf Registration Statement pursuant toRule 415 covering all of the Registrable Securities covered by and not soldunder the Initial Shelf Registration or an earlier Subsequent ShelfRegistration (each, a “Subsequent Shelf Registration”).  If a Subsequent Shelf Registration is filed,the Issuer 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 the EffectivenessPeriod less the aggregate number of days during which the Initial ShelfRegistration or any Subsequent Shelf Registration was previously continuouslyeffective.  As used herein the term “ShelfRegistration” means the Initial Shelf Registration and any Subsequent ShelfRegistration.

 

(c)           Supplements and Amendments.  TheIssuer shall promptly supplement and amend the Shelf Registration if requiredby the rules, regulations or instructions applicable to the registration formused for such Shelf Registration, if required by the Securities Act, or ifreasonably requested by the Holders of a majority in aggregate principal amountof the Registrable Securities (or their counsel) covered by such RegistrationStatement with respect to the information included therein with respect to oneor more of such Holders, or, if reasonably requested by any underwriter of suchRegistrable Securities, with respect to the information included therein withrespect 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 Issuer agrees to pay asliquidated damages, additional interest on the Notes (“Additional Interest”)if (A) the Issuer has neither (i) exchanged Exchange Securities for allSecurities validly tendered in accordance with the terms of the Exchange Offernor (ii) had a Shelf Registration Statement declared effective, in either caseon or prior to the 360th day after the Issue Date, (B) notwithstanding clause(A), the Issuer is required to file a Shelf Registration Statement and suchShelf Registration Statement is not declared effective on or prior to the 360thday after the date such Shelf Registration Statement filing was requested orrequired or (C), if applicable, a Shelf Registration has been declaredeffective and such Shelf Registration ceases to be effective at any time duringthe Effectiveness Period (other than because of the sale of all of theSecurities registered thereunder), and then Additional Interest shall accrue onthe principal amount of the Registrable Securities at a rate of 0.25% per annum(which rate will be increased by an additional 0.25% per annum for eachsubsequent 90 day period that such Additional Interest continues to accrue, providedthat the rate at which such Additional Interest accrues may in no event exceed1.00% per annum) (such Additional Interest to be calculated by the Issuer)commencing on the (x) 361st day after the Issue Date, in the case of(A) above, (y) the 361st day after the date such Shelf Registration Statementfiling was requested or required in the case of (B) above or (z) the day suchShelf Registration 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 toaccrue.  Notwithstanding any other provisionsof this Section 4, the Issuer shall not be obligated to pay Additional Interestprovided in Sections 4(a)(B) during a Shelf Suspension Period permitted bySection 3(a) hereof.

 

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## (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 Additional Interest duepursuant to (a) of this Section 4 will be payable in cash semiannually oneach May 1 and November 1 (to the holders of record on the April 15 and October15 immediately preceding such dates), commencing with the first such dateoccurring after any such Additional Interest commences to accrue.  The amount of Additional Interest will bedetermined by the Issuer by multiplying the applicable Additional Interest rateby the principal amount of the Registrable Securities, multiplied by afraction, the numerator of which is the number of days such Additional Interestrate was applicable during such period (determined on the basis of a360 day year comprised of twelve 30 day months and, in the case of apartial month, the actual number of days elapsed), and the denominator of whichis 360.

##  

5.             RegistrationProcedures

 

In connection with the filing of any RegistrationStatement pursuant to Section 2 or 3 hereof, the Issuer shall effect suchregistrations to permit the sale of the securities covered thereby inaccordance with the intended method or methods of disposition thereof, andpursuant thereto and in connection with any Registration Statement filed by theIssuer hereunder the Issuer shall:

 

(a)           Prepare and file with the SEC (prior to the applicable Filing Date inthe case of a Shelf Registration), a Registration Statement or RegistrationStatements as prescribed by Section 2 or 3 hereof, and use its reasonablebest efforts to cause each such Registration Statement to become effective andremain effective as provided herein; provided, however, that if(1) such filing is pursuant to Section 3 hereof or (2) aProspectus contained in the Exchange Offer Registration Statement filedpursuant to Section 2 hereof is required to be delivered under theSecurities Act by any Participating Broker-Dealer who seeks to sell ExchangeSecurities during the Applicable Period relating thereto from whom the Issuerhas received prior written notice that it will be a Participating Broker-Dealerin the Exchange Offer, before filing any Registration Statement or Prospectus orany amendments or supplements thereto, the Issuer shall furnish to and affordcounsel for the Holders of the Registrable Securities covered by suchRegistration Statement (with respect to a Registration Statement filed pursuantto Section 3 hereof) or counsel for such Participating Broker-Dealer (withrespect to any such Registration Statement), as the case may be, and counsel tothe managing underwriters, if any, a reasonable opportunity to review copies ofall such documents (including copies of any documents to be incorporated byreference therein and all exhibits thereto) proposed to be filed (in each caseat least three Business Days prior to such filing).  The Issuer shall not file any RegistrationStatement or Prospectus or any amendments or supplements thereto if the Holdersof a majority in aggregate principal amount of the Registrable Securitiescovered by such Registration Statement, their counsel, or the managingunderwriters, if any, shall reasonably object.

 

(b)           Prepare and file with the SEC such amendments and post-effectiveamendments to each Shelf Registration Statement or Exchange Offer RegistrationStatement, as the case may be, as may be necessary to keep such RegistrationStatement continuously effective for the Effectiveness Period, the ApplicablePeriod or until consummation of the Exchange Offer, as the case may be; causethe related Prospectus to be supplemented by any Prospectus supplement requiredby applicable law, and as so supplemented to be filed pursuant toRule 424; and comply with the provisions of the Securities Act and theExchange Act applicable to it with respect to the disposition of all securitiescovered by such Registration Statement as so amended or in such Prospectus asso supplemented and with respect to the subsequent

 

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resale of any securitiesbeing sold by an Participating Broker-Dealer covered by any such Prospectus inall material respects.  The Issuer shallbe deemed not to have used its reasonable best efforts to keep a RegistrationStatement effective if it voluntarily takes any action that is reasonably expectedto result in selling Holders of the Registrable Securities covered thereby orParticipating Broker-Dealers seeking to sell Exchange Securities not being ableto sell such Registrable Securities or such Exchange Securities during thatperiod unless such action is required by applicable law or permitted by thisAgreement.

 

(c)           If (1) a Shelf Registration is filed pursuant to Section 3hereof or (2) a Prospectus contained in the Exchange Offer RegistrationStatement filed pursuant to Section 2 hereof is required to be deliveredunder the Securities Act by any Participating Broker-Dealer who seeks to sellExchange Securities during the Applicable Period relating thereto from whom theIssuer has received written notice that it will be a ParticipatingBroker-Dealer in the Exchange Offer, notify the selling Holders of RegistrableSecurities (with respect to a Registration Statement filed pursuant toSection 3 hereof), or each such Participating Broker-Dealer (with respectto any such Registration Statement), as the case may be, their counsel and themanaging underwriters, if any, promptly (but in any event within three BusinessDays), and confirm such notice in writing, (i) when a Prospectus or anyProspectus supplement or post-effective amendment has been filed, and, withrespect to a Registration Statement or any post-effective amendment, when thesame has become effective under the Securities Act (including in such notice awritten statement that any Holder may, upon request, obtain, at the soleexpense of the Issuer, one conformed copy of such Registration Statement orpost-effective amendment including financial statements and schedules,documents incorporated or deemed to be incorporated by reference and exhibits),(ii) of the issuance by the SEC of any stop order suspending the effectivenessof a Registration Statement or of any order preventing or suspending the use ofany preliminary prospectus or the initiation of any proceedings for thatpurpose, (iii) if at any time when a prospectus is required by theSecurities Act to be delivered in connection with sales of the RegistrableSecurities or resales of Exchange Securities by Participating Broker-Dealers therepresentations and warranties of the Issuer contained in any agreement(including any underwriting agreement) contemplated by Section 5(m) hereofcease to be true and correct, (iv) of the receipt by the Issuer of anynotification with respect to the suspension of the qualification or exemptionfrom qualification of a Registration Statement or any of the RegistrableSecurities or the Exchange Securities to be sold by any ParticipatingBroker-Dealer for offer or sale in any jurisdiction, or the initiation orthreatening of any proceeding for such purpose, (v) of the happening ofany event, the existence of any condition or any information becoming knownthat makes any statement made in such Registration Statement or relatedProspectus or any document incorporated or deemed to be incorporated therein byreference untrue in any material respect or that requires the making of anychanges in or amendments or supplements to such Registration Statement,Prospectus or documents so that, in the case of the Registration Statement, itwill not contain any untrue statement of a material fact or omit to state anymaterial fact required to be stated therein or necessary to make the statementstherein not misleading, and that in the case of the Prospectus, 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 therein,in the light of the circumstances under which they were made, not misleading,and (vi) of the Issuer’s determination that a post-effective amendment toa Registration Statement would be appropriate.

 

(d)           Use its reasonable best efforts to prevent the issuance of any ordersuspending the effectiveness of a Registration Statement or of any orderpreventing or suspending the use of a Prospectus or suspending thequalification (or exemption from qualification) of any of the RegistrableSecurities or the Exchange Securities to be sold by any Participating Broker-Dealer,for sale in any jurisdiction.

 

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(e)           If a Shelf Registration is filed pursuant to Section 3 and ifrequested during the Effectiveness Period by the managing underwriter orunderwriters (if any) or the Holders of a majority in aggregate principal amountof the Registrable Securities being sold in connection with an underwrittenoffering, (i) as promptly as practicable incorporate in a prospectus supplementor post-effective amendment such information as the managing underwriter orunderwriters (if any), such Holders or counsel for either of them reasonablyrequest to be included therein, (ii) make all required filings of suchprospectus supplement or such post-effective amendment as soon as practicableafter the Issuer has received notification of the matters to be incorporated insuch prospectus supplement or post-effective amendment, and(iii) supplement or make amendments to such Registration Statement.

 

(f)            If (1) a Shelf Registration is filedpursuant to Section 3 hereof, or (2) a Prospectus contained in the ExchangeOffer Registration Statement filed pursuant to Section 2 hereof isrequired to be delivered under the Securities Act by any ParticipatingBroker-Dealer who seeks to sell Exchange Securities during the ApplicablePeriod, furnish to each selling Holder of Registrable Securities (with respectto a Registration Statement filed pursuant to Section 3 hereof) and toeach such Participating Broker-Dealer who so requests (with respect to any suchRegistration Statement) and to their respective counsel and each managing underwriter,if any, at the sole expense of the Issuer, one conformed copy of theRegistration Statement or Registration Statements and each post-effectiveamendment thereto, including financial statements and schedules, and, if requested,all documents incorporated or deemed to be incorporated therein by referenceand all exhibits.

 

(g)           If (1) a Shelf Registration is filed pursuant to Section 3hereof, or (2) a Prospectus contained in the Exchange Offer RegistrationStatement filed pursuant to Section 2 hereof is required to be deliveredunder the Securities Act by any Participating Broker-Dealer who seeks to sellExchange Securities during the Applicable Period, deliver to each sellingHolder of Registrable Securities (with respect to a Registration Statementfiled pursuant to Section 3 hereof), or each such ParticipatingBroker-Dealer (with respect to any such Registration Statement), as the casemay be, their respective counsel, and the underwriters, if any, at the soleexpense of the Issuer, as many copies of the Prospectus or Prospectuses (includingeach form of preliminary prospectus) and each amendment or supplement theretoand any documents incorporated by reference therein as such Persons mayreasonably request; and, subject to the last paragraph of this Section 5,the Issuer hereby consents to the use of such Prospectus and each amendment orsupplement thereto by each of the selling Holders of Registrable Securities oreach such Participating Broker-Dealer, as the case may be, and the underwritersor agents, if any, and dealers, if any, in connection with the offering andsale of the Registrable Securities covered by, or the sale by ParticipatingBroker-Dealers of the Exchange Securities pursuant to, such Prospectus and anyamendment or supplement thereto.

 

(h)           Prior to any public offering of Registrable Securities or any deliveryof a Prospectus contained in the Exchange Offer Registration Statement by anyParticipating Broker-Dealer who seeks to sell Exchange Securities during theApplicable Period, use its reasonable best efforts to register or qualify, andto cooperate with the selling Holders of Registrable Securities or each suchParticipating Broker-Dealer, as the case may be, the managing underwriter orunderwriters, if any, and their respective counsel in connection with the registrationor qualification (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, ParticipatingBroker-Dealer, or the managing underwriter or underwriters reasonably requestin writing; provided, however, that where Exchange Securitiesheld by Participating Broker-Dealers or Registrable Securities are offeredother than through an underwritten offering, the Issuer agrees to cause itscounsel to perform Blue Sky investigations and file registrations andqualifications required to be filed pursuant to this Section 5(h), keepeach such registration or qualification (or exemption therefrom) effectiveduring the period such Registration Statement is required to be kept effectiveand do any and all other acts or things necessary or advisable to enable the dispositionin such jurisdictions of the Exchange Securities

 

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held by ParticipatingBroker-Dealers or the Registrable Securities covered by the applicableRegistration Statement; provided, however, that the Issuer shallnot be required to (A) qualify generally to do business in anyjurisdiction where it is not then so qualified, (B) take any action thatwould subject it to general service of process in any such jurisdiction whereit is not then so subject or (C) subject itself to taxation in excess of anominal dollar amount in any such jurisdiction where it is not then so subject.

 

(i)            If a Shelf Registration is filed pursuant toSection 3 hereof, cooperate with the selling Holders of Registrable Securitiesand the managing underwriter or underwriters, if any, to facilitate the timelypreparation and delivery of certificates representing Registrable Securities tobe sold, which certificates shall not bear any restrictive legends and shall bein a form eligible for deposit with The Depository Trust Company; and enablesuch Registrable Securities to be in such denominations (subject to applicablerequirements contained in the Indenture) and registered in such names as themanaging underwriter or underwriters, if any, or Holders may request.

 

(j)            Use its reasonable best efforts to cause theRegistrable Securities covered by the Registration Statement to be registeredwith or approved by such other U.S. governmental agencies or authorities as maybe necessary to enable the seller or sellers thereof or the underwriter orunderwriters, if any, to consummate the disposition of such RegistrableSecurities, except as may be required solely as a consequence of the nature ofsuch selling Holder’s business, in which case the Issuer will cooperate in allrespects with the filing of such Registration Statement and the granting ofsuch approvals.

 

(k)           If (1) a Shelf Registration is filed pursuant to Section 3hereof, or (2) a Prospectus contained in the Exchange Offer RegistrationStatement filed pursuant to Section 2 hereof is required to be deliveredunder the Securities Act by any Participating Broker-Dealer who seeks to sellExchange Securities during the Applicable Period, upon the occurrence of anyevent contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly aspracticable prepare and (subject to Section 5(a) hereof) file with theSEC, at the sole expense of the Issuer, a supplement or post-effectiveamendment to the Registration Statement or a supplement to the relatedProspectus or any document incorporated therein by reference, or file any otherrequired document so 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 Participating Broker-Dealer(with respect to any such Registration Statement), any such Prospectus will notcontain an untrue statement of a material fact or omit to state a material factrequired to be stated therein or necessary to make the statements therein, inthe light of the circumstances under which they were made, not misleading.

 

(l)            Prior to the effective date of the firstRegistration Statement relating to the Registrable Securities, (i) providethe Trustee with certificates for the Registrable Securities in a form eligiblefor deposit with The Depository Trust Company and (ii) provide a CUSIPnumber for the Registrable Securities.

 

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(m)          In connection with any underwritten offering of Registrable Securitiespursuant to a Shelf Registration, enter into an underwriting agreement as iscustomary in underwritten offerings of debt securities similar to theSecurities (including, without limitation, a customary condition to theobligations of the underwriters that the underwriters shall have received “coldcomfort” letters and updates thereof in form, scope and substance reasonablysatisfactory to the managing underwriter or underwriters from the independentcertified public accountants of the Issuer (and, if necessary, any otherindependent certified public accountants of the Issuer, or of any businessacquired by the Issuer, for which financial statements and financial data are,or are required to be, included or incorporated by reference in theRegistration Statement), addressed to each of the underwriters, such letters tobe in customary form and covering matters of the type customarily covered in “coldcomfort” letters in connection with underwritten offerings of debt securitiessimilar to the Securities), and take all such other actions as are reasonably requestedby the managing underwriter or underwriters in order to expedite or facilitatethe registration or the disposition of such Registrable Securities and, in suchconnection, (i) make such representations and warranties to, and covenantswith, the underwriters with respect to the business of the Issuer (includingany acquired business, properties or entity, if applicable), and theRegistration Statement, Prospectus and documents, if any, incorporated ordeemed to be incorporated by reference therein, in each case, as arecustomarily made by issuers to underwriters in underwritten offerings of debtsecurities similar to the Securities, and confirm the same in writing if andwhen requested; (ii) obtain the written opinions of counsel to the Issuer,and written updates thereof in form, scope and substance reasonablysatisfactory to the managing underwriter or underwriters, addressed to theunderwriters covering the matters customarily covered in opinions reasonably requestedin underwritten offerings; and (iii) if an underwriting agreement isentered into, the same shall contain indemnification provisions and proceduresno less favorable to the sellers and underwriters, if any, than those set forthin Section 7 hereof (or such other provisions and procedures reasonablyacceptable to Holders of a majority in aggregate principal amount of RegistrableSecurities covered by such Registration Statement and the managing underwriteror underwriters or agents, if any).  Theabove shall be done at each closing under such underwriting agreement, or asand to the extent required thereunder.

 

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

 

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of the Issuer and that itwill not disclose any of the Records or Information that the Issuer determines,in good faith, 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 withany action, 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 trustee for the Registrable Securities or theExchange Securities, as the case may be, and cause the Indenture or the trustindenture provided for in Section 2(a) hereof, as the case may be, to be qualifiedunder the TIA not later than the effective date of the first RegistrationStatement relating to the Registrable Securities; and in connection therewith,cooperate with the trustee under any such indenture and the Holders of theRegistrable Securities, to effect such changes (if any) to such indenture asmay be required for such indenture to be so qualified in accordance with theterms of the TIA; and execute, and use its commercially reasonable best effortsto cause such trustee to execute, all documents as may be required to effectsuch changes, and all other forms and documents required to be filed with theSEC to enable such indenture to be so qualified in a timely manner.

 

(p)           Comply in all material respects with all applicable rules and regulationsof the SEC and make generally available to its securityholders with regard toany applicable Registration Statement, a consolidated earning statement satisfyingthe provisions 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 the Exchange Offer or a Private Exchange, obtainan opinion of counsel to the Issuer, in a form customary for underwrittentransactions, addressed to the Trustee for the benefit of all Holders ofRegistrable Securities participating in the Exchange Offer or the PrivateExchange, as the case may be, that the Exchange Securities or Private ExchangeNotes, as the case may be, the related guarantees and the related indentureconstitute legal, valid and binding obligations of the Issuer, enforceableagainst the Issuer in accordance with their respective terms, subject tocustomary exceptions and qualifications. If the Exchange Offer or a Private Exchange is to be consummated, upon

 

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

 

(r)            Use reasonable efforts to cooperate with eachseller of Registrable Securities covered by any Registration Statement and eachunderwriter, if any, participating in the disposition of such RegistrableSecurities and their respective counsel in connection with any filings requiredto be made with the National Association of Securities Dealers, Inc. (the “NASD”).

 

(s)           Use its respective reasonable best efforts to take all other stepsreasonably necessary to effect the registration of the Exchange Securities and/orRegistrable Securities covered by a Registration Statement contemplated hereby.

 

The Issuer may require each seller of RegistrableSecurities as to which any registration is being effected to furnish to theIssuer such information regarding such seller and the distribution of suchRegistrable Securities as the Issuer may, from time to time, reasonablyrequest.  The Issuer may exclude fromsuch 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 asto which any Shelf Registration is being effected agrees to furnish promptly tothe Issuer all information required to be disclosed in order to make theinformation previously furnished to the Issuer by such seller not materiallymisleading.

 

If any such Registration Statement refers to anyHolder by name or otherwise as the holder of any securities of the Issuer, thensuch Holder shall have the right to require (i) the insertion therein oflanguage, in form and substance reasonably satisfactory to such Holder, to theeffect that the holding by such Holder of such securities is not to beconstrued as a recommendation by such Holder of the investment quality of thesecurities covered thereby and that such holding does not imply that suchHolder will assist in meeting any future financial requirements of the Issuer,or (ii) in the event that such reference to such Holder by name orotherwise is not required by the Securities Act or any similar federal statutethen in force, the deletion of the reference to such Holder in any amendment orsupplement to the Registration Statement filed or prepared subsequent to thetime that such reference ceases to be required.

 

Each Holder of Registrable Securities and eachParticipating Broker-Dealer agrees by its acquisition of such RegistrableSecurities or Exchange Securities to be sold by such ParticipatingBroker-Dealer, as the case may be, that, upon actual receipt of any notice fromthe Issuer of the happening of any event of the kind described inSection 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such Holder willforthwith discontinue disposition of such Registrable Securities covered bysuch Registration Statement or Prospectus or Exchange Securities to be sold bysuch Holder or Participating Broker-Dealer, as the case may be, until suchHolder’s or Participating Broker-Dealer’s receipt of the copies of thesupplemented or amended Prospectus contemplated by Section 5(k) hereof, oruntil it is advised in writing (the “Advice”) by the Issuer that the useof the applicable Prospectus may be resumed, and has received copies of anyamendments or supplements thereto.  Inthe event that the Issuer shall give any such notice, each of the Applicable Periodand the Effectiveness Period shall be extended by the number of days duringsuch periods

 

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

 

6.             RegistrationExpenses

 

All fees and expenses incident to the performance ofor compliance with this Agreement by the Issuer of its obligations underSections 2, 3, 5 and 8 shall be borne by the Issuer, whether or not theExchange Offer Registration Statement or any Shelf Registration Statement isfiled or becomes effective or the Exchange Offer is consummated, including,without limitation, (i) all registration and filing fees (including,without limitation, (A) fees with respect to filings required to be madewith the NASD in connection with an underwritten offering and (B) fees andexpenses of compliance with state securities or Blue Sky laws (including,without limitation, reasonable fees and disbursements of counsel in connectionwith Blue Sky qualifications of the Registrable Securities or ExchangeSecurities and determination of the eligibility of the Registrable Securitiesor Exchange Securities for investment under the laws of such jurisdictions inthe United States (x) where the holders of Registrable Securities arelocated, in the case of the Exchange Securities, or (y) as provided inSection 5(h) hereof, in the case of Registrable Securities or ExchangeSecurities to be sold by a Participating Broker-Dealer during the ApplicablePeriod)), (ii) printing expenses, including, without limitation, printingprospectuses if the printing of prospectuses is requested by the managing underwriteror underwriters, if any, by the Holders of a majority in aggregate principalamount of the Registrable Securities included in any Registration Statement orin respect of Registrable Securities or Exchange Securities to be sold by anyParticipating Broker-Dealer during the Applicable Period, as the case may be,(iii) fees and expenses of the Trustee, any exchange agent and theircounsel, (iv) fees and disbursements of counsel for the Issuer and, in thecase of a Shelf Registration, reasonable fees and disbursements of one specialcounsel for all of the sellers of Registrable Securities selected by the Holderof a majority in aggregate principal amount of Registrable Securities coveredby such Shelf Registration (which counsel shall be reasonably satisfactory tothe Issuer) exclusive of any counsel retained pursuant to Section 7 hereof),(v) fees and disbursements of all independent certified public accountantsreferred to in Section 5(m) hereof (including, without limitation, the expensesof 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 other Personsretained by the Issuer, (ix) internal expenses of the Issuer (including,without limitation, all salaries and expenses of officers and employees of theIssuer performing legal or accounting duties), (x) the expense of anyannual audit, (xi) any fees and expenses incurred in connection with thelisting of the securities to be registered on any securities exchange, and theobtaining of a rating of the securities, in each case, if applicable and(xii) the expenses relating to printing, word processing and distributingall Registration Statements, underwriting agreements, indentures and any otherdocuments necessary in order to comply with this Agreement.

 

7.             Indemnificationand Contribution.

 

## (a)           The Issuer and the Guarantors jointly 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

 

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

##  

#### (i)      any untrue statement or alleged untrue statement of any material factcontained in any Registration Statement (or any amendment thereto) orProspectus (as amended or supplemented if the Issuer shall have furnished anyamendments or supplements thereto) or any preliminary prospectus; or

####  

#### (ii)     the omission or alleged omission to state, in any Registration Statement(or any amendment thereto) or Prospectus (as amended or supplemented if theIssuer shall 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 are arising out of orbased upon any untrue statement or omission or alleged untrue statement oromission made in reliance upon and in conformity with any information relatingto any Initial Purchaser or any Holder furnished to the Issuer in writingthrough the Initial Purchasers or any selling Holder expressly for use therein;

####  

and agree (subject to thelimitations set forth in the proviso to this sentence) to reimburse, asincurred, the Participant for any reasonable legal or other expenses incurredby the Participant in connection with investigating, defending against orappearing as a third-party witness in connection with any such loss, claim,damage, liability or action; provided, however, neither theIssuer nor the Guarantors will be liable in any such case to the extent thatany such loss, claim, damage, or liability arises out of or is based upon any untruestatement or alleged untrue statement or omission or alleged omission made 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 any amendment orsupplement thereto in reliance upon and in conformity with written informationrelating to any Participant furnished to the Issuer by such Participantspecifically for use therein. The indemnity provided for in this Section 7will be in addition to any liability that the Issuer may otherwise have to theindemnified parties.  The Issuer and theGuarantors 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 Issuer and the Guarantors, which consent shall not be unreasonablywithheld.  

 

## (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 suchdirector, officer or controlling person may become subject under the Act, theExchange Act or otherwise, insofar as such losses, claims, damages or liabilities(or

 

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## actionsin 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 or defendingagainst or appearing as a third party witness in connection with any such loss,claim, damage, liability or action in respect thereof.  The indemnity provided for in thisSection 7 will be in addition to any liability that the Participants mayotherwise have to the indemnified parties. The Participants 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 Participants, which consent shall not beunreasonably withheld.  The Issuer andthe Guarantors shall not, without the prior written consent of such Participant,effect any settlement or compromise of any pending or threatened proceeding inrespect of which such Participant is or could have been a party, or indemnitycould have been sought hereunder by such Participant, unless such settlement(A) includes an unconditional written release of such Participant, in formand substance reasonably satisfactory to such Participant, from all liabilityon claims that are the subject matter of such proceeding and (B) does not includeany statement as to an admission of fault, culpability or failure to act by oron 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 the indemnifyingparty under this Section 7, notify the indemnifying party of the commencementthereof in writing; but the omission to so notify the indemnifying party(i) will not relieve it from any liability under paragraph (a) or (b)above unless and to the extent it did not otherwise learn of such action andsuch failure results in the forfeiture by the indemnifying party of substantialrights and defenses and (ii) will not, in any event, relieve theindemnifying party from any obligations to any indemnified party other than theindemnification obligation provided in paragraphs (a) and (b) above.  The indemnifying party shall be entitled toappoint counsel (including local counsel) of the indemnifying party’s choice atthe indemnifying party’s expense to represent the indemnified party in anyaction for which indemnification is sought (in which case the indemnifyingparty shall not thereafter be responsible for the fees and expenses of anyseparate counsel, other than local counsel if not appointed by the indemnifyingparty, retained by the indemnified party or parties except as set forth below);provided, however, that such counsel shall be reasonablysatisfactory to the indemnified party. Notwithstanding the indemnifying party’s election to appoint counsel(including local counsel) to represent the indemnified party in an action, theindemnified party shall have the right to employ separate counsel (includinglocal counsel), and the indemnifying party shall bear the reasonable fees,costs and expenses of such separate counsel if (i) the use of counselchosen by the indemnifying party to represent the indemnified party wouldpresent such counsel with a conflict of interest (based on the advice ofcounsel to the indemnified person); (ii) such action includes both theindemnified party and the indemnifying party and the indemnified party shallhave reasonably concluded (based on the advice of counsel to the indemnifiedperson) that there may be legal defenses

 

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## availableto it and/or other indemnified parties that are different from or additional tothose available to the indemnifying party; (iii) the indemnifying partyshall not have employed counsel reasonably satisfactory to the indemnified partyto represent the indemnified party within a reasonable time after notice of theinstitution of such action; or (iv) the indemnifying party shall authorizethe indemnified party to employ separate counsel at the expense of theindemnifying party.  It is understood andagreed that the indemnifying person shall not, in connection with anyproceeding or separate but related or substantially similar proceedings in thesame jurisdiction arising out of the same general allegations or circumstances,be liable for the reasonable fees and expenses of more than one separate firm(in addition to any local counsel) representing the indemnified parties underparagraph (a) or paragraph (b) of this Section 7, as the case may be, who areparties to such action or actions.  Anysuch separate firm for any Participants shall be designated in writing byParticipants who sold a majority in interest of the Registrable Securities andExchange Securities sold by all such Participants in the case of paragraph (a)of this Section 7 or the Issuer in the case of paragraph (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 single jurisdiction,to the payment of fees and expenses of a single separate firm under thisSection 7(c), and any such Participants cannot agree to a mutuallyacceptable separate firm to act as counsel thereto, then such separate firm forall such Indemnified Persons shall be designated in writing by Participants whosold a majority in interest of the Registrable Securities and ExchangeSecurities sold by all such Participants. An indemnifying party will not, without the prior written consent of theindemnified parties, settle or compromise or consent to the entry of anyjudgment with respect to any pending or threatened claim, action, suit orproceeding in respect of which indemnification or contribution may be soughthereunder (whether or not the indemnified parties are actual or potential partiesto such claim or action) unless such settlement, compromise or consent includesan unconditional release of each indemnified party from all liability arisingout of such claim, action, suit or proceeding and does not include anystatement as to, or any admission of, fault, culpability or failure to act byor on behalf of any indemnified party. All fees and expenses reimbursed pursuant to this paragraph (c) shall bereimbursed as they are incurred.  

##  

## (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 such notice from the indemnifying partyto such indemnified party, the indemnifying party will not be liable for thecosts and expenses of any settlement of such action effected by such indemnifiedparty without the prior written consent of the indemnifying party (which consentshall not be unreasonably withheld), unless such indemnified party waived inwriting its rights under this Section 7, in which case the indemnifiedparty may effect such a settlement without such consent.

##  

## (e)           In circumstances in which the 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

 

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## toparagraph (a) or (b) of this Section 7, where such failure materiallyprejudices the indemnifying party (through the forfeiture of substantial rightsor defenses)), each indemnifying party, in order to provide for just andequitable contribution, shall contribute to the amount paid or payable by suchindemnified party as a result of such losses, claims, damages or liabilities(or actions in respect thereof) in such proportion as is appropriate to reflect(i) the relative benefits received by the indemnifying party or parties on theone hand and the indemnified party on the other from the offering of the Securitiesor (ii) if the allocation provided by the foregoing clause (i) is not permittedby applicable law, not only such relative benefits but also the relative faultof the indemnifying party or parties on the one hand and the indemnified partyon the other in connection with the statements or omissions or allegedstatements or omissions that resulted in such losses, claims, damages orliabilities (or actions in respect thereof). The relative benefits received by the Issuer and the Guarantors on theone hand and such Participant on the other shall be deemed to be in the sameproportion that the total net proceeds from the offering (before deductingexpenses) of the Securities received by the Issuer bear to the total discountsand commissions received by such Participant in connection with the sale of theSecurities (or if such Participant did not receive discounts or commissions,the value or receiving the Securities). The relative fault of the parties shall be determined by reference to,among other things, whether the untrue or alleged untrue statement of amaterial fact or the omission or alleged omission to state a material factrelates to information supplied by the Issuer on the one hand, or theParticipants on the other, the parties’ relative intent, knowledge, access toinformation and opportunity to correct or prevent such statement or omission oralleged statement or omission, and any other equitable considerationsappropriate in the circumstances.  Theparties agree that it would not be equitable if the amount of such contributionwere determined by pro rata or per capita allocation or by any other method ofallocation that does not take into account the equitable considerationsreferred to in the first sentence of this paragraph (e).  Notwithstanding any other provision of thisparagraph (e), no Participant shall be obligated to make contributionshereunder that in the aggregate exceed the total discounts, commissions andother compensation or net proceeds on the sale of Securities received by such Participantin connection 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 thisparagraph (d), each person, if any, who controls a Participant within themeaning of Section 15 of the Act or Section 20 of the Exchange Actshall have the same rights to contribution as the Participants, and each directorof the Issuer and the Guarantors, each officer of the Issuer and the Guarantorsand each person, if any, who controls the Issuer and the Guarantors within themeaning of Section 15 of the Act or Section 20 of the Exchange Act,shall have the same rights to contribution as the Issuer.

##  

8.             Rules 144 and 144A

 

The Issuer covenants and agrees that it will usereasonable best efforts to file the reports required to be filed by it underthe Securities Act and the Exchange Act and the rules and regulations adoptedby the SEC thereunder in a timely manner in accordance with the requirements ofthe Securities Act and the Exchange Act and, if at any time the Issuer is not requiredto file such reports, the Issuer will, upon the request of any Holder orbeneficial owner of Registrable Securities, make available such information necessaryto permit sales pursuant to Rule 144A. The Issuer further covenants andagrees, for so long as any Registrable Securities remain outstanding that itwill take such further action as any Holder of Registrable Securities may reasonablyrequest, all to the extent required from time to time to enable such

 

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holder to sell Registrable Securities withoutregistration under the Securities Act within the limitation of the exemptions providedby Rule 144(k) under the Securities Act and Rule 144A unless theIssuer is then subject to Section 13 or 15(d) of the Exchange Act and reportsfiled thereunder satisfy the information requirements of Rule 144A then ineffect.

 

9.             Underwritten Registrations

 

The Issuer shall not be required to assist in anunderwritten offering unless requested by the Holders of a majority in aggregateprincipal amount of the Registrable Securities. If any of the RegistrableSecurities covered by any Shelf Registration are to be sold in an underwrittenoffering, the investment banker or investment bankers and manager or managersthat will manage the offering will be selected by the Holders of a majority inaggregate principal amount of such Registrable Securities included in suchoffering and shall be reasonably acceptable to the Issuer.

 

No Holder of Registrable Securities may participatein any underwritten registration hereunder unless such Holder (a) agreesto sell such Holder’s Registrable Securities on the basis provided in anyunderwriting arrangements approved by the Persons entitled hereunder to approvesuch arrangements and (b) completes and executes all questionnaires,powers of attorney, indemnities, underwriting agreements and other documentsrequired under the terms of such underwriting arrangements.

 

10.           Miscellaneous

 

## (a)           No Inconsistent Agreements.  TheIssuer has not as of the date hereof, and the Issuer shall not, after the dateof this Agreement, enter into any agreement with respect to any of its securitiesthat is inconsistent with the rights granted to the Holders of RegistrableSecurities in this Agreement or otherwise conflicts with the provisionshereof.  The rights granted to the Holdershereunder do not in any way conflict with and are not inconsistent with therights granted to the holders of the Issuer other issued and outstanding securitiesunder any such agreements.  The Issuerwill not enter into any agreement (other than the Registration Rights Agreementsdated as of the date hereof in respect of the Senior Notes and the SubordinatedDiscount Notes) with respect to any of its securities which will grant to anyPerson piggy-back registration rights with respect to any RegistrationStatement.

##  

## (b)           Adjustments Affecting Registrable Securities.  TheIssuer shall not, directly or indirectly, take any action with respect to theRegistrable Securities as a class that would adversely affect the ability ofthe Holders of Registrable Securities to include such Registrable Securities ina registration undertaken pursuant to this Agreement.

##  

## (c)           Amendments and Waivers.  Theprovisions of this Agreement may not be amended, modified or supplemented, andwaivers or consents to departures from the provisions hereof may not be given,otherwise than with the prior written consent of (I) the Issuer, and(II) (A) the Holders of not less than a majority in aggregateprincipal amount of the then outstanding Registrable Securities and (B) incircumstances that would adversely affect the Participating Broker-Dealers, theParticipating Broker-Dealers holding not less than a majority in aggregateprincipal amount of the Exchange Notes held by all ParticipatingBroker-Dealers; provided, however, that Section 7 and thisSection 10(c) may not be amended, modified or supplemented without theprior written consent of each Holder and each Participating Broker-Dealer(including any person who was a Holder or Participating Broker-Dealer ofRegistrable

 

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## Securitiesor Exchange Securities, as the case may be, disposed of pursuant to anyRegistration Statement) affected by any such amendment, modification orsupplement.  Notwithstanding the foregoing,a waiver or consent to depart from the provisions hereof with respect to a matterthat relates exclusively to the rights of Holders of Registrable Securitieswhose securities are being sold pursuant to a Registration Statement and thatdoes not directly or indirectly affect, impair, limit or compromise the rightsof other Holders of Registrable Securities may be given by Holders of at leasta majority in aggregate principal amount of the Registrable Securities beingsold pursuant to such Registration Statement.

##  

## (d)           Notices.  All notices and othercommunications (including, without limitation, any notices or other communicationsto the Trustee) provided for or permitted hereunder shall be made in writing byhand-delivery, registered first-class mail, next-day air courier or facsimile:

##  

#### (i)      if to a Holder of the Registrable Securities or any ParticipatingBroker-Dealer, at the most current address of such Holder or ParticipatingBroker-Dealer, as the case may be, set forth on the records of the registrarunder the Indenture, with a copy in like manner to the Initial Purchasers as follows:

####  

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

 

with a copy to:Cahill Gordon & Reindel LLP80 Pine StreetNew York, New York 10005Facsimile 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 theaddress as follows:

####  

MichaelsStores, Inc.8000 Bent Branch Drive

Irving, Texas75063

FacsimileNo.: (972) 409-1965Attention:  General Counsel 

 

witha copy to:Ropes & Gray LLP

OneInternational Place

 

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

 

All such notices and communications shall be deemedto have been duly given:  when deliveredby hand, if personally delivered; five Business Days after being deposited inthe mail, postage prepaid, if mailed; one Business Day after being timelydelivered to a next-day air courier; and upon written confirmation, if sent byfacsimile.

 

Copies of all such notices, demands or othercommunications shall be concurrently delivered by the Person giving the same tothe Trustee at the address and in the manner specified in such Indenture.

 

## (e)           Successors and Assigns.  ThisAgreement shall inure to the benefit of and be binding upon the successors andassigns of each of the parties hereto, the Holders and the ParticipatingBroker-Dealers; provided, however, that nothing herein shall be deemedto permit any assignment, transfer or other disposition of RegistrableSecurities in violation of the terms of the Purchase Agreement or theIndenture.

##  

## (f)            Counterparts.  ThisAgreement may be executed in any number of counterparts and by the partieshereto in separate counterparts, each of which when so executed shall be deemedto be an original and all of which taken together shall constitute one and thesame agreement.

##  

## (g)           Headings.  The headings in this Agreementare for convenience of reference only and shall not limit or otherwise affectthe meaning hereof.

##  

## (h)           **Governing Law****.  THIS AGREEMENT SHALL BE GOVERNED BY ANDCONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TOCONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK.  EACH OF THE PARTIES HEREBY WAIVE ANY RIGHT TOTRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF ORRELATING TO THIS AGREEMENT.**

##  

## (i)            Severability.  Ifany term, provision, covenant or restriction of this Agreement is held by acourt of competent jurisdiction to be invalid, illegal, void or unenforceable,the remainder of the terms, provisions, covenants and restrictions set forthherein shall remain in full force and effect and shall in no way be affected,impaired or invalidated, and the parties hereto shall use their best efforts tofind and employ an alternative means to achieve the same or substantially thesame result as that contemplated by such term, provision, covenant orrestriction.  It is hereby stipulated anddeclared to be the intention of the parties that they would have executed theremaining terms, provisions, covenants and restrictions without including anyof such that may be hereafter declared invalid, illegal, void or unenforceable.

##  

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

 

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

##  

## (k)           Third-Party Beneficiaries. Holders of Registrable Securities and Participating Broker-Dealers areintended third-party beneficiaries of this Agreement, and this Agreement may beenforced by such Persons.

##  

## (l)            Entire Agreement.  ThisAgreement, together with the Purchase Agreement and the Indenture, is intended bythe parties as a final and exclusive statement of the agreement andunderstanding of the parties hereto in respect of the subject matter containedherein and therein and any and all prior oral or written agreements,representations, or warranties, contracts, understandings, correspondence,conversations and memoranda between the Holders on the one hand and the Issueron the other, or between or among any agents, representatives, parents,subsidiaries, affiliates, predecessors in interest or successors in interestwith respect to the subject matter hereof and thereof are merged herein and replacedhereby.

 

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IN WITNESS WHEREOF, the parties have executed thisAgreement as of the date first written 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 Rights Agreement

 

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SCHEDULE I

 

**THEGUARANTORS**

 

AARON BROTHERS, INC.

MICHAELS FINANCE COMPANY, INC. 

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

ARTISTREE, INC.

 

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