Exhibit
4.3


 


EXECUTION VERSION


 


	
   

  



 


 


REGISTRATION RIGHTS AGREEMENT


 


Dated as of October 21, 2010


 


Among


 


MICHAELS STORES, INC.,


 


THE GUARANTORS LISTED ON SCHEDULE I HERETO


 


and


 


DEUTSCHE BANK SECURITIES INC.,


BANC OF AMERICA SECURITIES LLC


BARCLAYS CAPITAL INC.,


CREDIT SUISSE SECURITIES (USA) LLC,


J.P. MORGAN SECURITIES LLC


 


and


 


WELLS FARGO SECURITIES, LLC


 


 


73⁄4% Senior Notes due 2018


 


	
   

  



 

















 


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.

  	
  Rule 144 and Rule 144A

  	
  21

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Underwritten Registrations

  	
  22

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Miscellaneous

  	
  22

  



 


i

















 


REGISTRATION RIGHTS AGREEMENT


 


This
Registration Rights Agreement (this “Agreement”) is dated as of October 21,
2010, among MICHAELS STORES INC., a Delaware corporation (the “Issuer”),
the guarantors listed on Schedule I hereto (the “Guarantors”) and
DEUTSCHE BANK SECURITIES INC., BANC OF AMERICA SECURITIES LLC, BARCLAYS CAPITAL
INC., CREDIT SUISSE SECURITIES (USA) LLC, J.P. MORGAN SECURITIES LLC and WELLS
FARGO SECURITIES, LLC (together, the “Initial Purchasers”).


 


This
Agreement is entered into in connection with the Purchase Agreement, dated as
of October 7, 2010 (the “Purchase Agreement”), by and among the
Issuer, the Guarantors and the Initial Purchasers, which provides for, among
other things, the sale by the Issuer to the Initial Purchasers of $800,000,000
aggregate principal amount of the Issuer’s 73⁄4% Senior Notes due 2018 (the “Notes”).  The Notes are issued under an indenture,
dated as of the date hereof (as amended or supplemented from time to time, the “Indenture”),
among the Issuer, the Guarantors and Law Debenture Trust Company of New York,
as trustee (the “Trustee”). 
Pursuant to the Purchase Agreement and the Indenture, the Guarantors are
required to guarantee (collectively, the “Guarantees”) the Issuer’s
obligations under the Notes and the Indenture. 
References to the “Securities” shall mean, collectively, the
Notes and the Guarantees. In order to induce the Initial Purchasers to enter
into the Purchase Agreement, the Issuer has agreed to provide the registration
rights set forth in this Agreement for the benefit of the Initial Purchasers
and any subsequent holder or holders of the Securities.  The execution and delivery of this Agreement
is a condition to the Initial Purchasers’ obligations under the Purchase
Agreement.


 


The
parties hereby agree as follows:


 


1.             Definitions


 


As
used in this Agreement, the following terms shall have the following meanings:


 


Additional Interest:  See Section 4(a) hereof.


 


Advice:  See the
last paragraph of Section 5 hereof.


 


Agreement:  See the
introductory paragraphs hereto.


 


Applicable Period:  See
Section 2(b) hereof.


 


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


 


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


 

















 


Effectiveness Period:  See Section 3(a) hereof.


 


Event Date:  See
Section 4(b) hereof.


 


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


 


Exchange Notes:  See
Section 2(a) hereof.


 


Exchange Offer:  See
Section 2(a) hereof.


 


Exchange Offer Registration Statement:  See Section 2(a) hereof.


 


Exchange Securities:  See Section 2(a) hereof.


 


Filing Date:  The 90th
day after the delivery 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 is not a Business Day, then the Filing Date shall be the next
succeeding Business Day.


 


FINRA:  See Section 5(r).


 


Guarantees:  See the
introductory paragraphs hereto.


 


Guarantors:  See the
introductory paragraphs hereto.


 


Holder:  Any holder
of a Registrable Security or Registrable Securities.


 


Indenture:  See the
introductory paragraphs hereto.


 


Information:  See
Section 5(n) hereof.


 


Initial Purchasers:  See the introductory paragraphs hereto.


 


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


 


Inspectors:  See
Section 5(n) hereof.


 


Issue Date:  October 21,
2010, the date of original issuance of the Notes.


 


Issuer:  See the
introductory paragraphs hereto.


 


New Guarantees:  See
Section 2(a) hereof.


 


Notes:  See the
introductory paragraphs hereto.


 


Participant:  See
Section 7(a) hereof.


 


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


 


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


 


Private Exchange:  See
Section 2(b) hereof.


 


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


 


Prospectus:  The
prospectus included in any Registration Statement (including, without
limitation, any prospectus subject to completion and a prospectus that includes
any information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A or Rule 430C
under the Securities Act), as amended or supplemented by any prospectus
supplement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.


 


Purchase Agreement:  See the introductory paragraphs hereof.


 


Records:  See
Section 5(n) hereof.


 


Registrable Securities:  Each Security upon its original issuance and
at all times subsequent thereto, each Exchange Security as to which
Section 2(c)(iv) hereof is applicable upon original issuance and at
all times subsequent thereto and each Private Exchange Note (and the related
Guarantees) upon original issuance thereof and at all times subsequent thereto,
until, in each case, the earliest to occur of (i) a Registration Statement
(other than, with respect to any Exchange Securities as to which
Section 2(c)(iv) hereof is applicable, the Exchange Offer
Registration Statement) covering such Security, Exchange Security or Private
Exchange Note (and the related Guarantees) has been declared effective by the
SEC and such Security, Exchange Security or such Private Exchange Note (and the
related Guarantees), as the case may be, has been disposed of in accordance
with such effective Registration Statement, (ii) such Security has been
exchanged pursuant to the Exchange Offer for an Exchange Security or Exchange
Securities that may be resold without restriction under state and federal
securities laws or (iii) such Security, Exchange Security or Private
Exchange Note (and the related Guarantees), as the case may be, ceases to be
outstanding for purposes of the Indenture.


 


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


 


Rule 144: 
Rule 144 under the Securities Act.


 


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


 


Rule 405: 
Rule 405 under the Securities Act.


 


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Rule 415: 
Rule 415 under the Securities Act.


 


Rule 424: 
Rule 424 under the Securities Act.


 


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


 


Securities:  See the
introductory paragraphs hereto.


 


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


 


Shelf Notice:  See
Section 2(c) hereof.


 


Shelf Registration:  See Section 3(b) hereof.


 


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


 


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


 


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


 


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


 


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


 


Underwritten registration or underwritten offering:  A registration in which securities of the
Issuer are sold to an underwriter for reoffering to the public.


 


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


 


2.             Exchange Offer


 


(a)           Unless the Exchange Offer would violate applicable law or
any applicable interpretation of the staff of the SEC, the Issuer and the
Guarantors shall use their reasonable best efforts to file with the SEC a
Registration Statement (the “Exchange Offer Registration Statement”) on
an appropriate registration form with respect to a registered offer (the “Exchange
Offer”) to exchange any and all of the Registrable Securities for a like
aggregate principal amount of debt securities of the Issuer (the “Exchange
Notes”), guaranteed, to the extent applicable, on an unsecured senior basis
by the Guarantors (the “New Guarantees” and, together with the Exchange
Notes, the “Exchange Securities”), that are identical in all material
respects to the Notes, except that (i) the Exchange Notes shall contain no
restrictive legend thereon, (ii) interest thereon shall accrue (A) from
the later of (x) the last date on which interest was paid 


 


4

















 


on such Notes or (y) if such Notes are
surrendered for exchange on a date in a period that includes the record date
for an interest payment date to occur on or after the date of such exchange and
as to which interest on such Note will be paid, the date of such interest
payment date or (B) if no such interest has been paid, from the Issue Date
and (iii) the Exchange Notes shall be entitled to the benefits of the
Indenture or a trust indenture which is identical in all material respects to
the Indenture (other than such changes to the Indenture or any such identical
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 all applicable tender offer rules and
regulations under the Exchange Act and other applicable laws.  The Issuer shall use its reasonable best
efforts to (x) prepare and file with the SEC the Exchange Offer
Registration Statement with respect to the Exchange Offer; (y) keep the
Exchange Offer open for at least 20 Business Days (or longer if required by
applicable law) after the date that notice of the Exchange Offer is mailed to
Holders; and (z) consummate the Exchange Offer on or prior to the 360th
day following the Issue Date.


 


Each
Holder (including, without limitation, each Participating Broker-Dealer) that
participates in the Exchange Offer, as a condition to participation in the
Exchange Offer, will be required to represent to the Issuer in writing (which
may be contained in the applicable letter of transmittal) that:  (i) any Exchange Securities acquired in
exchange for Registrable Securities tendered are being acquired in the ordinary
course of business; (ii) at the time of the commencement or consummation
of the Exchange Offer such Holder has no arrangement or understanding with any
Person to participate in the distribution (within the meaning of the Securities
Act) of the Exchange Securities in violation of the provisions 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 the Issuer, it will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable and will provide information to be
included in the Shelf Registration Statement in accordance with Section 5
hereof in order to have their Securities included in the Shelf Registration
Statement and benefit from the provisions regarding Additional Interest in
Section 4 hereof; (iv) if such Holder is not a broker-dealer, such
Holder is not engaged in and does not intend to engage in a distribution of the
Exchange Securities; and (v) if such Holder is a Participating
Broker-Dealer, such Holder has acquired the Registrable Securities for its own
account in exchange for Securities that were acquired as a result of
market-making activities or other trading activities and that it will 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 in accordance with this Section 2, the
provisions of this Agreement shall continue to apply, mutatis  mutandis,
solely with respect to Registrable Securities that are Private Exchange Notes
(and the related Guarantees), Exchange Securities as to which Section 2(c)(iv) is
applicable and Exchange Securities held by Participating Broker-Dealers, and
the Issuer shall have no further obligation to register Registrable Securities
(other than Private Exchange Notes (and the related Guarantees), Exchange
Securities as to which clause 2(c)(iv) hereof applies and Exchange
Securities held by Participating Broker-Dealers) pursuant to Section 3
hereof.


 


No
securities other than the Exchange Securities shall be included in the Exchange
Offer Registration Statement.


 


(b)           The Issuer shall include within the Prospectus contained
in the Exchange Offer Registration Statement a section entitled “Plan of
Distribution,” which shall contain a summary statement 


 


5

















 


of the positions taken or policies made by the staff
of the SEC with respect to the potential “underwriter” status of any
broker-dealer that is the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act) of Exchange Notes received by such broker-dealer in the
Exchange Offer (a “Participating Broker-Dealer”), whether such positions
or policies have been publicly disseminated by the staff of the SEC or such positions
or policies represent the prevailing views of the staff of the SEC.  Such “Plan of Distribution” section shall
also expressly permit, to the extent permitted by applicable policies and
regulations of the SEC, the use of the Prospectus by all Participating
Broker-Dealers, and include a statement describing the means by which
Participating Broker-Dealers may resell the Exchange Securities in compliance
with the Securities Act.


 


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


 


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


 


In
connection with the Exchange Offer, the Issuer shall:


 


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


 


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


 


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


 


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


 


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


 


6

















 


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


 


(1)           accept for exchange all Registrable Securities validly
tendered and not validly withdrawn pursuant to the Exchange Offer and any
Private Exchange;


 


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


 


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


 


The
Exchange Offer and the Private Exchange shall not be subject to any conditions,
other than that (i) the Exchange Offer or Private Exchange, as the case
may be, does not violate applicable law or any applicable interpretation of the
staff of the SEC; (ii) no action or proceeding shall have been instituted
or threatened in any court or by any governmental agency which might materially
impair the ability of the Issuer to proceed with the Exchange Offer or the
Private Exchange, and no material adverse development shall have occurred in
any existing action or proceeding with respect to the Issuer; and
(iii) all governmental approvals shall have been obtained, which approvals
the Issuer deems necessary for the consummation of the Exchange Offer or
Private Exchange.


 


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


 


(c)           If, (i) because of any change in law or in currently
prevailing interpretations of the staff of the SEC, the Issuer is not permitted
to effect the Exchange Offer, (ii) the Exchange Offer is not consummated
within 360 days of the Issue Date, (iii) any holder of Private
Exchange Notes so requests in writing to the Issuer at any time within 30 days
after the consummation of the Exchange Offer, or (iv) in the case of any
Holder that participates in the Exchange Offer, such Holder does not receive
Exchange Securities on the date of the exchange that may be sold without
restriction under state and federal securities laws (other than due solely to
the status of such Holder as an affiliate of the Issuer within the meaning of
the Securities Act) and so notifies the Issuer within 30 days after such Holder
first becomes aware of such restrictions, in the case of each of clauses (i) to
and including (iv) of this sentence, then the Issuer shall promptly
deliver to the Trustee (to deliver to the Holders) written notice thereof (the “Shelf
Notice”) and shall file a Shelf Registration pursuant to Section 3
hereof.


 


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3.                                       Shelf
Registration


 


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


 


(a)                                  Shelf
Registration.  The Issuer
shall promptly file with the SEC a Registration Statement for an offering to be
made on a continuous basis pursuant to Rule 415 covering all of the
Registrable Securities (the “Initial Shelf Registration”).  The Issuer shall use its reasonable best
efforts to file with the SEC the Initial Shelf Registration on or prior to the
Filing Date.  The Initial Shelf Registration
shall be on Form S-1 or another appropriate form permitting registration
of such Registrable Securities for resale by Holders in the manner or manners
designated by them (including, without limitation, one or more underwritten
offerings).  The Issuer shall not permit
any securities other than the Registrable Securities to be included in the
Initial Shelf Registration or any Subsequent Shelf Registration (as defined
below).


 


The
Issuer shall use its reasonable best efforts to cause the Shelf Registration to
be declared effective under the Securities Act on or prior to the Effectiveness
Date and to keep the Initial Shelf Registration continuously effective under
the Securities Act until the earliest of (i) the date that is two years
from the Issue Date, or (ii) such shorter period ending when all
Registrable Securities covered by the Initial Shelf Registration have been sold
in the manner set forth and as contemplated in the Initial Shelf Registration
or, if applicable, a Subsequent Shelf Registration (the “Effectiveness
Period”); provided, however, that the Effectiveness Period in
respect of the Initial Shelf Registration shall be extended to the extent
required to permit dealers to comply with the applicable prospectus delivery
requirements of Rule 174 under the Securities Act and as otherwise
provided herein.  Notwithstanding
anything to the contrary in this Agreement, at any time, the Issuer may delay
the filing of any Initial Shelf Registration Statement or delay or suspend the
effectiveness thereof, for a reasonable period of time, but not in excess of 60
consecutive days or more than three (3) times during any calendar year
(each, a “Shelf Suspension Period”), if the Board of Directors of the
Issuer determines reasonably and in good faith that the filing of any such
Initial Shelf Registration Statement or the continuing effectiveness thereof
would require the disclosure of non-public material information that, in the
reasonable judgment of the Board of Directors of the Issuer, would be detrimental
to the Issuer if so disclosed or would otherwise materially adversely affect a
financing, acquisition, disposition, merger or other material transaction or
such action is required by applicable law.


 


(b)                                 Withdrawal of
Stop Orders; Subsequent Shelf Registrations.  If the Initial Shelf Registration or any
Subsequent Shelf Registration ceases to be effective for any reason at any time
during the Effectiveness Period (other than because of the sale of all of the
Securities registered thereunder), the Issuer shall use its reasonable best
efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall file an additional Shelf
Registration Statement pursuant to Rule 415 covering all of the
Registrable Securities covered by and not sold under the Initial Shelf
Registration or an earlier Subsequent Shelf Registration (each, a “Subsequent
Shelf Registration”).  If a
Subsequent Shelf Registration is filed, the Issuer shall use its reasonable
best efforts to cause the Subsequent Shelf Registration to be declared
effective under the Securities Act as soon as practicable after such filing and
to keep such subsequent Shelf Registration continuously effective for a period
equal to the number of days in the Effectiveness Period less the aggregate
number of days during which the Initial Shelf Registration or any Subsequent
Shelf Registration was previously continuously effective.  As used herein the term “Shelf
Registration” means the Initial Shelf Registration and any Subsequent Shelf
Registration.


 


8

















 


(c)                                  Supplements and
Amendments.  The Issuer
shall promptly supplement and amend the Shelf Registration if required by the
rules, regulations or instructions applicable to the registration form used for
such Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Securities (or their counsel) covered by such Registration Statement
with respect to the information included therein with respect to one or more of
such Holders, or, if reasonably requested by any underwriter of such
Registrable Securities, with respect to the information included therein with
respect to such underwriter.


 


4.                                       Additional
Interest


 


(a)                                  The Issuer and
the Initial Purchasers agree that the Holders will suffer damages if the Issuer
fails to fulfill its obligations under Section 2 or Section 3 hereof
and that it would not be feasible to ascertain the extent of such damages with
precision.  Accordingly, the Issuer
agrees to pay as liquidated damages, additional interest on the Notes (“Additional
Interest”) if (A) the Issuer has neither (i) exchanged Exchange
Securities for all Securities validly tendered in accordance with the terms of
the Exchange Offer nor (ii) had a Shelf Registration Statement declared
effective, in either case on or prior to the 360th day after the Issue Date, (B) notwithstanding
clause (A), the Issuer is required to file a Shelf Registration Statement and
such Shelf Registration Statement is not declared effective on or prior to the
360th day after the date such Shelf Registration Statement filing was requested
or required or (C), if applicable, a Shelf Registration has been declared
effective and such Shelf Registration ceases to be effective at any time during
the Effectiveness Period (other than because of the sale of all of the
Securities registered thereunder), and then Additional Interest shall accrue on
the 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 each
subsequent 90 day period that such Additional Interest continues to accrue,
provided that the rate at which such Additional Interest accrues may in no
event exceed 1.00% per annum) (such Additional Interest to be calculated by the
Issuer) commencing on the (x) 361st day after the Issue Date, in the
case of (A) above, (y) the 361st day after the date such Shelf
Registration Statement filing was requested or required in the case of (B) above
or (z) the day such Shelf Registration ceases to be effective in the case
of (C) above; provided, however, that upon the exchange
of the Exchange Securities for all Securities tendered (in the case of clause (A) of
this Section 4), upon the effectiveness of the applicable Shelf
Registration Statement (in the case of (B) of this Section 4), or
upon the effectiveness of the applicable Shelf Registration Statement which had
ceased to remain effective (in the case of (C) of this Section 4),
Additional Interest on the Registrable Securities in respect of which such
events relate as a result of such clause (or the relevant subclause thereof),
as the case may be, shall cease to accrue. 
Notwithstanding any other provisions of this Section 4, the Issuer
shall not be obligated to pay Additional Interest provided in Sections 4(a)(B) and
(C) during a Shelf Suspension Period permitted by Section 3(a) hereof.


 


(b)                                 The Issuer
shall notify the Trustee within one business day after each and every date on
which an event occurs in respect of which Additional Interest is required to be
paid (an “Event Date”).  Any
amounts of Additional Interest due pursuant to (a) of this Section 4
will be payable in cash semiannually on each May 1 and November 1 (to
the holders of record on the April 15 and October 15 immediately
preceding such dates), commencing with the first such date occurring after any
such Additional Interest commences to accrue. 
The amount of Additional Interest will be determined by the Issuer by
multiplying the applicable Additional Interest rate by the principal amount of
the Registrable Securities, multiplied by a fraction, the numerator of which is
the number of days such Additional Interest rate was applicable during such
period (determined on the basis of a 360 day year comprised of twelve
30 day 


 


9

















 


months and, in the case of a partial month, the
actual number of days elapsed), and the denominator of which is 360.


 


5.                                       Registration
Procedures


 


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


 


(a)                                  Prepare and
file with the SEC (prior to the applicable Filing Date in the case of a Shelf
Registration), a Registration Statement or Registration Statements as
prescribed by Section 2 or 3 hereof, and use its reasonable best efforts
to cause each such Registration Statement to become effective and remain
effective as provided herein; provided, however, that if
(1) such filing is pursuant to Section 3 hereof or (2) a
Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period relating thereto from whom the Issuer
has received prior written notice that it will be a Participating Broker-Dealer
in the Exchange Offer, before filing any Registration Statement or Prospectus
or any amendments or supplements thereto, the Issuer shall furnish to and
afford counsel for the Holders of the Registrable Securities covered by such
Registration Statement (with respect to a Registration Statement filed pursuant
to Section 3 hereof) or counsel for such Participating Broker-Dealer (with
respect to any such Registration Statement), as the case may be, and counsel to
the managing underwriters, if any, a reasonable opportunity to review copies of
all such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (in each case
at least three Business Days prior to such filing).  The Issuer shall not file any Registration
Statement or Prospectus or any amendments or supplements thereto if the Holders
of a majority in aggregate principal amount of the Registrable Securities
covered by such Registration Statement, their counsel, or the managing
underwriters, if any, shall reasonably object.


 


(b)                                 Prepare and
file with the SEC such amendments and post-effective amendments to each Shelf
Registration Statement or Exchange Offer Registration Statement, as the case
may be, as may be necessary to keep such Registration Statement continuously
effective for the Effectiveness Period, the Applicable Period or until
consummation of the Exchange Offer, as the case may be; cause the related
Prospectus to be supplemented by any Prospectus supplement required by
applicable law, and as so supplemented to be filed pursuant to Rule 424;
and comply with the provisions of the Securities Act and the Exchange Act
applicable to it with respect to the disposition of all securities covered by
such Registration Statement as so amended or in such Prospectus as so
supplemented and with respect to the subsequent resale of any securities being
sold by an Participating Broker-Dealer covered by any such Prospectus in all
material respects.  The Issuer shall be
deemed not to have used its reasonable best efforts to keep a Registration
Statement effective if it voluntarily takes any action that is reasonably
expected to result in selling Holders of the Registrable Securities covered
thereby or Participating Broker-Dealers seeking to sell Exchange Securities not
being able to sell such Registrable Securities or such Exchange Securities
during that period unless such action is required by applicable law or
permitted by this Agreement.


 


(c)                                  If (1) a
Shelf Registration is filed pursuant to Section 3 hereof or (2) a
Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to 


 


10

















 


be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period relating thereto from whom the Issuer has received written
notice that it will be a Participating Broker-Dealer in the Exchange Offer,
notify the selling Holders of Registrable Securities (with respect to a
Registration Statement filed pursuant to Section 3 hereof), or each such
Participating Broker-Dealer (with respect to any such Registration Statement),
as the case may be, their counsel and the managing underwriters, if any,
promptly (but in any event within three Business Days), and confirm such notice
in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective
under the Securities Act (including in such notice a written statement that any
Holder may, upon request, obtain, at the sole expense of the Issuer, one
conformed copy of such Registration Statement or post-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 effectiveness of a Registration Statement
or of any order preventing or suspending the use of any preliminary prospectus
or the initiation of any proceedings for that purpose, (iii) if at any
time when a prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Securities or resales of Exchange
Securities by Participating Broker-Dealers the representations and warranties
of the Issuer contained in any agreement (including any underwriting agreement)
contemplated by Section 5(m) hereof cease to be true and correct,
(iv) of the receipt by the Issuer of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Securities or the Exchange
Securities to be sold by any Participating Broker-Dealer for offer or sale in
any jurisdiction, or the initiation or threatening of any proceeding for such
purpose, (v) of the happening of any event, the existence of any condition
or any information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in or amendments or supplements to
such Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case
of the Prospectus, it will not contain any untrue statement of a material fact
or omit to state any material fact 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 to a Registration Statement would be
appropriate.


 


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


 


(e)                                  If a Shelf
Registration is filed pursuant to Section 3 and if requested during the
Effectiveness Period by the managing underwriter or underwriters (if any) or
the Holders of a majority in aggregate principal amount of the Registrable
Securities being sold in connection with an underwritten offering, (i) as
promptly as practicable incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter or
underwriters (if any), such Holders or counsel for either of them reasonably
request to be included therein, (ii) make all required filings of such
prospectus supplement or such post-effective amendment as soon as practicable
after the Issuer has received notification 


 


11

















 


of the matters to be incorporated in such prospectus
supplement or post-effective amendment, and (iii) supplement or make
amendments to such Registration Statement.


 


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


 


(g)                                 If (1) a
Shelf Registration is filed pursuant to Section 3 hereof, or (2) a
Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, deliver to each selling Holder of
Registrable Securities (with respect to a Registration Statement filed pursuant
to Section 3 hereof), or each such Participating Broker-Dealer (with
respect to any such Registration Statement), as the case may be, their
respective counsel, and the underwriters, if any, at the sole expense of the
Issuer, as many copies of the Prospectus or Prospectuses (including each form
of preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Issuer
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Securities or each such
Participating Broker-Dealer, as the case may be, and the underwriters or
agents, if any, and dealers, if any, in connection with the offering and sale
of the Registrable Securities covered by, or the sale by Participating
Broker-Dealers of the Exchange Securities pursuant to, such Prospectus and any
amendment or supplement thereto.


 


(h)                                 Prior to any
public offering of Registrable Securities or any delivery of a Prospectus
contained in the Exchange Offer Registration Statement by any Participating
Broker-Dealer who seeks to sell Exchange Securities during the Applicable
Period, use its reasonable best efforts to register or qualify, and to
cooperate with the selling Holders of Registrable Securities or each such
Participating Broker-Dealer, as the case may be, the managing underwriter or
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any selling Holder, Participating Broker-Dealer, or the managing underwriter or
underwriters reasonably request in writing; provided, however,
that where Exchange Securities held by Participating Broker-Dealers or Registrable
Securities are offered other than through an underwritten offering, the Issuer
agrees to cause its counsel to perform Blue Sky investigations and file
registrations and qualifications required to be filed pursuant to this
Section 5(h), keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is required
to be kept effective and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Exchange
Securities held by Participating Broker-Dealers or the Registrable Securities
covered by the applicable Registration Statement; provided, however,
that the Issuer 


 


12

















 


shall not be required to (A) qualify generally
to do business in any jurisdiction where it is not then so qualified,
(B) take any action that would subject it to general service of process in
any such jurisdiction where it is not then so subject or (C) subject itself
to taxation in excess of a nominal dollar amount in any such jurisdiction where
it is not then so subject.


 


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


 


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


 


(k)                                  If (1) a
Shelf Registration is filed pursuant to Section 3 hereof, or (2) a
Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, upon the occurrence of any event
contemplated by Section 5(c)(v) or 5(c)(vi) hereof, as promptly
as practicable prepare and (subject to Section 5(a) hereof) file with
the SEC, at the sole expense of the Issuer, a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated therein by reference, or file any other
required document so that, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder (with respect to a Registration
Statement filed pursuant to Section 3 hereof) or to the purchasers of the
Exchange Securities to whom such Prospectus will be delivered by a
Participating Broker-Dealer (with respect to any such Registration Statement),
any such Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact 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.


 


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


 


(m)                               In connection
with any underwritten offering of Registrable Securities pursuant to a Shelf
Registration, enter into an underwriting agreement as is customary in
underwritten offerings of debt securities similar to the Securities (including,
without limitation, a customary condition to the obligations of the
underwriters that the underwriters shall have received “cold comfort” letters
and updates thereof in form, scope and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent certified public
accountants of the Issuer (and, if necessary, any other independent 


 


13

















 


certified public accountants of the Issuer, or of
any business acquired by the Issuer, for which financial statements and financial
data are, or are required to be, included or incorporated by reference in the
Registration Statement), addressed to each of the underwriters, such letters to
be in customary form and covering matters of the type customarily covered in “cold
comfort” letters in connection with underwritten offerings of debt securities
similar to the Securities), and take all such other actions as are reasonably
requested by the managing underwriter or underwriters in order to expedite or
facilitate the registration or the disposition of such Registrable Securities
and, in such connection, (i) make such representations and warranties to,
and covenants with, the underwriters with respect to the business of the Issuer
(including any acquired business, properties or entity, if applicable), and the
Registration Statement, Prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each case, as are
customarily made by issuers to underwriters in underwritten offerings of debt
securities similar to the Securities, and confirm the same in writing if and
when requested; (ii) obtain the written opinions of counsel to the Issuer,
and written updates thereof in form, scope and substance reasonably
satisfactory to the managing underwriter or underwriters, addressed to the
underwriters covering the matters customarily covered in opinions reasonably
requested in underwritten offerings; and (iii) if an underwriting
agreement is entered into, the same shall contain indemnification provisions
and procedures no less favorable to the sellers and underwriters, if any, than
those set forth in Section 7 hereof (or such other provisions and
procedures reasonably acceptable to Holders of a majority in aggregate
principal amount of Registrable Securities covered by such Registration
Statement and the managing underwriter or underwriters or agents, if any).  The above shall be done at each closing under
such underwriting agreement, or as and to the extent required thereunder.


 


(n)                                 If (1) a
Shelf Registration is filed pursuant to Section 3 hereof, or (2) a
Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, make available for inspection by any
Initial Purchaser, any selling Holder of such Registrable Securities being sold
(with respect to a Registration Statement filed pursuant to Section 3
hereof), or each such Participating Broker-Dealer, as the case may be, any
underwriter participating in any such disposition of Registrable Securities, if
any, and any attorney, accountant or other agent retained by any such selling
Holder or each such Participating Broker-Dealer (with respect to any such
Registration Statement), as the case may be, or underwriter (any such Initial
Purchasers, Holders, Participating Broker-Dealers, underwriters, attorneys,
accountants or agents, collectively, the “Inspectors”), upon written request,
at the offices where normally kept, during reasonable business hours, all
pertinent financial and other records, pertinent corporate documents and
instruments of the Issuer and subsidiaries of the Issuer (collectively, the “Records”),
as shall be reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and employees of
the Issuer and any of its subsidiaries to supply all information (“Information”)
reasonably requested by any such Inspector in connection with such due
diligence responsibilities.  Each
Inspector shall agree in writing that it will keep the Records and Information
confidential, to use the Information only for due diligence purposes, to
abstain from using the Information as the basis for any market transactions in
Securities of the Issuer and that it will not disclose any of the Records or
Information that the Issuer determines, in good faith, to be confidential and
notifies the Inspectors in writing are confidential unless (i) the
disclosure of such Records or Information is necessary to avoid or correct a
misstatement or omission in such Registration Statement or Prospectus,
(ii) the release of such Records or Information is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction,
(iii) disclosure of such Records or Information is necessary or advisable,
in the opinion of counsel for any Inspector, in connection with any 


 


14

















 


action, claim, suit or proceeding, directly or
indirectly, involving or potentially involving such Inspector and arising out
of, based upon, relating to, or involving this Agreement or the Purchase
Agreement, or any transactions contemplated hereby or thereby or arising
hereunder or thereunder, or (iv) the information in such Records or
Information has been made generally available to the public other than by an
Inspector or an “affiliate” (as defined in Rule 405) thereof; provided,
however, that prior notice shall be provided as soon as practicable to
the Issuer of the potential disclosure of any information by such Inspector
pursuant to clauses (ii) or (iii) of this sentence to permit the
Issuer to obtain a protective order (or waive the provisions of this
paragraph (n)) and that such Inspector shall take such actions as are
reasonably necessary to protect the confidentiality of such information (if
practicable) to the extent such action is otherwise not inconsistent with, an
impairment of or in derogation of the rights and interests of the Holder or any
Inspector.


 


(o)                                 Provide an
indenture trustee for the Registrable Securities or the Exchange Securities, as
the case may be, and cause the Indenture or the trust indenture provided for in
Section 2(a) hereof, as the case may be, to be qualified under the
TIA not later than the effective date of the first Registration Statement
relating to the Registrable Securities; and in connection therewith, cooperate
with the trustee under any such indenture and the Holders of the Registrable
Securities, to effect such changes (if any) to such indenture as may be
required for such indenture to be so qualified in accordance with the terms of
the TIA; and execute, and use its commercially reasonable best efforts to cause
such trustee to execute, all documents as may be required to effect such
changes, and all other forms and documents required to be filed with the SEC to
enable such indenture to be so qualified in a timely manner.


 


(p)                                 Comply in all
material respects with all applicable rules and regulations of the SEC and
make generally available to its securityholders with regard to any applicable
Registration Statement, a consolidated earning statement satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no
later than 45 days after the end of any fiscal quarter (or 90 days
after the end of any 12-month period if such period is a fiscal year)
(i) commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Issuer, after the effective date of a Registration Statement, which statements
shall cover said 12-month periods; provided that this requirement shall be
deemed satisfied by the Issuer complying with Section 4.03 of the
Indenture.


 


(q)                                 Upon
consummation of the Exchange Offer or a Private Exchange, obtain an opinion of
counsel to the Issuer, in a form customary for underwritten transactions,
addressed to the Trustee for the benefit of all Holders of Registrable
Securities participating in the Exchange Offer or the Private Exchange, as the
case may be, that the Exchange Securities or Private Exchange Notes, as the
case may be, the related guarantees and the related indenture constitute legal,
valid and binding obligations of the Issuer, enforceable against the Issuer in
accordance with their respective terms, subject to customary exceptions and
qualifications.  If the Exchange Offer or
a Private Exchange is to be consummated, upon delivery of the Registrable
Securities by Holders to the Issuer (or to such other Person as directed by the
Issuer), in exchange for the Exchange Securities or the Private Exchange Notes
(and the related guarantees), as the case may be, the Issuer shall mark, or
cause to be marked, on such Registrable Securities that such Registrable
Securities are being cancelled in exchange for the Exchange Securities or the
Private Exchange Notes (and the related guarantees), as the case may be; in no
event shall such Registrable Securities be marked as paid or otherwise
satisfied.


 


15
















 


(r)                                    Use reasonable
efforts to cooperate with each seller of Registrable Securities covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the Financial Industry
Regulatory Authority (“FINRA”).


 


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


 


The
Issuer may require each seller of Registrable Securities as to which any
registration is being effected to furnish to the Issuer such information
regarding such seller and the distribution of such Registrable Securities as
the Issuer may, from time to time, reasonably request.  The Issuer may exclude from such registration
the Registrable Securities of any seller so long as such seller fails to furnish
such information within a reasonable time after receiving such request.  Each seller as to which any Shelf
Registration is being effected agrees to furnish promptly to the Issuer all
information required to be disclosed in order to make the information
previously furnished to the Issuer by such seller not materially misleading.


 


If
any such Registration Statement refers to any Holder by name or otherwise as
the holder of any securities of the Issuer, then such Holder shall have the
right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the
holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the securities
covered thereby and that such holding does not imply that such Holder will
assist in meeting any future financial requirements of the Issuer, or
(ii) in the event that such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar federal statute then in
force, the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.


 


Each
Holder of Registrable Securities and each Participating Broker-Dealer agrees by
its acquisition of such Registrable Securities or Exchange Securities to be
sold by such Participating Broker-Dealer, as the case may be, that, upon actual
receipt of any notice from the Issuer of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof,
such Holder will forthwith discontinue disposition of such Registrable
Securities covered by such Registration Statement or Prospectus or Exchange
Securities to be sold by such Holder or Participating Broker-Dealer, as the
case may be, until such Holder’s or Participating Broker-Dealer’s receipt of
the copies of the supplemented or amended Prospectus contemplated by
Section 5(k) hereof, or until it is advised in writing (the “Advice”)
by the Issuer that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto.  In the event that the Issuer shall give any
such notice, each of the Applicable Period and the Effectiveness Period shall
be extended by the number of days during such periods from and including the
date of the giving of such notice to and including the date when each seller of
Registrable Securities covered by such Registration Statement or Exchange Securities
to be sold by such Participating Broker-Dealer, as the case may be, shall have
received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 5(k) hereof or (y) the Advice.


 


16

















 


6.                                       Registration
Expenses


 


All
fees and expenses incident to the performance of or compliance with this
Agreement by the Issuer of its obligations under Sections 2, 3, 5 and 8 shall
be borne by the Issuer, whether or not the Exchange Offer Registration
Statement or any Shelf Registration Statement is filed 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 made with FINRA in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Securities or Exchange Securities and determination of the
eligibility of the Registrable Securities or Exchange Securities for investment
under the laws of such jurisdictions in the United States (x) where the
holders of Registrable Securities are located, in the case of the Exchange
Securities, or (y) as provided in Section 5(h) hereof, in the
case of Registrable Securities or Exchange Securities to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses, including, without limitation, printing prospectuses if the printing
of prospectuses is requested by the managing underwriter or underwriters, if
any, by the Holders of a majority in aggregate principal amount of the
Registrable Securities included in  any
Registration Statement or in respect of Registrable Securities or Exchange
Securities to be sold by any Participating Broker-Dealer during the Applicable
Period, as the case may be, (iii) fees and expenses of the Trustee, any
exchange agent and their counsel, (iv) fees and disbursements of counsel
for the Issuer and, in the case of a Shelf Registration, reasonable fees and
disbursements of one special counsel for all of the sellers of Registrable
Securities selected by the Holder of a majority in aggregate principal amount
of Registrable Securities covered by such Shelf Registration (which counsel
shall be reasonably satisfactory to the Issuer) exclusive of any counsel
retained pursuant to Section 7 hereof), (v) fees and disbursements of
all independent certified public accountants referred to in Section 5(m) hereof
(including, without limitation, the expenses of any “cold comfort” letters
required by or incident to such performance), (vi) rating agency fees, if
any, and any fees associated with making the Registrable Securities or Exchange
Securities eligible for trading through The Depository Trust Company,
(vii) Securities Act liability insurance, if the Issuer desires such
insurance, (viii) fees and expenses of all other Persons retained by the
Issuer, (ix) internal expenses of the Issuer (including, without
limitation, all salaries and expenses of officers and employees of the Issuer
performing legal or accounting duties), (x) the expense of any annual
audit, (xi) any fees and expenses incurred in connection with the listing
of the securities to be registered on any securities exchange, and the
obtaining of a rating of the securities, in each case, if applicable and
(xii) the expenses relating to printing, word processing and distributing
all Registration Statements, underwriting agreements, indentures and any other
documents necessary in order to comply with this Agreement.


 


7.                                       Indemnification
and Contribution.


 


(a)                                  The Issuer and
the Guarantors jointly and severally agree, to indemnify and hold harmless each
Holder of Registrable Securities and each Participating Broker-Dealer selling
Exchange Securities during the Applicable Period, and each Person, if any, who
controls such Person or its affiliates within the 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 become subject under the
Securities Act, the Exchange Act or otherwise, insofar as any such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon:


 


17

















 


(i)                                     any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement (or any amendment thereto) or Prospectus (as amended or
supplemented if the Issuer shall have furnished any amendments 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 the Issuer shall have
furnished any amendments or supplements thereto) or any preliminary prospectus
or any other document or any amendment or supplement thereto, a material fact
required to be stated therein or necessary to make the statements therein not
misleading,


 


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


 


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


 


(b)                                 Each
Participant, severally and not jointly, agrees to indemnify and hold harmless
the Issuer, the Guarantors, their respective directors (or equivalent), their
respective officers who sign any Registration Statement and each person, if
any, who controls the Issuer within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act against any losses, claims, damages or
liabilities to which the Issuer, the Guarantors or any such director, officer
or controlling person may become subject under the Act, the Exchange Act or
otherwise, insofar as such 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 fact contained in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary prospectus, or (ii) the omission or the alleged omission
to state therein a material fact necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission 


 


18

















 


was made in reliance upon and in conformity with
written information concerning such Participant, furnished to the Issuer by or
on behalf of such Participant, specifically for use therein; and subject to the
limitation set forth immediately preceding this clause, will reimburse, as
incurred, any reasonable legal or other expenses incurred by the Issuer, the
Guarantors or any such director, officer or controlling person in connection
with investigating or defending against 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
this Section 7 will be in addition to any liability that the Participants
may otherwise have to the indemnified parties. 
The Participants shall not be liable under this Section 7 to any
indemnified party regarding any settlement or compromise or consent to the
entry of any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise
or consent is consented to by the Participants, which consent shall not be
unreasonably withheld.  The Issuer and
the Guarantors shall not, without the prior written consent of such
Participant, effect any settlement or compromise of any pending or threatened
proceeding in respect of which such Participant is or could have been a party,
or indemnity could have been sought hereunder by such Participant, unless such
settlement (A) includes an unconditional written release of such
Participant, in form and substance reasonably satisfactory to such Participant,
from all liability on claims that are the subject matter of such proceeding and
(B) does not include any statement as to an admission of fault,
culpability or failure to act by or on behalf of such Participant.


 


(c)                                  Promptly after
receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 7,
notify the indemnifying party of the commencement thereof 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 and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses and
(ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraphs (a) and (b) above.  The indemnifying party shall be entitled to
appoint counsel (including local counsel) of the indemnifying party’s choice at
the indemnifying party’s expense to represent the indemnified party in any
action for which indemnification is sought (in which case the indemnifying
party shall not thereafter be responsible for the fees and expenses of any
separate counsel, other than local counsel if not appointed by the indemnifying
party, retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably
satisfactory to the indemnified party. 
Notwithstanding the indemnifying party’s election to appoint counsel (including
local counsel) to represent the indemnified party in an action, the indemnified
party shall have the right to employ separate counsel (including local
counsel), and the indemnifying party shall bear the reasonable fees, costs and
expenses of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest (based on the advice of counsel to the
indemnified person); (ii) such action includes both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded (based on the advice of counsel to the indemnified person) that there
may be legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying party;
(iii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action; or
(iv) the indemnifying party shall authorize the indemnified party to
employ separate counsel at the expense of the indemnifying party.  It is understood and agreed that the 


 


19

















 


indemnifying person shall not, in connection with
any proceeding or separate but related or substantially similar proceedings in
the same 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 under paragraph (a) or paragraph (b) of this Section 7,
as the case may be, who are parties to such action or actions.  Any such separate firm for any Participants
shall be designated in writing by Participants who sold a majority in interest
of the Registrable Securities and Exchange 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 are
indemnified persons collectively entitled, in connection with a proceeding or
separate but related or substantially similar proceedings in a single
jurisdiction, to the payment of fees and expenses of a single separate firm
under this Section 7(c), and any such Participants cannot agree to a
mutually acceptable separate firm to act as counsel thereto, then such separate
firm for all such Indemnified Persons shall be designated in writing by
Participants who sold a majority in interest of the Registrable Securities and
Exchange Securities sold by all such Participants.  An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties
are actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action, suit or
proceeding and does not include any statement as to, or any admission of,
fault, culpability or failure to act by or on behalf of any indemnified
party.  All fees and expenses reimbursed
pursuant to this paragraph (c) shall be reimbursed as they are incurred.


 


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


 


(e)                                  In
circumstances in which the indemnity agreement provided for in the preceding
paragraphs of this Section 7 is unavailable to, or insufficient to hold
harmless, an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) (other than by virtue of the
failure of an indemnified party to notify the indemnifying party of its right
to indemnification pursuant to paragraph (a) or (b) of this Section 7,
where such failure materially prejudices the indemnifying party (through the
forfeiture of substantial rights or defenses)), each indemnifying party, in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such indemnified 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 the one 


 


20

















 


hand and the indemnified party on the other from the
offering of the Securities or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, not only such
relative benefits but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof).  The relative benefits received
by the Issuer and the Guarantors on the one hand and such Participant on the
other shall be deemed to be in the same proportion that the total net proceeds
from the offering (before deducting expenses) of the Securities received by the
Issuer bear to the total discounts and commissions received by such Participant
in connection with the sale of the Securities (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 a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Issuer on the one
hand, or the Participants on the other, the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission or alleged statement or omission, and any other equitable
considerations appropriate in the circumstances.  The parties agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the first sentence of this
paragraph (e).  Notwithstanding any other
provision of this paragraph (e), no Participant shall be obligated to make
contributions hereunder that in the aggregate exceed the total discounts,
commissions and other compensation or net proceeds on the sale of Securities
received by such Participant in connection with the sale of the Securities,
less the aggregate amount of any damages that such Participant has otherwise
been required to pay by reason of the untrue or alleged untrue statements or
the omissions or alleged omissions to state a material fact, and no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. 
For purposes of this paragraph (d), each person, if any, who controls a
Participant within the meaning of Section 15 of the Act or Section 20
of the Exchange Act shall have the same rights to contribution as the
Participants, and each director of the Issuer and the Guarantors, each officer
of the Issuer and the Guarantors and each person, if any, who controls the
Issuer and the Guarantors within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, shall have the same rights to contribution
as the Issuer.


 


8.                                       Rule 144
and Rule 144A


 


The
Issuer covenants and agrees that it will use reasonable best efforts to file
the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder
in a timely manner in accordance with the requirements of the Securities Act
and the Exchange Act and, if at any time the Issuer is not required to file
such reports, the Issuer will, upon the request of any Holder or beneficial
owner of Registrable Securities, make available such information necessary to
permit sales pursuant to Rule 144A. The Issuer further covenants and
agrees, for so long as any Registrable Securities remain outstanding that it
will take such further action as any Holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144(c) under
the Securities Act and Rule 144A unless the Issuer is then subject to Section 13
or 15(d) of the Exchange Act or is otherwise filing quarterly and annual
reports under the Exchange Act and reports filed thereunder satisfy the
information requirements of Rule 144A then in effect.


 


21

















 


9.                                       Underwritten
Registrations


 


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


 


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


 


10.                                 Miscellaneous


 


(a)                                  No Inconsistent
Agreements.  The Issuer
has not as of the date hereof, and the Issuer shall not, after the date of this
Agreement, enter into any agreement with respect to any of its securities that
is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions
hereof.  The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Issuer’s other issued and outstanding
securities under any such agreements. 
The Issuer will not enter into any agreement with respect to any of its
securities which will grant to any Person piggy-back registration rights with
respect to any Registration Statement.


 


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


 


(c)                                  Amendments and
Waivers.  The provisions of this
Agreement may not be amended, modified or supplemented, and waivers 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 aggregate principal amount of the then
outstanding Registrable Securities and (B) in circumstances that would
adversely affect the Participating Broker-Dealers, the Participating
Broker-Dealers holding not less than a majority in aggregate principal amount
of the Exchange Notes held by all Participating Broker-Dealers; provided,
however, that Section 7 and this Section 10(c) may not be
amended, modified or supplemented without the prior written consent of each
Holder and each Participating Broker-Dealer (including any person who was a
Holder or Participating Broker-Dealer of Registrable Securities or Exchange
Securities, as the case may be, disposed of pursuant to any Registration
Statement) affected by any such amendment, modification or supplement.  Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Securities whose
securities are being sold pursuant to a Registration Statement and that does
not directly or indirectly affect, impair, limit or compromise the rights of


 


22






 












 


other Holders of Registrable Securities may be given
by Holders of at least a majority in aggregate principal amount of the
Registrable Securities being sold pursuant to such Registration Statement.


 


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


 


(i)                                     if to a Holder
of the Registrable Securities or any Participating Broker-Dealer, at the most
current address of such Holder or Participating Broker-Dealer, as the case may
be, set forth on the records of the registrar under 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 10005


 


with
a copy to:


 


Cahill
Gordon & Reindel LLP


80
Pine Street


New
York, New York 10005


Facsimile
No.:  (212) 269-5420 


Attention:  John A. Tripodoro, Esq.


Jonathan J. Frankel, Esq.


 


(ii)                           if to the
Initial Purchasers, at the address specified in Section 10(d)(i);


 


(iii)                        if to the
Issuer, at the address as follows:


 


Michaels
Stores, Inc.


8000 Bent Branch
Drive


Irving, Texas
75063


Facsimile
No.: (972) 409-1965


Attention:
 General Counsel


 


with
a copy to:


 


Ropes &
Gray LLP


Prudential
Tower, 800 Boylston Street


Boston
Massachusetts  02199


Facsimile
No.:  (617) 951-7050


Attention:  David A. Fine, Esq.


 


23

















 


All
such notices and communications shall be deemed to have been duly given:  when delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; one Business Day after being timely delivered to a next-day
air courier; and upon written confirmation, if sent by facsimile.


 


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


 


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


 


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


 


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


 


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


 


(i)                                     Severability.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein 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 to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction.  It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of 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 of Registrable Securities is required hereunder,
Registrable Securities held by the Issuer or its affiliates (as such term is
defined in Rule 405 under the Securities Act) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.


 


24

















 


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


 


(l)                                     Entire
Agreement.  This
Agreement, together with the Purchase Agreement and the Indenture, is intended
by the parties as a final and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein 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 Issuer
on the other, or between or among any agents, representatives, parents,
subsidiaries, affiliates, predecessors in interest or successors in interest
with respect to the subject matter hereof and thereof are merged herein and
replaced hereby.


 


25

















 


IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.


 


 


	
   

  	
  MICHAELS
  STORES, INC.

  
	
   

  	
  MICHAELS
  STORES PROCUREMENT

  
	
   

  	
  COMPANY, INC.

  
	
   

  	
  MICHAELS
  OF CANADA, ULC

  
	
   

  	
  ARTISTREE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Charles M. Sonsteby

  
	
   

  	
   

  	
  Name:

  	
  Charles
  M. Sonsteby

  
	
   

  	
   

  	
  Title:

  	
  Chief
  Administrative Officer and 

  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AARON
  BROTHERS, INC.

  
	
   

  	
  MICHAELS
  FINANCE COMPANY, INC.

  
	
   

  	
  MICHAELS
  STORES CARD SERVICES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Charles M. Sonsteby

  
	
   

  	
   

  	
  Name:

  	
  Charles
  M. Sonsteby

  
	
   

  	
   

  	
  Title:

  	
  President,
  Chief Administrative

  
	
   

  	
   

  	
   

  	
  Officer and Chief
  Financial Officer

  



 


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.


BANC
OF AMERICA SECURITIES LLC


BARCLAYS
CAPITAL INC.


CREDIT
SUISSE SECURITIES (USA) LLC


J.P.
MORGAN SECURITIES LLC


WELLS
FARGO SECURITIES, LLC


 


 


	
  By: 
  Deutsche Bank Securities Inc.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  



 


 


For
itself and the other several Initial Purchasers.


 


Signature Page to
Registration Rights Agreement


 

















 


SCHEDULE I


 


THE GUARANTORS


 


AARON
BROTHERS, INC.


MICHAELS
FINANCE COMPANY, INC.


MICHAELS
STORES PROCUREMENT COMPANY, INC. 


MICHAELS
OF CANADA, ULC


MICHAELS
STORES CARD SERVICES, LLC


ARTISTREE, INC.