Exhibit
10.1


 


THIRD
AMENDMENT TO CREDIT AGREEMENT


 


THIRD AMENDMENT TO CREDIT AGREEMENT (this “Third Amendment”), dated as of August 20, 2009, among
MICHAELS STORES, INC., a Delaware corporation (the “Borrower”),
the Lenders party to the Credit Agreement referred to below (the “Lenders”), and DEUTSCHE BANK AG NEW YORK BRANCH, as
administrative agent (in such capacity, the “Administrative
Agent”).  Unless otherwise
defined herein, capitalized terms used herein and defined in the Credit
Agreement are used herein as therein defined.


 


W  I  T
N  E  S  S  E  T  H :


 


WHEREAS, the Borrower, the Lenders, the
Administrative Agent, the Syndication Agent and the Co-Documentation Agents
have entered into a Credit Agreement, dated as of October 31, 2006 (as
amended, supplemented and/or otherwise modified to, but not including, the date
hereof, the “Credit Agreement”); and


 


WHEREAS, pursuant to Section 10.01 of
the Credit Agreement, the parties hereto wish to amend certain provisions of
the Credit Agreement as provided herein, subject to the terms and conditions
set forth below.


 


NOW, THEREFORE, it is agreed;


 


A.                                   Amendments to the Credit Agreement


 


1.                                       Section 1.01
of the Credit Agreement is hereby amended by (i) deleting the definitions
of “Commitment”, “Lender”, “Loan”,
“Loan Documents” and “Secured Hedge Agreement” appearing in said Section in
their entirety and (ii) inserting in appropriate alphabetical order the
following new definitions:


 


“Additional First Lien Intercreditor Agreement”
means an intercreditor agreement among the Administrative Agent, the Collateral
Agent and one or more Senior Representatives for holders of Permitted First
Priority Refinancing Debt providing that, inter alia, the
Liens on the Collateral as between the Collateral Agent (for the benefit of the
Secured Parties) and one or more Senior Representatives (for the benefit of the
holders of Permitted First Priority Refinancing Debt) shall be pari passu (but without regard to control of remedies), as
such intercreditor agreement may be amended, modified or supplemented from time
to time in accordance with the terms hereof and thereof.  The Additional First Lien Intercreditor
Agreement shall be in a form customary for transactions of the type
contemplated thereby and otherwise reasonably satisfactory to the Administrative
Agent and the Borrower and, to the extent agreed to by the Collateral Agent,
the Senior Representative for the applicable holders of Permitted First
Priority Refinancing Debt and the ABL Collateral Agent, may be in the form of
an amendment and restatement of the Intercreditor Agreement.


 

















 


“Additional
Lender” means, at any time, any bank or other financial institution
or institutional lender (other than any such bank, financial institution or
institutional lender that is a Lender at such time) that agrees to provide any
portion of Credit Agreement Refinancing Indebtedness pursuant to a Refinancing
Amendment in accordance with Section 2.15, provided
that each Additional Lender shall be subject to the approval of the
Administrative Agent to the extent that each such Additional Lender is not then
an existing Lender, an Affiliate of a then existing Lender or an Approved Fund (such
approval not to be unreasonably withheld) and the Borrower.


 


“Appropriate Lender”
means, at any time, with respect to Loans of any Class, the Lenders of such
Class.


 


“Class” when
used with respect to Loans or a Borrowing, refers to whether such Loans, or the
Loans comprising such Borrowing, are Replacement Loans or Other Term Loans.


 


“Commitment” means, as to each Lender,
its Original Commitment, its New Commitment, its Replacement Commitment or its
Other Term Loan Commitment, as the context may require.


 


“Credit Agreement Refinancing Indebtedness” means (a) Permitted First
Priority Refinancing Debt, (b) Permitted Unsecured Refinancing Debt or (c) Indebtedness
incurred pursuant to a Refinancing Amendment, in each case, issued,
incurred or otherwise obtained (including by means of the extension or renewal
of existing Indebtedness) in exchange for, or to extend, renew, replace or
refinance, in whole or part, then existing Loans (including any successive
Credit Agreement Refinancing Indebtedness) (“Refinanced Debt”); provided that (i) such extending,
renewing or refinancing Indebtedness is in an original aggregate principal
amount (or accreted value, if applicable) not greater than the aggregate
principal amount (or accreted value, if applicable) of the Refinanced Debt
except by an amount equal to unpaid accrued interest and premium thereon plus
other reasonable amounts paid, and fees and expenses reasonably incurred, in
connection with such extending, renewing or refinancing Indebtedness, (ii) such
Indebtedness has a later maturity and a Weighted Average Life to
Maturity equal to or greater than the Refinanced Debt, and (iii) unless
such Credit Agreement Refinancing Indebtedness is incurred solely by means of
extending or renewing then existing Indebtedness described in clause (a) or
(b) above without resulting in any Net Proceeds, such Refinanced
Debt shall be repaid, defeased or satisfied and discharged with 100% of the Net
Proceeds from any Credit Agreement Refinancing Indebtedness, and all accrued
interest, fees and premiums (if any) in connection therewith shall be paid, on
the date such Credit Agreement Refinancing Indebtedness is issued, incurred or
obtained.


 


“Latest
Maturity Date” means, at any date of determination, the latest Maturity
Date applicable to any Loan or Commitment hereunder at such time, including the
latest maturity date of any Other Term Loan or any Other Term Commitment, in
each case as extended in accordance with this Agreement from time to time.


 


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“Lender” has the
meaning specified in the introductory paragraph to this Agreement and includes (i) each
Replacement Lender and its respective successors and assigns as permitted
hereunder and (ii) each Person that shall become a party hereto pursuant
to a Refinancing Amendment and its respective successors and assigns as
permitted hereunder, each of which is referred to herein as a “Lender”.


 


“Loan” means (a) the
making of an Original Loan by a Lender to the Borrower pursuant to Section 2.01(a),
(b) the making of an Additional New Loan by a Lender to the Borrower
pursuant to Section 2.01(c), (c) the conversion of an Original Loan
to a Converted New Loan by a Lender pursuant to Section 2.01(b), (d) the
making of a Replacement Loan by a Lender to the Borrower pursuant to Section 2.01(d) or
(e) the making of an Other Term Loan by a Lender or an Additional Lender to
the Borrower pursuant to Section 2.15.


 


“Loan Documents”
means, collectively, (a) this Agreement, (b) the Notes, (c) the
Guaranty, (d) the Intercreditor Agreement, (e) the Collateral
Documents and (f) on and after the execution and delivery thereof, the
Additional First Lien Intercreditor Agreement.


 


“Other Term
Commitments” means one or more term loan commitments hereunder that
fund Other Term Loans of the applicable Class hereunder pursuant to a
Refinancing Amendment.


 


“Other Term
Loans” means one or more Classes of term loans hereunder that result
from a Refinancing Amendment.


 


“Permitted First Priority
Refinancing Debt” means any secured Indebtedness incurred by the
Borrower in the form of one or more series of senior secured notes or loans; provided that (i) such Indebtedness is secured by (A) the
TL Priority Collateral on a pari passu first-lien basis (but without regard to
the control of remedies) with the Secured Obligations and (B) the ABL
Priority Collateral on a pari passu second-lien basis (but without regard to
the control of remedies) with the Secured Obligations, and is not secured by
any property or assets of the Borrower or any Subsidiary other than the
Collateral, (ii) such Indebtedness constitutes Credit Agreement
Refinancing Indebtedness in respect of any Class of Loans (including
portions of any Class of Loans), (iii) such Indebtedness (and the
Liens securing the same) are permitted by the terms of the ABL Credit Agreement
and the Intercreditor Agreement (in each case, to the extent the ABL Credit
Agreement and the Intercreditor Agreement are then in effect), (iv) such
Indebtedness does not mature or have scheduled amortization or payments of
principal prior to the date that is ninety-one (91) days after the Latest
Maturity Date at the time such Indebtedness is incurred, (v) the security agreements
relating to such Indebtedness are substantially the same as the Collateral
Documents (with such differences as are reasonably satisfactory to the
Administrative Agent), (vi) such Indebtedness is not guaranteed by any
Subsidiaries other than the Subsidiary Guarantors, and (vii) a Senior
Representative acting on behalf of the holders of such Indebtedness shall have


 


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become party to the Additional First Lien
Intercreditor Agreement, provided that if such Indebtedness is the initial
Permitted First Priority Refinancing Debt incurred by the Borrower, then the
Borrower, the Subsidiary Guarantors, the Administrative Agent, the Collateral
Agent and the Senior Representative for such Indebtedness shall have executed
and delivered the Additional First Lien Intercreditor Agreement.  Permitted First Priority Refinancing Debt
will include any Registered Equivalent Notes issued in exchange therefor.


 


“Permitted Refinancing”
means, with respect to any Person, any modification, replacement, refinancing,
refunding, renewal or extension of any Indebtedness of such Person; provided that (a) the principal
amount (or accreted value, if applicable) thereof does not exceed the principal
amount (or accreted value, if applicable) of the Indebtedness so modified,
replaced, refinanced, refunded, renewed or extended except by an amount equal
to unpaid accrued interest and premium thereon plus other reasonable amount
paid, and fees and expenses reasonably incurred, in connection with such
modification, replacement, refinancing, refunding, renewal or extension and by
an amount equal to any existing commitments unutilized thereunder, (b) such
modification, replacement, refinancing, refunding, renewal or extension has a
final maturity date equal to or later than the final maturity date of, and has
a Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness being modified, replaced,
refinanced, refunded, renewed or extended, (c) at the time thereof, no
Default or Event of Default shall have occurred and be continuing, (d) if
such Indebtedness being modified, replaced, refinanced, refunded, renewed or
extended is subordinated in right of payment to the Obligations, such
modification, replacement, refinancing, refunding, renewal or extension is
subordinated in right of payment to the Obligations on terms at least as
favorable to the Lenders as those contained in the documentation governing the
Indebtedness being modified, replaced, refinanced, refunded, renewed or
extended, (e) the terms and conditions (including, if applicable, as to
collateral but excluding as to subordination, interest rate and redemption
premium) of any such modified, replaced, refinanced, refunded, renewed or
extended Indebtedness, taken as a whole, are not materially less favorable to
the Loan Parties or the Lenders than the terms and conditions of the
Indebtedness being modified, replaced, refinanced, refunded, renewed or
extended; provided that a
certificate of a Responsible Officer delivered to the Administrative Agent at
least five Business Days prior to the incurrence of such Indebtedness, together
with a reasonably detailed description of the material terms and conditions of
such Indebtedness or drafts of the documentation relating thereto, stating that
the Borrower has determined in good faith that such terms and conditions
satisfy the foregoing requirement shall be conclusive evidence that such terms
and conditions satisfy the foregoing requirement unless the Administrative
Agent notifies the Borrower within such five Business Day period that it
disagrees with such determination (including a reasonable description of the
basis upon which it disagrees), (f) any such modification, replacement,
refinancing, refunding, renewal or extension is incurred by the Person who is
the obligor of the Indebtedness being modified, refinanced, refunded, renewed
or extended, (g) in the case of a “Permitted Refinancing” of Permitted
First Priority Refinancing


 


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Debt, such Indebtedness meets the requirements of clauses (i), (iii),
(v), (vi) and (vii) of the definition of “Permitted First Priority
Refinancing Debt” and (h) in the case of a “Permitted Refinancing” of
Permitted Unsecured Refinancing Debt, such Indebtedness meets the requirements
of clauses (iv) and (v) of the definition of “Permitted Unsecured
Refinancing Debt”.


 


“Permitted Unsecured
Refinancing Debt” means unsecured Indebtedness incurred by the
Borrower in the form of one or more series of senior unsecured notes or loans;
provided that (i) such Indebtedness constitutes Credit Agreement
Refinancing Indebtedness in respect of any Class of Loans (including
portions of any Class of Loans), (iii) such Indebtedness does not
mature or have scheduled amortization or payments of principal prior to the
date that is ninety-one (91) days after the Latest Maturity Date at the time
such Indebtedness is incurred, (iv) such Indebtedness is not guaranteed by
any Subsidiaries other than the Subsidiary Guarantors, and (v) such
Indebtedness is not secured by any Lien on any property or assets of the
Company or any Subsidiary.  Permitted
Unsecured Refinancing Debt will include any Registered Equivalent Notes issued
in exchange therefor.


 


“Refinancing
Amendment” means an amendment to this Agreement in form and
substance reasonably satisfactory to the Administrative Agent and the Borrower
executed by each of (a) the Borrower, (b) the Administrative Agent
and (c) each Additional Lender and Lender that agrees to provide any
portion of the Credit Agreement Refinancing Indebtedness being incurred
pursuant thereto, in accordance with Section 2.15.


 


“Registered Equivalent
Notes” means, with respect to any notes originally issued in a Rule 144A
or other private placement transaction under the Securities Act of 1933,
substantially identical notes (having the same guarantees) issued in a dollar
for dollar exchange therefor pursuant to an exchange offer registered with the
SEC.


 


“Replacement Lender”
means each Lender with a Replacement Commitment and/or Replacement Loans.


 


“Secured Hedge Agreement”
means any Swap Contract permitted under Article 7 that is entered into by
and between any Loan Party or any Restricted Subsidiary and any Hedge Bank and
with respect to which, at or prior to the time that such Swap Contract is
entered into, the Borrower (or another Loan Party) and the Hedge Bank party
thereto (except in the case of the Administrative Agent) shall have delivered
written notice to the Administrative Agent that such Swap Contract has been
entered into and that it constitutes a “Secured Hedge Agreement” entitled to
the benefits of the Collateral Documents, the Intercreditor Agreement and (if
then in effect) the Additional First Lien Intercreditor Agreement.


 


“Senior Representative”
means, with respect to any series of Permitted First Priority Refinancing Debt,
the trustee, administrative agent, collateral agent,


 


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security agent or similar agent under the
indenture or agreement pursuant to which such Indebtedness is issued, incurred
or otherwise obtained, as the case may be, and each of their successors in such
capacities.


 


“Third Amendment” means the Third
Amendment to this Agreement, dated as of August 20, 2009.


 


“Third Amendment Effective
Date” has the meaning provided in the Third Amendment.


 


2.                                       The definition
of “Collateral and Guarantee Requirement”
appearing in Section 1.01 of the Credit Agreement is hereby amended by (i) replacing
the text “and (y) the Intercreditor Agreement” appearing in clause (a) of
said definition with the text “(y) the Intercreditor Agreement, and (z) if
then in effect, the Additional First Lien Intercreditor Agreement”, (ii) inserting
the text “and, if then in effect, the Additional First Lien Intercreditor
Agreement” immediately after the text “the Intercreditor Agreement” appearing
in the first parenthetical of clause (d) of said definition, (iii) replacing
the text “and the Intercreditor Agreement” appearing in clause (e) of said
definition with the text “, the Intercreditor Agreement and, if then in effect,
the Additional First Lien Intercreditor Agreement” and (iv) inserting the
text “and, if then in effect, the Additional First Lien Intercreditor Agreement”
immediately after the text “the Intercreditor Agreement” appearing in the
parenthetical of clause (g)(ii) of said definition.


 


3.                                       The definition
of “Disqualified Stock” appearing
in Section 1.01 of the Credit Agreement is hereby amended by replacing the
text “Maturity Date” appearing in clause (b) of said definition with the
text “Latest Maturity Date at the time such Disqualified Stock is first issued”.


 


4.                                       The definition
of “Permitted Collateral Liens”
appearing in Section 1.01 of the Credit Agreement is hereby amended by
replacing the text “and (ll)” appearing in clause (c) of said definition
with the text “, (ll) and (nn)”.


 


5.                                       The definition
of “Permitted Liens” appearing in Section 1.01
of the Credit Agreement is hereby amended by (i) deleting the word “and”
at the end of clause (ll) of said definition, (ii) replacing the period (“.”)
at the end of clause (mm) of said definition with the text “; and” and (iii) inserting
the following new clause (nn) at the end of said definition:


 


“(nn)                    Liens on the Collateral
securing Permitted First Priority Refinancing Debt (and Permitted Refinancings
thereof) permitted under Section 7.03(b)(xxii).”.


 


6.                                       Section 2.01
of the Credit Agreement is hereby amended by deleting the text “ (i)” appearing
in clause (b) of said Section and inserting a comma in lieu thereof.


 


7.                                       Section 2.02
of the Credit Agreement is hereby amended by (i) inserting the text “the
applicable Class of” immediately before the text “Loans,” appearing in the
first sentence of clause (b) of said Section and (ii) inserting
the word “Appropriate” immediately before the text “Lender shall make”
appearing in clause (b) of said Section.


 


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8.                                       Section 2.05
of the Credit Agreement is hereby amended by deleting clause (a)(i) of
said Section in its entirety and restating said clause as follows:


 


“(i)  The Borrower may, upon notice to
the Administrative Agent, at any time or from time to time voluntarily prepay
Loans in whole or in part without premium or penalty; provided that (1) such
notice must be received by the Administrative Agent not later than 12:30 p.m.
(New York, New York time) (A) three (3) Business Days prior to any
date of prepayment of Eurocurrency Rate Loans and (B) one (1) Business
Day prior to any date of prepayment of Base Rate Loans; (2) any prepayment
of Eurocurrency Rate Loans shall be in a principal amount of $2,500,000 or a
whole multiple of $500,000 in excess thereof; and (3) any prepayment of
Base Rate Loans shall be in a principal amount of $500,000 or a whole multiple
of $100,000 in excess thereof or, in each case, if less, the entire principal
amount thereof then outstanding.  Each such
notice shall specify the date and amount of such prepayment, the Type(s) of
Loans to be prepaid and the manner in which such prepayment shall be applied to
scheduled repayments of Loans required pursuant to Section 2.07; provided
that in the event such notice fails to specify the manner in which the
respective prepayment shall be applied to scheduled repayments of such Loans
required pursuant to Section 2.07, such prepayment of such Loans shall be
applied in direct order of maturity to scheduled repayments thereof required
pursuant to Section 2.07.  The
Administrative Agent will promptly notify each Appropriate Lender of its
receipt of each such notice, and of the amount of such Lender’s Pro Rata Share
of such prepayment.  If such notice is
given by the Borrower, the Borrower shall make such prepayment and the payment
amount specified in such notice shall be due and payable on the date specified
therein.  Any prepayment of a
Eurocurrency Rate Loan shall be accompanied by all accrued interest thereon, together
with any additional amounts required pursuant to Section 3.05.  Each prepayment of the Loans pursuant to this
Section 2.05(a) shall be paid to the Appropriate Lenders in
accordance with their respective Pro Rata Shares.”.


 


9.                                       Section 2.05
of the Credit Agreement is hereby further amended by restating clause (b)(ii) of
said Section in its entirety as follows:


 


“(ii)                            (A) If the Borrower or any
Restricted Subsidiary incurs or issues any Indebtedness not expressly permitted
to be incurred or issued pursuant to Section 7.03, the Borrower shall
cause to be prepaid an aggregate principal amount of Loans in an amount equal
to 100% of all Net Proceeds received therefrom on or prior to the date which is
five (5) Business Days after the receipt of such Net Proceeds.  (B) If the Borrower incurs or issues any
Credit Agreement Refinancing Indebtedness (other than solely by means of extending or renewing then
existing Credit Agreement Refinancing Indebtedness of the type described in
clause (a) or (b) of the definition thereof without resulting in any
Net Proceeds), the Borrower shall prepay an aggregate principal amount
of Loans in an amount equal to 100% of the Net Proceeds of such Credit
Agreement Refinancing Indebtedness on the date such Credit Agreement
Refinancing Indebtedness is incurred or issued; provided,
that each prepayment of Loans required by this clause (B) shall be applied
first to the Class or Classes of Loans with the earliest


 


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Maturity Date until all
such Loans of such Class or Classes have been repaid in full and then to
the Class or Classes of Loans with the next earliest Maturity Date and so
on until 100% of the Net Proceeds from such Credit Agreement Refinancing
Indebtedness has been applied to the Loans as required by this clause (B).”.


 


10.                                 Section 2.05 of the Credit Agreement
is hereby further amended by (i) inserting the text “Appropriate”
immediately prior to the text “Lenders” appearing in clause (b)(iii) of
said Section and (ii) deleting the last sentence appearing in clause
(b)(iv) of said Section and inserting the following sentence in lieu
thereof:


 


“The
Administrative Agent will promptly notify each Appropriate Lender of the
contents of the Borrower’s prepayment notice and of such Appropriate Lender’s Pro
Rata Share of the prepayment.”.


 


11.                                 Section 2.06
of the Credit Agreement is hereby amended by (i) inserting the text “Original”
immediately before the text “Commitment” appearing in said Section and (ii) deleting
the text “Section 2.01” in said Section and inserting the text “Section 2.01(a)”
in lieu thereof.


 


12.                                 Article II
of the Credit Agreement is hereby amended by inserting the following new Section 2.15
immediately following Section 2.14 of said Article:


 


“SECTION 2.15. Refinancing Amendments.  At any time after the Third Amendment
Effective Date, the Borrower may obtain from any Lender or any Additional
Lender Credit Agreement Refinancing Indebtedness in respect of all or any
portion of the Loans then outstanding under this Agreement (which for this
purpose will be deemed to include any then outstanding Other Term Loans), in
the form of Other Term Loans or Other Term Commitments, in each case pursuant
to a Refinancing Amendment; provided that
such Credit Agreement Refinancing Indebtedness (i) will rank pari passu in right of payment and of security with the
other Loans and Commitments hereunder, (ii) have such pricing and optional
prepayment terms as may be agreed by the Borrower and the Lenders thereof, (iii) except
as otherwise provided in Section 2.05(b)(ii)(B) or as may be agreed
to by the Lenders and Additional Lenders providing such Credit Agreement
Refinancing Indebtedness in the respective Refinancing Amendment (but solely as
it relates to such Credit Agreement Refinancing Indebtedness waiving their pro
rata share of any applicable prepayment or repayment), each Class of
Other Term Loans shall be prepaid and repaid (or offered to be repaid in the
case of Section 2.05(c)) on a pro  rata basis with all
voluntary prepayments and mandatory prepayments (other than amortization
payments) of the other Classes of Loans and (iv) otherwise be treated
hereunder no more favorably, including with respect to covenants and events of
default, than the Refinanced Debt; provided  further that the terms and conditions applicable to such
Credit Agreement Refinancing Indebtedness may provide for any additional or
different financial or other covenants or other provisions that are agreed
between the Borrower and the Lenders thereof and applicable only during periods
after the Latest Maturity Date that is in effect on the date such Credit
Agreement Refinancing Indebtedness is issued, incurred or obtained.  The effectiveness of


 


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any Refinancing Amendment shall be subject to
the satisfaction on the date thereof of each of the conditions set forth in
Sections 4.01 (i), (j) and (k) and, to the extent reasonably
requested by the Administrative Agent, receipt by the Administrative Agent of (i) legal
opinions, board resolutions and officers’ certificates consistent with those
delivered on the Closing Date other than changes to such legal opinion
resulting from a change in law, change in fact or change to counsel’s form of
opinion reasonably satisfactory to the Administrative Agent and (ii) reaffirmation
agreements reasonably satisfactory to the Administrative Agent.  Each tranche of Credit Agreement Refinancing
Indebtedness incurred under this Section 2.15 shall be in an aggregate
principal amount that is not less than $50,000,000.  The Administrative Agent shall promptly
notify each Lender as to the effectiveness of each Refinancing Amendment.  Each of the parties hereto hereby agrees
that, upon the effectiveness of any Refinancing Amendment, this Agreement shall
be deemed amended to the extent (but only to the extent) necessary to (i) reflect
the existence and terms of the Credit Agreement Refinancing Indebtedness
incurred pursuant thereto (including any amendments necessary to treat the
Loans and Commitments subject thereto as Other Term Loans and/or Other Term
Commitments), (ii) provide certain class protection to the Lenders and
Additional Lenders providing such Credit Agreement Refinancing Indebtedness
with respect to voluntary prepayments and mandatory prepayments and (iii) make
such other changes to this Agreement and the other Loan Documents consistent
with the provisions and intent of the second paragraph of Section 10.01.  Any Refinancing Amendment may, without the
consent of any other Lenders, effect such amendments to this Agreement and the
other Loan Documents as may be necessary or appropriate, in the reasonable
opinion of the Administrative Agent and the Borrower, to effect the provisions
of this Section, and the Required Lenders hereby expressly authorize the
Administrative Agent to enter into any such Refinancing Amendment.”.


 


13.                                 Section 3.07
of the Credit Agreement is hereby amended by inserting the text “or all the
Lenders with respect to a certain Class of Loans” immediately following
the text “Section 10.01” appearing in clause (c) of said Section.


 


14.                                 Section 7.03
of the Credit Agreement is hereby amended by inserting the text “(including any
Indebtedness incurred pursuant to Section 2.15)” immediately after the
text “Restricted Subsidiary” appearing at the end of clause (b)(i) in said
Section.


 


15.                                 Section 7.03
of the Credit Agreement is hereby further amended by (i) deleting the text
“and” appearing at the end of clause (b)(xx) in said Section, (ii) replacing
the period (“.”) at the end of clause (b)(xxi) in said Section with a semi-colon
(“;”) and (iii) inserting the following new subclauses (xxii) and (xxiii)
at the end of clause (b) of said Section:


 


“(xxii) 
Permitted First Priority Refinancing Debt and any Permitted Refinancing
thereof; and


 


(xxiii) Permitted Unsecured Refinancing Debt and any Permitted
Refinancing thereof.”.


 


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16.                                 Section 7.12
of the Credit Agreement is hereby amended and restated as follows:


 


“SECTION 7.12.  Use of
Proceeds.  The Borrower shall not,
and shall not permit any of its Restricted Subsidiaries to, use the proceeds of
any Borrowing, whether directly or indirectly, in a manner inconsistent with
the uses set forth in the preliminary statements to this Agreement.  Notwithstanding the foregoing, (a) proceeds
of the Replacement Loans will not be used for any purpose other than the
repayment of principal of the outstanding Refinanced Loans on the Second
Amendment Effective Date and (b) proceeds of any Other Term Loans will not
be used for any purpose other than the repayment of principal and accrued and
unpaid interest and premium on Loans outstanding on the date of incurrence of
such Other Term Loans and payment of other reasonable amounts incurred and fees
and expenses reasonably incurred, in connection with such Other Term Loans.”.


 


17.                                 Section 8.01
of the Credit Agreement is hereby amended by replacing the text “and the
Intercreditor Agreement” appearing in clause (k) of said Section with
the text “, the Intercreditor Agreement and (if then in effect) the Additional
First Lien Intercreditor Agreement”.


 


18.                                 Section 9.01
of the Credit Agreement is hereby amended by replacing the text “the
Intercreditor Agreement” appearing in clause (b) of said Section with
the text “the Intercreditor Agreement and (if then in effect) the Additional
First Lien Intercreditor Agreement”.


 


19.                                 Section 9.11
of the Credit Agreement is hereby amended by replacing the text “the
Intercreditor Agreement” appearing in the introductory clause of said Section with
the text “the Intercreditor Agreement and (if then in effect) the Additional
First Lien Intercreditor Agreement”.


 


20.                                 Section 10.07
of the Credit Agreement is hereby amended by (i) inserting the text “of
any Class” immediately after the text “assigning Lender’s Commitment or Loans”
appearing in clause (b)(ii)(A) of said Section and (ii) inserting
the following sentence immediately after clause (b)(ii) in said Section:


 


“This paragraph (b) shall not prohibit any lender from assigning
all or a portion of its rights and obligations among separate Classes of Loans
or Commitments on a non-pro rata basis.”.


 


21.                                 Section 10.22
of the Credit Agreement is hereby amended by deleting clauses (ii) and (iii) appearing
in said Section in their entirety and inserting the following new clauses (ii) and
(iii) in lieu thereof:


 


“(ii) EACH LENDER AUTHORIZES AND
INSTRUCTS THE COLLATERAL AGENT AND THE ADMINISTRATIVE AGENT TO ENTER INTO THE
INTERCREDITOR AGREEMENT AND THE ADDITIONAL FIRST LIEN INTERCREDITOR AGREEMENT
ON BEHALF OF SUCH LENDER, AND TO TAKE ALL ACTIONS (AND EXECUTE ALL


 


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DOCUMENTS) REQUIRED (OR DEEMED ADVISABLE) BY IT IN ACCORDANCE WITH THE
TERMS OF THE INTERCREDITOR AGREEMENT OR THE ADDITIONAL FIRST LIEN INTERCREDITOR
AGREEMENT, AS THE CASE MAY BE.


 


(iii)                               THE PROVISIONS OF THIS SECTION 10.22
ARE NOT INTENDED TO SUMMARIZE ALL RELEVANT PROVISIONS OF (A) THE
INTERCREDITOR AGREEMENT, THE FORM OF WHICH IS ATTACHED AS AN EXHIBIT TO
THIS AGREEMENT OR (B) THE ADDITIONAL FIRST LIEN INTERCREDITOR AGREEMENT,
WHICH WILL BE IN THE FORM APPROVED BY THE ADMINISTRATIVE AGENT AS
PERMITTED BY THIS AGREEMENT.  REFERENCE
MUST BE MADE TO THE INTERCREDITOR AGREEMENT OR THE ADDITIONAL FIRST LIEN
INTERCREDITOR AGREEMENT ITSELF TO UNDERSTAND ALL TERMS AND CONDITIONS THEREOF.  EACH LENDER IS RESPONSIBLE FOR MAKING ITS OWN
ANALYSIS AND REVIEW OF EACH OF THE INTERCREDITOR AGREEMENT AND THE ADDITIONAL
FIRST LIEN INTERCREDITOR AGREEMENT AND THE TERMS AND PROVISIONS THEREOF, AND NO
AGENT (AND NONE OF ITS AFFILIATES) MAKES ANY REPRESENTATION TO ANY LENDER AS TO
THE SUFFICIENCY OR ADVISABILITY OF THE PROVISIONS CONTAINED IN THE
INTERCREDITOR AGREEMENT OR THE ADDITIONAL FIRST LIEN INTERCREDITOR AGREEMENT.”.


 


B.                                     Miscellaneous
Provisions


 


1.                                       In order to
induce the Lenders to enter into this Third Amendment, the Borrower hereby
represents and warrants to each of the Lenders that, as of the Third Amendment
Effective Date (as defined below):


 


(i)                                     This Third
Amendment has been duly authorized, executed and delivered by it and this Third
Amendment and the Credit Agreement (as modified hereby) constitute its legal,
valid and binding obligation, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors’ rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in
equity or at law.


 


(ii)                                  The representations and
warranties set forth in Article V of the Credit Agreement and in the other
Loan Documents are, both immediately before and after giving effect to this
Third Amendment, true and correct in all material respects both on and as of
the Third Amendment Effective Date with the same effect as though made on and
as of the Third Amendment Effective Date unless such representations and
warranties relate to a specific earlier date, in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date.


 


(iii) there exists no Default or Event
of Default on the Third Amendment Effective Date, both immediately before and
after giving effect to this Third Amendment.


 


11

















 


2.                                       (a) Except
as expressly set forth herein, this Third Amendment shall not by implication or
otherwise limit, impair, constitute a waiver of or otherwise affect the rights
and remedies of the Lenders or the Agents under the Credit Agreement or any
other Loan Document, and shall not alter, modify, amend or in any way affect
any of the terms, conditions, obligations, covenants or agreements contained in
the Credit Agreement or any other provision of the Credit Agreement or of any
other Loan Document, all of which are ratified and affirmed in all respects and
shall continue in full force and effect. 
Nothing herein shall be deemed to entitle the Borrower to receive a
consent to, or a waiver, amendment, modification or other change of, any of the
terms, conditions, obligations, covenants or agreements contained in the Credit
Agreement or any other Loan Document in similar or different circumstances.


 


(b)                                 On and after
the Third Amendment Effective Date, each reference in the Credit Agreement to “this
Agreement”, “hereunder”, “hereof”, “herein”, or words of like import, and each
reference to the Credit Agreement in any other Loan Document shall be deemed a
reference to the Credit Agreement as modified hereby.  This Third Amendment shall constitute a “Loan
Document” for all purposes of the Credit Agreement and the other Loan
Documents.


 


3.                                       This Third
Amendment may be executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which counterparts when
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. 
Delivery by facsimile or other electronic imaging means of an executed
counterpart of a signature page to this Third Amendment shall be effective
as delivery of an original executed counterpart of this Third Amendment. A
complete set of counterparts executed by all the parties hereto shall be lodged
with the Borrower and the Administrative Agent.


 


4.                                       THIS
THIRD AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW
YORK.


 


5.                                       (a) This
Third Amendment shall become effective on the date (the “Third Amendment Effective Date”) when:


 


(i)                                     the Borrower,
the Administrative Agent and the Required Lenders shall have signed a
counterpart hereof (whether the same or different counterparts) and the
Borrower and Required Lenders shall have delivered (including by way of
facsimile transmission) their signed counterparts to the Administrative Agent;


 


(ii)                                  the
Administrative Agent shall have received payment from the Borrower, for the
account of each Lender that executes and delivers a counterpart signature page to
this Third Amendment prior to 12:00 noon, New York City time, on August 17,
2009, an amendment fee (an “Amendment Fee”) in an aggregate amount equal
to 0.025% of the aggregate principal amount of the Loans of such Lender.  The Amendment Fee shall be payable in
immediately available funds and, once paid, such fee or any part thereof shall
not be refundable; and


 


(iii)                               the Borrower
shall have paid all fees and other amounts due and payable pursuant to this
Third Amendment, including, to the extent invoiced, reimbursement or payment of
reasonable out-of-pocket expenses in connection with this Third Amendment


 


12

















 


and
any other reasonable out-of-pocket expenses of the Administrative Agent
required to be paid or reimbursed pursuant to the Credit Agreement, including
the reasonable fees, charges and disbursements of counsel for the
Administrative Agent.


 


(b)                                 The Administrative
Agent shall notify the Borrower and the Lenders of the Third Amendment
Effective Date and such notice shall be conclusive and binding.


 


6.                                       By executing
and delivering a copy hereof, each Loan Party hereby agrees that all Loans
shall be fully guaranteed pursuant to the Guaranty to which it is party in
accordance with the terms and provisions thereof and shall be fully secured
pursuant to the applicable Collateral Documents.


 


7.                                       From and after
the Third Amendment Effective Date, all references in the Credit Agreement and
in the other Loan Documents to the Credit Agreement shall be deemed to be
references to the Credit Agreement as modified hereby.


 


*     *     *


 


13

















 


IN WITNESS WHEREOF, the undersigned have
caused this Third Amendment to be duly executed and delivered as of the date
first above written.


 


	
   

  	
  MICHAELS
  STORES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Elaine D. Crowley

  
	
   

  	
   

  	
  Name:

  	
  Elaine
  D. Crowley

  
	
   

  	
   

  	
  Title:

  	
  Executive
  Vice President — Chief

  
	
   

  	
   

  	
   

  	
  Financial
  Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DEUTSCHE BANK AG NEW YORK BRANCH, Individually and
  as Administrative Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Enrique Landaeta

  
	
   

  	
   

  	
  Name:

  	
  Enrique
  Landaeta

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Omayra Laucella

  
	
   

  	
   

  	
  Name:

  	
  Omayra
  Laucella

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  



 

















 


Each of the undersigned Guarantors
acknowledges and agrees to the terms of the Third Amendment.


 


	
   

  	
  AARON BROTHERS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Elaine D. Crowley

  
	
   

  	
   

  	
  Name:

  	
  Elaine D. Crowley

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President - CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MICHAELS FINANCE COMPANY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Elaine D. Crowley

  
	
   

  	
   

  	
  Name:

  	
  Elaine D. Crowley

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President - CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MICHAELS STORES PROCUREMENT
  COMPANY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Elaine D. Crowley

  
	
   

  	
   

  	
  Name:

  	
  Elaine D. Crowley

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President
  - CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MICHAELS STORES CARD SERVICES,
  LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Elaine D. Crowley

  
	
   

  	
   

  	
  Name:

  	
  Elaine D. Crowley

  
	
   

  	
   

  	
  Title:

  	
  President - CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARTISTREE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Elaine D. Crowley

  
	
   

  	
   

  	
  Name:

  	
  Elaine D. Crowley

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President - CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MICHAELS OF CANADA, ULC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Elaine D. Crowley

  
	
   

  	
   

  	
  Name:

  	
  Elaine D. Crowley

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice
  President - CFO

  



 

















 


	
   

  	
  SIGNATURE
  PAGE TO THE THIRD AMENDMENT, DATED AS OF THE DATE FIRST WRITTEN ABOVE, TO THE
  CREDIT AGREEMENT DATED AS OF OCTOBER 31, 2006, AMONG MICHAELS STORES, INC.,
  DEUTSCHE BANK AG NEW YORK BRANCH, AS ADMINISTRATIVE AGENT, JPMORGAN CHASE
  BANK, N.A., AS SYNDICATION AGENT, AND BANK OF AMERICA, N.A. AND CREDIT
  SUISSE, AS CO-DOCUMENTATION AGENTS

  
	
   

  	
   

  
	
   

  	
  NAME
  OF INSTITUTION:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title: