Document:

Exhibit 4.5

 

 

 

REGISTRATION RIGHTS AGREEMENT

 

Dated as of October 31, 2006

 

Among

 

MICHAELS STORES, INC.,

 

THE GUARANTORS LISTED ON SCHEDULE I HERETO

 

and

 

DEUTSCHE BANK SECURITIES INC.,

J.P. MORGAN SECURITIES INC.,

BANC OF AMERICA SECURITIES LLC 

 

and

 

CREDIT SUISSE SECURITIES (USA) LLC

 

 

11 3/8% Senior Subordinated Notes due 2016

 

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Exchange
  Offer

  	
  4

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Shelf
  Registration

  	
  8

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Additional
  Interest

  	
  9

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Registration
  Procedures

  	
  10

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Registration
  Expenses

  	
  17

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Indemnification
  and Contribution.

  	
  17

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Rules 144
  and 144A

  	
  21

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Underwritten
  Registrations

  	
  22

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Miscellaneous

  	
  22

  

 

i

 

REGISTRATION RIGHTS AGREEMENT

 

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

 

This Agreement is entered into in connection with
the Purchase Agreement, dated as of October 25, 2006 (the “Purchase
Agreement”), by and among the Issuer and the Initial Purchasers, which
provides for, among other things, the sale by the Issuer to the Initial
Purchasers of $750,000,000 aggregate principal amount of the Issuer’s 10%
Senior Notes due 2014 (the “Senior Notes”) and $400,000,000 aggregate
principal amount of the Issuer’s 11 3/8% Senior Subordinated Notes due 2016
(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 Wells Fargo Bank, National Association, as trustee (the “Trustee”).  Pursuant to the Purchase Agreement and the
Indenture, the Guarantors are required to guarantee (collectively, the “Guarantees”)
the Issuer’s obligations under the Notes and the Indenture.  References to the “Securities” shall
mean, collectively, the Notes and the Guarantees. In order to induce 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.

 

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 31, 2006, the date of
original issuance of the Notes.

 

Issuer:  See the introductory
paragraphs hereto.

 

NASD:  See Section 5(r) hereof.

 

New Guarantees:  See
Section 2(a) hereof.

 

Notes:  See the introductory
paragraphs hereto.

 

Participant:  See Section 7(a) hereof.

 

2

 

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

 

Person:  An individual, trustee,
corporation, partnership, limited liability company, joint stock company,
trust, unincorporated association, union, business association, firm or other
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 under the Securities Act and any term sheet filed
pursuant to Rule 434 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, (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 or (iv) such Security, Exchange Security or
Private Exchange Note (and the related Guarantees), as the case may be, may be
resold without restriction pursuant to Rule 144(k) (as amended or
replaced) under the Securities Act.

 

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.

 

3

 

Rule 405:  Rule 405 under the
Securities Act.

 

Rule 415:  Rule 415 under the
Securities Act.

 

Rule 424:  Rule 424 under the
Securities Act.

 

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

 

Securities:  See the introductory
paragraphs hereto.

 

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

 

Senior Notes:  See
the introductory paragraphs hereto.

 

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.

 

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

 

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

 

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

 

Trustee:  The trustee under the
Indenture and 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 is 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

 

4

 

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 subordinated 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 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.

 

5

 

No securities other than the Exchange Securities,
the Senior Notes and the Subordinated Discount Notes (and the related
guarantees) 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 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;

 

6

 

(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.

 

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 deem 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

 

7

 

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.

 

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 and the
Guarantees, the Senior Notes and the related guarantees and the Subordinated
Discount Notes and the related guarantees to be included in the Initial Shelf
Registration or any Subsequent Shelf Registration (as defined below).

 

The Issuer shall use its
respective 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 (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 or (iii) the date upon which all Registrable
Securities become eligible for resale without regard to volume, manner of sale
or other restrictions contained in Rule 144(k) (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

 

8

 

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.

 

(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) during a Shelf Suspension Period permitted by
Section 3(a) hereof.

 

9

 

(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 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

 

10

 

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 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.

 

11

 

(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 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

 

12

 

held by Participating
Broker-Dealers or the Registrable Securities covered by the applicable
Registration Statement; provided, however, that the Issuer shall
not be required to (A) qualify generally to do business in any
jurisdiction where it is 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 paragraph 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.

 

13

 

(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 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

 

14

 

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 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 4.02 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

 

15

 

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.

 

(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 National Association of Securities Dealers, Inc. (the “NASD”).

 

(s)           Use its respective 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

 

16

 

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.

 

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 the NASD 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

 

17

 

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:

 

(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

 

18

 

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
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

 

19

 

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 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

 

20

 

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 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.             Rules 144 and 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

 

21

 

holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions provided
by Rule 144(k) under the Securities Act and Rule 144A unless the
Issuer is then subject to Section 13 or 15(d) of the Exchange Act and reports
filed thereunder satisfy the information requirements of Rule 144A then in
effect.

 

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 other issued and outstanding securities
under any such agreements.  The Issuer
will not enter into any agreement (other than the Registration Rights Agreements
dated as of the date hereof in respect of the Senior Notes and the Subordinated
Discount Notes) 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

 

22

 

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 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

Facsimile No.:  (646) 324-7554

Attention:  Corporate Finance Department

 

with a copy to:

Cahill Gordon & Reindel LLP

80 Pine Street

New York, New York 10005

Facsimile No.:  (212) 269-5420 

Attention:  William B. Gannett, Esq.

 

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

 

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

 

Michaels
Stores, Inc.

8000 Bent Branch Drive

Irving, Texas
75063

Facsimile
No.: (972) 409-1965

Attention:  General Counsel 

 

with
a copy to:

Ropes & Gray LLP

One
International Place

 

23

 

Boston
MA  02110

Facsimile No.:  (617) 951-7050

Attention:  Byung W. Choi, Esq.

 

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

 

24

 

be
counted in determining whether such consent or approval was given by the
Holders of such required percentage.

 

(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.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Lisa K. Klinger

  	
   

  
	
   

  	
   

  	
  Name:
  Lisa K. Klinger

  
	
   

  	
   

  	
  Title:
  Vice President – Treasurer

  
	
   

  	
   

  	
            and Investor Relations

  
	
   

  	
   

  	
   

  
	
   

  	
  AARON BROTHERS, INC.

  
	
   

  	
  MICHAELS FINANCE COMPANY, INC.

  
	
   

  	
  MICHAELS STORES PROCUREMENT

  
	
   

  	
   

  	
  COMPANY, INC.

  
	
   

  	
  MICHAELS OF CANADA, ULC

  
	
   

  	
  MICHAELS STORES CARD SERVICES, LLC

  
	
   

  	
  ARTISTREE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Lisa K. Klinger

  	
   

  
	
   

  	
   

  	
  Name:  Lisa K. Klinger

  
	
   

  	
   

  	
  Title:   Vice President and Treasurer

  

 

Signature Page to Registration Rights Agreement

 

 

	
  The foregoing Agreement is
  hereby

  confirmed and accepted as of the

  date first above written.

  
	
   

  
	
  DEUTSCHE BANK SECURITIES INC.

  
	
  J.P. MORGAN SECURITIES INC.

  
	
  BANC OF AMERICA SECURITIES LLC

  
	
  CREDIT SUISSE SECURITIES
  (USA) LLC

  
	
   

  
	
   

  
	
  By: Deutsche Bank
  Securities Inc.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Edwin Roland

  	
   

  
	
   

  	
  Name: Edwin Roland

  	
   

  
	
   

  	
  Title: Managing Director

  	
   

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Stephen R. Lapidus

  	
   

  
	
   

  	
  Name: Stephen R. Lapidus

  	
   

  
	
   

  	
  Title: Director

  	
   

  
	
   

  
	
   

  
	
  For
  itself and the other several Initial Purchasers.

  

 

Signature Page to Registration Rights Agreement

 

 

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.Exhibit 4.6

 

 

 

REGISTRATION RIGHTS AGREEMENT

 

Dated as of October 31, 2006

 

Among

 

MICHAELS STORES, INC.,

 

THE GUARANTORS LISTED ON SCHEDULE I HERETO

 

and

 

DEUTSCHE BANK SECURITIES INC.,

J.P. MORGAN SECURITIES INC.,

BANC OF AMERICA SECURITIES LLC

 

and

 

CREDIT SUISSE SECURITIES (USA) LLC

 

 

13% Subordinated Discount Notes due 2016

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Exchange Offer

  	
  5

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Shelf Registration

  	
  8

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Additional Interest

  	
  9

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Registration Procedures

  	
  10

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Registration Expenses

  	
  17

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Indemnification and Contribution

  	
  18

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Rules 144 and 144A

  	
  22

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Underwritten Registrations

  	
  22

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Miscellaneous

  	
  22

  

 

i

 

REGISTRATION RIGHTS AGREEMENT

 

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

 

This
Agreement is entered into in connection with the Purchase Agreement, dated as
of October 27, 2006 (the “Purchase Agreement”), by and among the Issuer
and the Initial Purchasers, which provides for, among other things, the sale by
the Issuer to the Initial Purchasers of $469,449,000 aggregate principal amount
at maturity of the Issuer’s 13% Subordinated Discount Notes due 2016 (the “Notes”).
The Notes are issued under an indenture, dated as of the date hereof (as
amended or supplemented from time to time, the “Indenture”), among the
Issuer, the Guarantors and Wells Fargo Bank, National Association, as trustee
(the “Trustee”). Pursuant to the Purchase Agreement and the Indenture,
the Guarantors are required to guarantee (collectively, the “Guarantees”)
the Issuer’s obligations under the Notes and the Indenture. References to the “Securities”
shall mean, collectively, the Notes and the Guarantees. In order to induce 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:

 

Accreted Value:
As defined in the Indenture.

 

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.

 

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

 

Guarantees:  See the introductory paragraphs hereto.

 

Guarantors:  See the introductory paragraphs hereto.

 

Holder:  Any holder of a Registrable Security 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 31, 2006, the date of original
issuance of the Notes.

 

Issuer:  See the introductory paragraphs hereto.

 

NASD:  See Section 5(r) hereof.

 

New Guarantees:  See Section 2(a) hereof.

 

Notes:  See the introductory paragraphs hereto.

 

2

 

Participant:  See Section 7(a) hereof.

 

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

 

Person:  An individual, trustee, corporation,
partnership, limited liability company, joint stock company, trust,
unincorporated association, union, business association, firm or other 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 under the Securities Act and any term sheet filed pursuant
to Rule 434 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,
(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 or (iv) such Security, Exchange Security or Private
Exchange Note (and the related Guarantees), as the case may be, may be resold
without restriction pursuant to Rule 144(k) (as amended or replaced) under
the Securities Act.

 

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.

 

3

 

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

 

Rule 405:  Rule 405 under the Securities Act.

 

Rule 415:  Rule 415 under the Securities Act.

 

Rule 424:  Rule 424 under the Securities Act.

 

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

 

Securities:  See the introductory paragraphs hereto.

 

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

 

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

 

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

 

Shelf Notice:  See Section 2(c) hereof.

 

Shelf Registration:  See Section 3(b) hereof.

 

Shelf Registration Statement:  Any Registration 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 is 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.

 

4

 

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 at maturity of debt securities of the Issuer (the “Exchange
Notes”), guaranteed, to the extent applicable, on an unsecured subordinated
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) if the exchange takes place
after the Full Accretion Date, interest thereon shall accrue (A) from the later
of (x) the last date on which interest was paid on such Notes or (y) if such
Notes are surrendered for exchange on a date in a period that 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

 

5

 

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, Senior Subordinated Notes (and
the related guarantees) and Senior Notes (and the related guarantees) 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 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 at maturity 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;

 

6

 

(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.

 

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 at maturity 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 at maturity
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 deem 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

 

7

 

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.

 

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 and the Guarantees, the Senior Subordinated Notes and
the related guarantees and the Senior Notes and the related guarantees to be
included in the Initial Shelf Registration or any Subsequent Shelf Registration
(as defined below).

 

The
Issuer shall use its respective 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 (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 or (iii) the date upon which
all Registrable Securities  become
eligible for resale without regard to volume, manner of sale or other
restrictions contained in Rule 144(k) (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,

 

8

 

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.

 

(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 at
maturity 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 average Accreted Value of the Registrable
Securities during the first 90 days thereafter at a rate of 0.25% per annum
(which rate will be increased by an additional 0.25% per annum of the average
Accreted Value during such 90 day period 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 of the
average Accreted Value for any such 90 day period but that Additional
Interest shall always be calculated on the average Accreted Value for a 90 day
period) (such Additional Interest to be calculated by the Issuer) commencing

 

9

 

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) 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 this Section 4 shall be (i) if such Additional
Interest accrued on or prior to November 1, 2011 (the “Full Accretion Date”),
added to the Accreted Value of each applicable Security and (ii) if after the
Full Accretion Date, paid in cash semiannually on each May 1 and November 1 (to
the holders of record on the April 15 and October 15, as applicable,
immediately preceding such dates), in each case, payable by the Issuer to the
Trustee, on behalf of the holders of the relevant Securities, commencing with
the first such interest payment date occurring after any such Additional
Interest commences to accrue. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by the
Accreted Value of the Registrable Securities, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest were
applicable during such period (determined on the basis of a 360 day year
comprised of twelve 30 day 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,

 

10

 

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 at maturity 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 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

 

11

 

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 at maturity 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 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

 

12

 

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 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

 

13

 

Securities during the
Applicable Period, upon the occurrence of any event contemplated by
paragraph 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 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 at maturity
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.

 

14

 

(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
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.

 

15

 

(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 4.02 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.

 

(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 National Association
of Securities Dealers, Inc. (the “NASD”).

 

(s)           Use its respective
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

 

16

 

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.

 

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 the NASD 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 at maturity 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 at maturity of Registrable Securities
covered by such Shelf Registration (which counsel shall be reasonably
satisfactory to the

 

17

 

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:

 

(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

 

18

 

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
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

 

19

 

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 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.

 

20

 

(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 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 (other than original issue discount (assuming an accreted value on
October 31, 2006 of $532.54 per $1,000 principal amount at maturity), which
shall not constitute a discount for such purposes) 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 (other than original issue discount
(assuming an accreted value on October 31, 2006 of $532.54 per $1,000 principal
amount at maturity), which shall not constitute a discount for such purposes),
commissions and other

 

21

 

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.             Rules 144 and
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(k) under the Securities
Act and Rule 144A unless the Issuer is then subject to Section 13 or 15(d)
of the Exchange Act and reports filed thereunder satisfy the information
requirements of Rule 144A then in effect.

 

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 at
maturity 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 at maturity 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

 

22

 

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 other
issued and outstanding securities under any such agreements. The Issuer will
not enter into any agreement (other than the Registration Rights Agreement
dated as of the date hereof in respect of the Senior Subordinated Notes and the
Registration Rights Agreement dated as of the date hereof in respect of the
Senior Notes) 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 at maturity 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
at maturity 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 other Holders of Registrable Securities may
be given by Holders of at least a majority in aggregate principal amount at
maturity 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

  
	
   

  	
  Facsimile No.: (646) 324-7554

  
	
   

  	
  Attention: Corporate Finance Department

  

 

23

 

	
   

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cahill Gordon & Reindel LLP

  
	
   

  	
   

  	
  80 Pine Street

  
	
   

  	
   

  	
  New York, New York 10005

  
	
   

  	
   

  	
  Facsimile No.: (212) 269-5420

  
	
   

  	
   

  	
  Attention: William B. Gannett, Esq.

  
	
   

  	
   

  	
   

  
	
   

  	
  (ii)

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

  
	
   

  	
   

  	
   

  
	
   

  	
  (iii)

  	
  if to the Issuer, at the address as follows:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Michaels Stores, Inc.

  
	
   

  	
   

  	
  8000 Bent Branch Drive

  
	
   

  	
   

  	
  Irving, Texas 75063

  
	
   

  	
   

  	
  Facsimile No.: (972) 409-1965

  
	
   

  	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Ropes & Gray LLP

  
	
   

  	
   

  	
  One International Place

  
	
   

  	
   

  	
  Boston MA 02110

  
	
   

  	
   

  	
  Facsimile No.: (617) 951-7050

  
	
   

  	
   

  	
  Attention: Byung W. Choi, Esq.

  

 

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.

 

24

 

(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.

 

(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.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lisa K. Klinger

  	
   

  
	
   

  	
   

  	
  Name:
  Lisa K. Klinger

  
	
   

  	
   

  	
  Title:
  Vice President – Treasurer
          and Investor Relations

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AARON
  BROTHERS, INC.

  
	
   

  	
  MICHAELS
  FINANCE COMPANY, INC.

  
	
   

  	
  MICHAELS
  STORES PROCUREMENT

  
	
   

  	
  COMPANY, INC.

  
	
   

  	
  MICHAELS
  OF CANADA, ULC

  
	
   

  	
  MICHAELS
  STORES CARD SERVICES, LLC

  
	
   

  	
  ARTISTREE,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lisa K. Klinger

  	
   

  
	
   

  	
   

  	
  Name:
  Lisa K. Klinger

  
	
   

  	
   

  	
  Title:
  Vice President and Treasurer

  
					

 

Signature Page to Registration Rights Agreement

 

 

	
  The
  foregoing Agreement is hereby

  
	
  confirmed
  and accepted as of the

  
	
  date
  first above written.

  
	
   

  
	
  DEUTSCHE BANK SECURITIES INC.

  
	
  J.P. MORGAN SECURITIES INC.

  
	
  BANC OF AMERICA SECURITIES LLC

  
	
  CREDIT
  SUISSE SECURITIES (USA) LLC

  
	
   

  
	
   

  
	
  By:
   Deutsche Bank Securities Inc.

  
	
   

  
	
   

  
	
  By:

  	
  /s/
  Edwin Roland

  	
   

  
	
   

  	
  Name:
  Edwin Roland

  
	
   

  	
  Title:
  Managing Director

  
	
   

  
	
   

  
	
  By:

  	
  /s/
  Stephen R. Lapidus

  	
   

  
	
   

  	
  Name:
  Stephen R. Lapidus

  
	
   

  	
  Title:
  Director

  
	
   

  
	
   

  
	
  For
  itself and the other several Initial Purchasers.

  

 

Signature Page to Registration Rights
Agreement

 

 

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.

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