Document:

Exhibit 10.2

 

FIRST AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

 

This First Amendment to Second Amended and Restated Credit Agreement (this “Amendment”) is made as of June 6, 2014, by and among:

 

MICHAELS STORES, INC., a Delaware corporation (the “Lead Borrower”);

 

the Persons named on Schedule I hereto (together with the Lead Borrower, individually, a “Borrower”, and collectively, the “Borrowers”);

 

the Persons named on Schedule II hereto (individually, a “Facility Guarantor”, and collectively, the “Facility Guarantors”, and together with the Borrowers, individually, a “Loan Party”, and collectively, the “Loan Parties”);

 

the LENDERS party hereto; and

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent and Collateral Agent;

 

in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

 

W I T N E S S E T H:

 

WHEREAS, reference is made to that certain Second Amended and Restated Credit Agreement dated as of September 17, 2012 (as amended, restated, supplemented (including pursuant to the Joinder Agreement referred to below) or otherwise modified and in effect from time to time, the “Credit Agreement”), by, among others, certain of the Loan Parties, the Lenders party thereto from time to time, and Wells Fargo Bank, National Association, as Administrative Agent and Collateral Agent, to which Michaels Funding, Inc. joined as a Facility Guarantor pursuant to that certain Joinder Agreement dated as of August 21, 2013 by and between the Loan Parties and the Agents;

 

WHEREAS, the Loan Parties have advised the Agents and the Lenders that they desire to incur (i) incremental term loans under the Term Loan Facility in an aggregate principal amount of $850,000,000 (the “New Term Loans”), and (ii) additional Senior Subordinated Notes in an aggregate principal amount of $250,000,000, the proceeds of which New Term Loans and Senior Subordinated Notes shall be used to pay in full all remaining Indebtedness and related obligations under the Senior Notes (such transactions, collectively, the “Indebtedness Refinancing”), and any excess proceeds not required for the Indebtedness Refinancing shall be used for any purpose permitted by the Credit Agreement;

 

WHEREAS, absent the consent of the Required Lenders, the Indebtedness Refinancing is not permitted under the terms of the Loan Documents;

 

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WHEREAS, the Loan Parties have requested that the Required Lenders agree to amend certain provisions of the Credit Agreement to permit the Indebtedness Refinancing and to make certain other changes as set forth herein; and

 

WHEREAS, the Required Lenders have agreed to do so, in each case subject to the terms and conditions hereof.

 

NOW, THEREFORE, the parties hereto hereby agree as follows:

 

1.                                      Defined Terms.  Capitalized terms used in this Amendment shall have the respective meanings assigned to such terms in Credit Agreement unless otherwise defined herein.

 

2.                                      Amendments to Article I of Credit Agreement.  The provisions of Article I of the Credit Agreement are hereby amended as follows:

 

(a)                                 By deleting the definition of “LIBO Rate” in its entirety and substituting the following new definition in its stead:

 

“LIBO Rate” means:

 

(a)                                 for any Interest Period with respect to a LIBO Loan, the per annum rate which appears on the Reuters Screen LIBOR01 page as of 11:00 a.m., London time, on the second London Business Day preceding the first day of such Interest Period (or if such rate does not appear on the Reuters Screen LIBOR01 Page, then the rate as determined by the Administrative Agent from another recognized source or interbank quotation), for a term, and in an amount, comparable to the Interest Period and the amount of the LIBO Loan requested (whether as an initial LIBO Loan or as a continuation of a LIBO Rate Loan or as a conversion of a Prime Rate Loan to a LIBO Loan) by the Borrowers in accordance with this Agreement (and, if any such rate is below zero, the LIBO Rate shall be deemed to be zero), which determination shall be made by the Administrative Agent and shall be conclusive in the absence of manifest error.  If such rate is not available at such time for any reason, then the “LIBO Rate” for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the LIBO Loan being made, continued or converted by Wells Fargo and with a term equivalent to such Interest Period would be offered to Wells Fargo by major banks in the London interbank eurodollar market in which Wells Fargo participates at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period; and

 

(b)                                 for any interest calculation with respect to a Prime Rate Loan on any date, (i) the per annum rate which appears on the Reuters Screen LIBOR01 page London time determined two (2) Business Days prior to such date for Dollar deposits being delivered in the London interbank market for a term of one (1) 

 

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month commencing that day (or if such rate does not appear on the Reuters Screen LIBOR01 Page, then the rate as determined by the Administrative Agent from another recognized source or interbank quotation), or (ii) if the rate described in clause (i) above is not available at such time for any reason, the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the date of determination in same day funds in the approximate amount of the Prime Rate Loan being made or maintained and with a term equal to one (1) month would be offered to Wells Fargo by major banks in the London interbank eurodollar market in which Wells Fargo participates at its request at the date and time of determination.

 

b)                                     By amending the definition of “Obligations” by adding the following new proviso at the end of the first sentence thereof:

 

provided, that the Obligations shall not include any Excluded Swap Obligations.

 

(c)                                  By deleting the definition of “Senior Notes” in its entirety and substituting the following new definition in its stead:

 

“Senior Notes” means, collectively, (i) the $800,000,000 aggregate principal amount of the Lead Borrower’s 7 3/4% Senior Notes due 2018 issued on October 21, 2010 and any senior notes issued in exchange or substitution therefor pursuant to the registration rights agreement related thereto entered into by the Lead Borrower on October 21, 2010, and (ii) the $200,000,000 aggregate principal amount of the Lead Borrower’s 7 3/4% Senior Notes due 2018 issued on September 27, 2012 and any senior notes issued in exchange or substitution therefor pursuant to the registration rights agreement related thereto entered into by the Lead Borrower on September 27, 2012.

 

(d)                                 By deleting the definition of “Senior Subordinated Notes” in its entirety and substituting the following new definition in its stead:

 

“Senior Subordinated Notes” means, collectively, (i) the $260,000,000 aggregate principal amount of the Lead Borrower’s 5 7/8% Senior Subordinated Notes due 2020 issued on December 19, 2013, (ii) the $250,000,000 aggregate principal amount of the Lead Borrower’s 5 7/8% Senior Subordinated Notes due 2020 issued on or about June 16, 2014.

 

(e)                                  By deleting the definition of “Senior Subordinated Note Documents” in its entirety and substituting the following new definition in its stead:

 

“Senior Subordinated Note Documents” means the documents, instruments and other agreements now or hereafter executed and delivered in connection with the Senior Subordinated Notes, including, without limitation, the Indenture dated 

 

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as of December 19, 2013 among the Lead Borrower, the guarantors party thereto and Wells Fargo Bank, National Association, as Trustee or any supplemental indenture.

 

(f)                                   By deleting the definition of “Term Loan Agreement” in its entirety and substituting the following new definition in its stead:

 

“Term Loan Agreement” means that certain Amended and Restated Credit Agreement dated January 28, 2013 by and among the Lead Borrower, as borrower, Deutsche Bank AG New York Branch as administrative agent and as collateral agent, and the lenders party thereto from time to time (or any predecessor agreement thereto), as such Term Loan Agreement may be amended, modified, or supplemented from time to time to the extent permitted pursuant to SECTION 6.13 hereof and pursuant to the Intercreditor Agreement, and any credit agreement, indenture or similar agreement evidencing a Permitted Refinancing of the Term Loan Facility.

 

(g)                                  By deleting the definition of “Term Loan Facility” in its entirety and substituting the following new definition in its stead:

 

“Term Loan Facility” means one or more term loan facilities established pursuant to the Term Loan Agreement in a principal amount not to exceed the sum of $2,478,000,000 plus the Available Incremental Amount (as defined in the Term Loan Agreement as in effect as of the First Amendment Effective Date), as such one or more term loan facilities may be amended, modified, or supplemented from time to time to the extent permitted pursuant to SECTION 6.13 hereof and pursuant to the Intercreditor Agreement, and any one or more Permitted Refinancings of any portion thereof.

 

(h)                                 By adding the following new definition thereto in appropriate alphabetical order:

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

 

“Excluded Swap Obligation” means, with respect to any Facility Guarantor or any Borrower other than the Lead Borrower, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Facility Guarantor of, or obligations of such Borrower under, or the grant by such Facility Guarantor or such Borrower of a security interest to secure, such Swap Obligation (or any Guarantee thereof or obligations thereunder) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Facility Guarantor’s or Borrower’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guarantee of such Facility Guarantor or 

 

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obligations of such Borrower or the grant of such security interest becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee, obligations or security interest is or becomes illegal.

 

“First Amendment Effective Date” means June 6, 2014.

 

“Indebtedness Refinancing” has the meaning set forth in that certain First Amendment to Second Amended and Restated Credit Agreement dated as of the First Amendment Effective Date by and among the Agents, the Required Lenders party thereto, and the Loan Parties.

 

“Indebtedness Refinancing Date” means the date on which the Indebtedness Refinancing has been consummated.

 

“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Loan Party that has total assets exceeding $10,000,000 at the time the relevant Guarantee or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

“Swap Obligation” means, with respect to any Facility Guarantor or any Borrower other than the Lead Borrower, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.

 

3.                                      Amendments to Article VI of Credit Agreement.   The provisions of Article VI of the Credit Agreement are hereby amended as follows:

 

(a)                                 By amending Section 6.03 thereof by deleting clause (bb) therefrom in its entirety and substituting in its stead the following new clause (bb):

 

(bb)                          Extensions, renewals and replacements of any such Indebtedness described in clauses (b), (c), (d), (e), (f), (g), (m), (n), (t), (u), (v), (w), (x) and (aa) above provided that such Indebtedness constitutes a Permitted Refinancing or a Permitted Refinancing of a Permitted Refinancing.

 

(b)                                 By amending Section 6.11 thereof by deleting the word “and” from the end of clause (h) thereof, re-lettering clause (i) as clause (j), and inserting in its stead the following new clause (i):

 

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(i)                                     the Indebtedness Refinancing; and

 

4.                                      Amendment to Article IX of Credit Agreement.  The provisions of Article IX of the Credit Agreement are hereby amended by adding the following new Section 9.27 at the end thereof:

 

SECTION 9.27              Keepwell.  Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Loan Party to honor all of its obligations under the Facility Guarantee or as a Borrower other than the Lead Borrower in respect of Swap Obligations (provided, however, that each Qualified ECP Guarantor shall only be liable under this SECTION 9.27 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this SECTION 9.27, or otherwise under the Facility Guarantee or the Credit Agreement in respect of the Other Liabilities, voidable under applicable Law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of each Qualified ECP Guarantor under this Section shall remain in full force and effect until payment in full of the Obligations and termination of the Commitments. Each Qualified ECP Guarantor intends that this SECTION 9.27 constitute, and this SECTION 9.27 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Loan Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

5.                                      Certain Acknowledgments.  The parties hereto acknowledge and agree as follows:

 

(a)                                 The Subordinated Discount Notes were redeemed and paid in full on or about November 1, 2012.  Accordingly, all references to “Subordinated Discount Notes”, “Subordinated Discount Note Documents” and the Indebtedness evidenced thereby are hereby deleted from the Loan Documents.

 

(b)                                 The Senior Notes shall be redeemed and paid in full on the Indebtedness Refinancing Date.  Accordingly, from and after the consummation of the Indebtedness Refinancing, all references to “Senior Notes”, “Senior Note Documents” and the Indebtedness evidenced thereby shall be deleted from the Loan Documents.

 

(c)                                  Michaels Funding, Inc., a Delaware corporation, was formed on July 17, 2013 and joined the Loan Documents as a Facility Guarantor on August 21, 2013.  Such Person constitutes “Holdco” under and as defined in the Credit Agreement.  Accordingly, all references to “Parent” in the Loan Documents shall mean and refer to Michaels Funding, Inc., a Delaware corporation and owner of one hundred percent (100%) of the Capital Stock of the Lead Borrower.

 

(d)                                 The Required Lenders hereby consent to any amendments to the Term Loan Agreement entered into in connection with the incurrence of the New Term Loans and the granting of security and provision of guaranties for the New Term Loans 

 

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(which security and guaranties shall be on the same terms as those securing and guaranteeing the Term Loan Facility as in effect as of the date hereof), in each case to the extent substantially in the form of the draft amendment to the Term Loan Agreement provided to the Required Lenders on the date hereof (or with such changes as are agreed to by the Agents) and otherwise in compliance with Section 2.17 of the Term Loan Agreement (as in effect as of the date hereof).

 

6.                                      Ratification of Loan Documents.  Except as otherwise expressly provided herein, all terms and conditions of the Credit Agreement, the Security Agreement, the Facility Guarantee and the other Loan Documents remain in full force and effect.  The Loan Parties hereby ratify, confirm, and reaffirm that all representations and warranties of the Loan Parties contained in the Credit Agreement, the Security Agreement and each other Loan Document are true and correct in all material respects on and as of the date hereof, other than representations and warranties that relate solely to an earlier date, which are true and correct in all material respects as of such earlier date, provided that any representations and warranties which are qualified as to “materiality”, “Material Adverse Effect” or similar language are true and correct in all respects as of such respective dates. The Facility Guarantors hereby acknowledge, confirm and agree that the Guaranteed Obligations of the Facility Guarantors under, and as defined in, the Facility Guarantee include, without limitation, all Obligations of the Loan Parties at any time and from time to time outstanding under the Credit Agreement and the other Loan Documents, as such Obligations have been amended pursuant to this Amendment.  The Loan Parties hereby acknowledge, confirm and agree that the Security Documents and any and all Collateral previously pledged to the Collateral Agent, for the benefit of the Secured Parties, pursuant thereto (to the extent not released prior to the date hereof), shall continue to secure all applicable Obligations of the Loan Parties at any time and from time to time outstanding under the Credit Agreement and the other Loan Documents.

 

7.                                      Conditions to Effectiveness.  This Amendment shall not be effective until each of the following conditions precedent has been fulfilled, but subject to the terms of Section 9 hereof:

 

(a)                                 The Administrative Agent shall have received from each Loan Party and the Required Lenders either (i) a counterpart of this Amendment signed on behalf of each such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission or electronic pdf copy of a signed signature page of this Amendment) that each such party has signed a counterpart of this Amendment.

 

(b)                                 All action on the part of the Loan Parties necessary for the valid execution, delivery and performance by the Loan Parties of this Amendment and the documents, instruments and agreements to be executed in connection herewith shall have been duly and effectively taken and evidence thereof reasonably satisfactory to the Administrative Agent shall have been provided to the Administrative Agent.

 

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(c)                                  The Loan Parties shall have paid in full all Credit Party Expenses (including the reasonable fees and expenses of counsel to the Administrative Agent and the Collateral Agent) in connection with the preparation, negotiation, execution and delivery of this Amendment and related documents.

 

(d)                                 The Administrative Agent shall have received such additional documents, instruments, and agreements as any Agent may reasonably request in connection with the transactions contemplated hereby, in each case in form and substance reasonably satisfactory to the Administrative Agent.

 

8.                                      Post-First Amendment Effective Date Covenants.  On the Indebtedness Refinancing Date, the Loan Parties shall deliver to the Administrative Agent:

 

(a)                                 true and complete copies of (i) an amendment to the Term Loan Agreement evidencing the incurrence of the New Term Loans in an original principal amount of $850,000,000, which amendment shall be permitted by the terms of the Credit Agreement and the Intercreditor Agreement, (ii) a supplemental indenture with respect to the Senior Subordinated Note Documents evidencing the incurrence of additional Senior Subordinated Notes in an original principal amount of $250,000,000, which amendment shall be permitted by the terms of the Credit Agreement, in each case duly executed by the parties thereto, and (iii) a certificate, in form and substance reasonably satisfactory to the Administrative Agent and duly executed by a Responsible Officer of the Lead Borrower, containing a representation and warranty that (x) the New Term Loans do not violate the terms of the Indenture, dated as of December 19, 2013, among the Lead Borrower, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee, governing the 57/8% Senior Subordinated Notes due 2020 (the “New Senior Subordinated Notes Indenture”) or the Indenture, dated as of July 19, 2013, among Michaels FinCo Holdings, LLC, Michaels FinCo, Inc. and Law Debenture Trust Company of New York, as trustee, governing the 7.50%/8.25% Senior PIK Toggle Notes due 2018 (the “PIK Notes Indenture”), and (y) the incurrence of the New Term Loans is permitted pursuant to Section 4.09(a) of each of the New Senior Subordinated Notes Indenture and the PIK Notes Indenture;

 

(b)                                 evidence of discharge of the Senior Note Documents and payment in full of the Senior Notes and any supplemental notes issued pursuant to the Senior Note Documents, which evidence shall be in form and substance reasonably satisfactory to the Administrative Agent; and

 

(c)                                  an acknowledgment to the Intercreditor Agreement, in form and substance reasonably satisfactory to the Administrative Agent and duly executed by the Term Agent and the Loan Parties, which acknowledgment shall contain certain statements with respect to the New Term Loans to be made on the Indebtedness Refinancing Date.

 

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Notwithstanding anything to the contrary, the Loan Parties acknowledge and agree that the failure of the Loan Parties to comply with any provision of this Section 8 shall constitute an immediate Event of Default pursuant to Section 7.01(b)(i) of the Credit Agreement.

 

9.                                      Indebtedness Refinancing Date.  The parties hereto acknowledge and agree that if the Indebtedness Refinancing Date shall not have occurred on or before September 30, 2014, the amendments to the Credit Agreement described in Sections 2(g), 5(b) and 5(d) hereof shall cease to be effective from and after such date unless the Agents and Required Lenders agree in writing to extend such date (which agreement may be given or withheld in the Agents’ and Required Lenders’ sole discretion).

 

10.                               Representations and Warranties.

 

(a)                                 The execution, delivery and performance by each Loan Party of this Amendment are within such Loan Party’s corporate or other powers, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (x) contravene the terms of any of such Person’s Organization Documents, (y) conflict with or result in any breach or contravention of, or the creation of any Lien under or require any payment to be made under (i) any contractual obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Restricted Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (z) violate any Applicable Law; except with respect to any conflict, breach or contravention or payment (but not creation of Liens) referred to in clause (y)(i), to the extent that such conflict, breach, contravention or payment could not reasonably be expected to have a Material Adverse Effect.

 

(b)                                 This Amendment has been duly executed and delivered by each Loan Party that is party thereto.  This Amendment constitutes a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and by general principles of equity.

 

(c)                                  On the First Amendment Effective Date, after giving effect to the transactions contemplated by this Amendment, the Loan Parties, on a Consolidated basis, are Solvent.  On the Indebtedness Refinancing Date, after giving effect to the Indebtedness Refinancing, the Loan Parties, on a Consolidated basis, shall be Solvent.

 

(d)                                 No Material Adverse Effect has occurred since February 1, 2014.

 

(e)                                  No consents, licenses or approvals are required in connection with the execution, delivery, or performance by, or enforcement against, any Loan Party, of this Amendment, except for (i) the approvals, consents, exemptions, authorizations, 

 

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actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect, and (ii) those approvals, consents, exemptions, authorizations or other actions, notices or filings, the failure of which to obtain or make could not reasonably be expected to have a Material Adverse Effect.

 

(f)                                   No Default or Event of Default has occurred and is continuing.

 

11.                               Miscellaneous.

 

(a)                                 Each of the Loan Parties hereby acknowledges and agrees that it has no offsets, defenses, claims, or counterclaims against the Agents, the other Secured Parties, or their respective parents, affiliates, predecessors, successors, or assigns, or their officers, directors, employees, attorneys, or representatives, with respect to the Obligations, and that if any of the Loan Parties now has, or ever did have, any offsets, defenses, claims, or counterclaims against such Persons, whether known or unknown, at law or in equity, from the beginning of the world through this date and through the time of execution of this Amendment, all of them are hereby expressly WAIVED, and each of the Loan Parties hereby RELEASES such Persons from any liability therefor.

 

(b)                                 This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Delivery by telecopier or by electronic pdf copy of an executed counterpart of a signature page to this Amendment shall be effective as delivery of an original executed counterpart of this Amendment.  The Administrative Agent and the Collateral Agent may also require that any such documents and signatures delivered by telecopier or by electronic pdf copy be confirmed by a manually signed original thereof; provided that the failure to request or deliver the same shall not limit the effectiveness of any document or signature delivered by telecopier or by electronic pdf copy.

 

(c)                                  This Amendment, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter.

 

(d)                                 If any provision of this Amendment is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Amendment shall not be affected or impaired thereby.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

(e)                                  This Amendment was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.

 

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(f)                                   THIS AMENDMENT AND EACH OTHER LOAN DOCUMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW THEREOF (BUT INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW); PROVIDED, HOWEVER, THAT IF THE LAWS OF ANY JURISDICTION OTHER THAN NEW YORK SHALL GOVERN IN REGARD TO THE VALIDITY, PERFECTION OR EFFECT OF PERFECTION OF ANY LIEN OR IN REGARD TO PROCEDURAL MATTERS AFFECTING ENFORCEMENT OF ANY LIENS IN COLLATERAL, SUCH LAWS OF SUCH OTHER JURISDICTIONS SHALL CONTINUE TO APPLY TO THAT EXTENT.

 

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the parties have hereunto caused this Amendment to be executed as of the date first above written.

 

	
 
    	
MICHAELS STORES, INC., as Lead Borrower and as a Borrower
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
Name: 
    	
Charles M. Sonsteby
    
	
 
    	
Title:
    	
Chief Administrative Officer &   Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
AARON BROTHERS, INC., as a Borrower
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
Name: 
    	
Charles M. Sonsteby
    
	
 
    	
Title:
    	
Chief Administrative Officer &   Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
MICHAELS STORES PROCUREMENT COMPANY, INC., as a Borrower
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
Name:
    	
Charles M. Sonsteby
    
	
 
    	
Title:
    	
Chief Administrative Officer &   Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
ARTISTREE, INC., as a Borrower
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
Name:
    	
Charles M. Sonsteby
    
	
 
    	
Title:
    	
Chief Administrative Officer &   Chief Financial Officer
    

 

Signature Page to First Amendment to Second Amended and Restated Credit Agreement

 

 

	
 
    	
MICHAELS FINANCE COMPANY, INC., as a Facility Guarantor
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
Name: 
    	
Charles M. Sonsteby
    
	
 
    	
Title:
    	
Chief Administrative Officer &   Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
MICHAELS STORES CARD SERVICES, LLC, as a Facility Guarantor
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
Name: 
    	
Charles M. Sonsteby
    
	
 
    	
Title:
    	
Chief Administrative Officer &   Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
MICHAELS FUNDING, INC., as a Facility Guarantor
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
Name: 
    	
Charles M.   Sonsteby
    
	
 
    	
Title:
    	
Chief Administrative Officer &   Chief Financial Officer
    

 

Signature Page to First Amendment to Second Amended and Restated Credit Agreement

 

 

	
 
    	
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, Collateral Agent, Lender, Swingline   Lender and Issuing Bank
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Connie Liu
    
	
 
    	
Name:
    	
Connie Liu
    
	
 
    	
Title:
    	
Director
    

 

Signature Page to First Amendment to Second Amended and Restated Credit Agreement

 

 

	
 
    	
JPMORGAN CHASE BANK, N.A., as a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Tom Floyd
    
	
 
    	
Name:
    	
Tom Floyd
    
	
 
    	
Title:
    	
Authorized Officer
    

 

Signature Page to First Amendment to Second Amended and Restated Credit Agreement

 

 

	
 
    	
GOLDMAN SACHS BANK USA, as a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Ashwin Ramakrishna
    
	
 
    	
Name:
    	
Ashwin Ramakrishna
    
	
 
    	
Title:
    	
Authorized Signatory
    

 

Signature Page to First Amendment to Second Amended and Restated Credit Agreement

 

 

	
 
    	
BARCLAYS   BANK PLC, as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Marguerite   Sutton
    
	
 
    	
Name:
    	
Marguerite Sutton
    
	
 
    	
Title:
    	
Vice President
    

 

Signature Page to First Amendment to Second Amended and Restated Credit Agreement

 

 

	
 
    	
DEUTSCHE BANK AG NEW YORK BRANCH,
    as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Dusan Lazarov
    
	
 
    	
Name:
    	
Dusan Lazarov
    
	
 
    	
Title:
    	
Director
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Lisa Wong
    
	
 
    	
Name:
    	
Lisa Wong
    
	
 
    	
Title:
    	
Vice President
    

 

Signature Page to First Amendment to Second Amended and Restated Credit Agreement

 

 

	
 
    	
BANK OF AMERICA, N.A., as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ David Vega
    
	
 
    	
Name:
    	
David Vega
    
	
 
    	
Title:
    	
Managing Director
    

 

Signature Page to First Amendment to Second Amended and Restated Credit Agreement

 

 

	
 
    	
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Vipul Dhadda
    
	
 
    	
Name:
    	
Vipul Dhadda
    
	
 
    	
Title:
    	
Authorized Signatory
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Sally Reyes
    
	
 
    	
Name:
    	
Sally Reyes
    
	
 
    	
Title:
    	
Authorized Signatory
    

 

Signature Page to First Amendment to Second Amended and Restated Credit Agreement

 

 

	
 
    	
MORGAN STANLEY BANK, N.A., as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ John Durland
    
	
 
    	
Name:
    	
John Durland
    
	
 
    	
Title:
    	
Authorized Signatory
    

 

Signature Page to First Amendment to Second Amended and Restated Credit Agreement

 

 

	
 
    	
UBS LOAN FINANCE LLC, as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Lana Gifas
    
	
 
    	
Name:
    	
Lana Gifas
    
	
 
    	
Title:
    	
Director
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Jennifer Anderson
    
	
 
    	
Name:
    	
Jennifer Anderson
    
	
 
    	
Title:
    	
Associate Director
    

 

Signature Page to First Amendment to Second Amended and Restated Credit Agreement

 

 

	
 
    	
RBS BUSINESS CAPITAL, A   DIVISION OF RBS ASSET FINANCE, INC., A SUBSIDIARY OF RBS CITIZENS, N.A., as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael Ganann
    
	
 
    	
Name:
    	
Michael Ganann
    
	
 
    	
Title:
    	
Senior Vice President
    

 

Signature Page to First Amendment to Second Amended and Restated Credit Agreement

 

 

	
 
    	
SUNTRUST BANK, as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Angela Leake
    
	
 
    	
Name:
    	
Angela Leake
    
	
 
    	
Title:
    	
Director
    

 

Signature Page to First Amendment to Second Amended and Restated Credit Agreement

 

 

	
 
    	
REGIONS BANK, as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Hossein Khejehnouri
    
	
 
    	
Name:
    	
Hossein Khejehnouri
    
	
 
    	
Title:
    	
Attorney-in-fact
    

 

Signature Page to First Amendment to Second Amended and Restated Credit Agreement

 

 

	
 
    	
U.S. BANK NATIONAL ASSOCIATION, as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ William Patton
    
	
 
    	
Name:
    	
William Patton
    
	
 
    	
Title:
    	
AVP
    

 

Signature Page to First Amendment to Second Amended and Restated Credit Agreement

 

 

	
 
    	
SIEMENS FINANCIAL SERVICES, INC., as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Sharon Prusakowski
    
	
 
    	
Name:
    	
Sharon Prusakowski
    
	
 
    	
Title:
    	
Vice President
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ John Finore
    
	
 
    	
Name:
    	
John Finore
    
	
 
    	
Title:
    	
Vice President
    

 

Signature Page to First Amendment to Second Amended and Restated Credit Agreement

 

 

	
 
    	
BANK OF MONTREAL, as a Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Kara Goodwin
    
	
 
    	
Name:
    	
Kara Goodwin
    
	
 
    	
Title:
    	
Director
    

 

Signature Page to First Amendment to Second Amended and Restated Credit Agreement

 

 

Schedule I

 

Borrowers other than the Lead Borrower

 

Aaron Brothers, Inc.

Michaels Stores Procurement Company, Inc.

Artistree, Inc.

 

 

Schedule II

 

Facility Guarantors

 

Michaels Finance Company, Inc.

Michaels Stores Card Services, LLC

Michaels Funding, Inc.Exhibit 10.3

 

EXECUTION VERSION

 

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “First Amendment”), dated as of June 10, 2014, among MICHAELS STORES, INC., a Delaware corporation (the “Borrower”), DEUTSCHE BANK AG NEW YORK BRANCH, as administrative agent (in such capacity, the “Administrative Agent”), the Guarantors party hereto and the Incremental 2014 Term Lenders referred to below.  Unless otherwise indicated, all capitalized terms used herein and not otherwise defined shall have the respective meanings provided such terms in the Credit Agreement referred to below.

 

W  I  T  N  E  S  S  E  T  H:

 

WHEREAS, the Borrower, various lenders from time to time party thereto (each, a “Lender” and, collectively, the “Lenders”) and the Administrative Agent are parties to an Amended and Restated Credit Agreement, dated as of January 28, 2013 (as so amended and restated, the “Credit Agreement”);

 

WHEREAS, the Borrower has previously notified the Administrative Agent that it is requesting an Incremental Amendment to incur Incremental Term Loans pursuant to Section 2.17 of the Credit Agreement;

 

WHEREAS, pursuant to Section 2.17 of the Credit Agreement, the Borrower may incur Incremental Term Loans by, among other things, entering into an Incremental Amendment with each Lender and/or Additional Incremental Lender agreeing to provide such Incremental Term Loans and the Administrative Agent;

 

WHEREAS, the Borrower has requested that the Incremental 2014 Term Lenders extend credit as Incremental Term Lenders to the Borrower in the form of new Incremental 2014 Term Loans (as defined below) on the terms and subject to the conditions set forth herein;

 

WHEREAS, the Incremental 2014 Term Lenders have indicated a willingness to provide the requested Incremental 2014 Term Loans on the terms and subject to the conditions herein; and

 

WHEREAS, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Barclays Bank PLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC, Morgan Stanley Senior Funding, Inc., Wells Fargo Securities, LLC, Guggenheim Securities, LLC and Macquarie Capital (USA) Inc. shall act as lead arrangers and book running managers (collectively, in such capacities, the “Lead Arrangers”), in each case, with respect to this First Amendment and the Incremental 2014 Term Loans provided for hereunder;

 

NOW, THEREFORE, it is agreed:

 

I.                Amendments to Credit Agreement.

 

1.                                (a) This First Amendment constitutes an Incremental Amendment pursuant to which a new Incremental Series (as defined in the Credit Agreement as amended hereby) and a new Class of Incremental Term Loans is established pursuant to Section 2.17 of the Credit Agreement upon the occurrence of the First Amendment Effective Date (as defined below).

 

(a)                                 Subject to the terms and conditions set forth herein and the occurrence of the First Amendment Effective Date, each Person party hereto as an “Incremental 2014 Term Lender” (each,

 

 

an “Incremental 2014 Term Lender”) severally agrees to make to the Borrower on the First Amendment Effective Date a single term loan (each, an “Incremental 2014 Term Loan” and collectively, the “Incremental 2014 Term Loans”) denominated in Dollars in a principal amount equal to the amount set forth opposite its name under the column entitled “Incremental 2014 Term Commitments” on Annex I hereto (with respect to any Incremental 2014 Term Lender, its “Incremental 2014 Term Commitment”).  Amounts borrowed under this Section I.1(b) and repaid or prepaid may not be reborrowed.

 

(c)                                  Each of the parties to this First Amendment hereby agrees that on the First Amendment Effective Date, (i) this First Amendment shall create a new Incremental Series and Class of Incremental Term Loans and Incremental Term Commitments, (ii) each Person executing this First Amendment in its capacity as an Incremental 2014 Term Lender shall become (or, if already a Term Lender prior to the First Amendment Effective Date, continue as) a “Lender” and a “Term Lender” under the Credit Agreement (as amended hereby) for all purposes of the Credit Agreement (as amended hereby) and the other Loan Documents and shall be bound by the provisions of the Credit Agreement (as amended hereby) as a Lender holding Incremental Term Commitments, Incremental 2014 Term Loans and Loans, (iii) the Incremental 2014 Term Commitments of the Incremental 2014 Term Lenders shall become “Incremental Term Commitments” for all purposes of the Credit Agreement (as amended hereby) and the other Loan Documents and (iv) the Incremental 2014 Term Loans of the Incremental 2014 Term Lenders shall become “Incremental Term Loans” and “Loans” for all purposes of the Credit Agreement (as amended hereby) and the other Loan Documents.

 

(d)                                 Each of the parties to this First Amendment hereby agrees that the Incremental 2014 Term Loans of the Incremental Series established pursuant to this First Amendment shall have the “Interest Rates”, “Maturity Date”, “Issuance Price” and “Scheduled Amortization” set forth on Annex II hereto and that all other terms and conditions applicable to such Incremental 2014 Term Loans shall be the same as the corresponding terms and conditions applicable to the Term B Loans.

 

2.  Section 1.01 of the Credit Agreement is hereby amended by inserting the following new definitions in the appropriate alphabetical order:

 

“First Amendment” means that certain First Amendment to Amended and Restated Credit Agreement, dated as of June 10, 2014, by and among the Borrower, the Guarantors party thereto, the various Lenders party thereto and the Administrative Agent.

 

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

 

“Incremental 2014 Term Loan” has the meaning provided in the First Amendment.

 

“Incremental 2014 Term Commitment” has the meaning provided in the First Amendment.

 

“Incremental Series” means all Incremental Term Loans and Incremental Term Commitments that are established pursuant to the same Incremental Amendment (or any subsequent Incremental Amendment to the extent that such Incremental Amendment expressly provides that the Incremental Term Loans or Incremental Commitments provided for therein are intended to be a part of any previously established “Incremental Series”) and that provide for the same interest margins, “floor” and amortization schedule.

 

“Transformative Acquisition” means any acquisition by the Borrower or any of its Restricted Subsidiaries of an unrelated third party that is either (a) not permitted by the terms of the Loan Documents immediately prior to the consummation of such acquisition or (b) if

 

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permitted by the terms of the Loan Documents immediately prior to the consummation of such acquisition, would not provide the Borrower and its Restricted Subsidiaries with adequate flexibility under the Loan Documents for the continuation and/or expansion of their combined operations following such consummation (as determined by the Borrower acting in good faith).

 

2.                                      The definition of “Applicable Rate” appearing in Section 1.01 of the Credit Agreement is hereby amended by replacing the text “Term Loans” in each place it appears in the table set forth in such definition with the text “Term B Loans”.

 

3.                                      The definition of “Class” appearing in Section 1.01 of the Credit Agreement is hereby amended by (x) inserting the text “of a given Incremental Series” immediately after the text “Incremental Term Commitments” appearing in clause (b) of the first sentence of such definition, and (y) inserting the text “made pursuant to a given Incremental Series” immediately after the text “Incremental Term Loans” appearing in clause (c) of the first sentence of such definition.

 

4.                                      The definition of “Commitment” appearing in Section 1.01 of the Credit Agreement is hereby amended by inserting the text “of a given Incremental Series” immediately after the text “Incremental Term Commitment” appearing in such definition.

 

5.                                      The definition of “Consolidated Secured Debt Ratio” appearing in Section 1.01 of the Credit Agreement is hereby amended by inserting the text “and the Incremental 2014 Term Loans” immediately after the text “Term B Loans” appearing in the last sentence of such definition.

 

6.                                      The definition of “Incremental Facility” appearing in Section 1.01 of the Credit Agreement is hereby amended by inserting the text “a given Class of” immediately before the text “Incremental Term Loans” appearing in such definition.

 

7.                                      The definition of “Pro Rata Share” appearing in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety as follows:

 

“Pro Rata Share” means, with respect to each Lender, (i) at or prior to the funding on the Restatement Effective Date, a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Commitment of such Lender at such time and the denominator of which is the amount of the Aggregate Commitments of all Lenders at such time, (ii) on the First Amendment Effective Date (immediately prior to the funding of the Incremental 2014 Term Loans and the termination of the Incremental 2014 Term Commitments on such date) and for purposes of Section 2.02(b) only, a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Incremental 2014 Term Commitment of such Lender at such time and the denominator of which is the aggregate amount of all Incremental 2014 Term Commitments of all Lenders at such time and (iii) at any other time and for all other purposes, a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the principal amount of the Loans of the applicable Class of such Lender at such time and the denominator of which is the aggregate principal amount of the Loans of the applicable Class of all Lenders at such time.

 

8.                                      The definition of “Repricing Transaction” appearing in Section 1.01 of the Credit Agreement is hereby amended by inserting the text “and, in the case of Incremental 2014 Term Loans only, any prepayment, refinancing, conversion, substitution or replacement of such Incremental 2014 Term Loans in connection with a Transformative Acquisition” immediately before the period (“.”) at the end of the first sentence of said definition.

 

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9.                                      The definition of “Term Lender” appearing in Section 1.01 of the Credit Agreement is hereby amended by inserting the text “, Incremental Term Commitment pursuant to a given Incremental Series, Refinancing Term Commitment pursuant to a given Refinancing Series or Extended Term Commitment pursuant to a given Extension Series” immediately after the text “Term Commitment” appearing in such definition.

 

10.                               Section 2.02(b) of the Credit Agreement is hereby amended by inserting the text “or Commitments” immediately after the text “Class of Loans” appearing in the first sentence of said Section.

 

11.                               Section 2.05(a)(i) of the Credit Agreement is hereby amended by (i) deleting the text “and” appearing immediately before clause (4) to the proviso in the first sentence thereof and (ii) inserting the text “; and (5) any prepayment of Incremental 2014 Term Loans made on or prior to the six-month anniversary of the First Amendment Effective Date in connection with a Repricing Transaction shall be accompanied by the payment of the fee required by Section 2.09(c)” immediately before the period (“.”) at the end of the first sentence thereof.

 

12.                               Section 2.06 of the Credit Agreement is hereby amended by adding the following text at the end of said Section:

 

“The Incremental 2014 Term Commitment of each Term Lender shall be automatically and permanently reduced to $0 upon the making of such Term Lender’s Incremental 2014 Term Loan pursuant to the First Amendment on the First Amendment Effective Date.”.

 

13.                               Section 2.09 of the Credit Agreement is hereby amended by adding the following new clause (c) at the end of such Section:

 

“(c)                            At the time of the effectiveness of any Repricing Transaction that is consummated on or prior to the six-month anniversary of the First Amendment Effective Date, the Borrower agrees to pay to the Administrative Agent, for the ratable account of each Lender with outstanding Incremental 2014 Term Loans that are either prepaid, refinanced, substituted, replaced, converted or otherwise subjected to a pricing reduction in connection with such Repricing Transaction (including each Lender that withholds its consent to such Repricing Transaction and is replaced as a Non-Consenting Lender under Section 3.07), a fee in an amount equal to 1.0% of (x) in the case of a Repricing Transaction of the type described in clause (a) of the definition thereof, the aggregate principal amount of all such Incremental 2014 Term Loans prepaid, refinanced, substituted, replaced or converted in connection with, or otherwise subject to, such Repricing Transaction and (y) in the case of a Repricing Transaction of the type described in clause (b) of the definition thereof, the aggregate principal amount of all such Incremental 2014 Term Loans outstanding on such date that are subject to an effective pricing reduction pursuant to such Repricing Transaction.  Such fees shall be earned, due and payable upon the date of the effectiveness of such Repricing Transaction.”

 

14.                               Section 2.17(b) of the Credit Agreement is hereby amended by (i) inserting the text “Incremental Series and” immediately before the text “Class” appearing in the first sentence of said Section and (ii) inserting the text “same Incremental Series and” immediately before the text “same” appearing in the last sentence of said Section.

 

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15.                               Section 7.03(b)(xxii) of the Credit Agreement is hereby amended by inserting the text “and the Incremental 2014 Term Loans” immediately after the text “Term B Loans” appearing in clause (A) of said Section.

 

16.                               Section 7.12 of the Credit Agreement is hereby amended by inserting the following sentence at the end of said Section:

 

“The Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, use the proceeds of the Borrowing of Incremental 2014 Term Loans on the First Amendment Effective Date, whether directly or indirectly, for any purpose other than to finance (i) the satisfaction and discharge of the outstanding Senior Notes (and related obligations), including premium and accrued and unpaid interest thereon to, but not including, the applicable redemption date, pursuant to, and in accordance with the terms of, the Senior Notes Indenture as contemplated by Section 5(viii) of Part II of the First Amendment, and (ii) fees and expenses incurred in connection with the First Amendment and the incurrence of the Incremental 2014 Term Loans; provided, that any excess proceeds of the Borrowing of Incremental 2014 Term Loans on the First Amendment Effective Date not required for the purposes described in clauses (i) and (ii) may be used for any purpose not prohibited by this Agreement.”

 

II.           Miscellaneous Provisions.

 

1.                                      In order to induce the Incremental 2014 Term Lenders to enter into this First Amendment, each Loan Party hereby represents and warrants that:

 

(i)                                                             the execution, delivery and performance by such Loan Party of this First Amendment and the performance by such Loan Party of the other Loan Documents (as modified hereby) to which it is a party are within such Loan Party’s corporate or other powers, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any such Loan Party’s Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under (other than as permitted by Section 7.01 of the Credit Agreement), or require any payment to be made under (i)(x) any indenture, mortgage, deed of trust or loan agreement evidencing Indebtedness in an aggregate principal amount in excess of the Threshold Amount or (y) any other Contractual Obligation to which such Loan Party is a party or affecting such Loan Party or the properties of such Loan Party or any Restricted Subsidiary or (ii) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Loan Party or its property is subject; or (c) violate any material Law, except with respect to any conflict, breach or contravention or payment (but not creation of Liens) referred to in clause (b)(i)(y) above, to the extent that such conflict, breach, contravention or payment could not reasonably be expected to have a Material Adverse Effect;

 

(ii)                                                          no Event of Default exists as of the First Amendment Effective Date, both before and after giving effect to this First Amendment and the incurrence of the Incremental 2014 Term Loans; and

 

(iii)                                                       the representations and warranties of each Loan Party set forth in Article V of the Credit Agreement and in each other Loan Document shall be true and correct in all material respects on and as of the First Amendment Effective Date (after giving effect thereto) with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date; provided that any representation and warranty that is

 

5

 

qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct (after giving effect to any qualification therein) in all respects on such respective dates.

 

2.                                      This First Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Loan Document.

 

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

 

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

 

5.                                      This First Amendment shall become effective on the date (the “First Amendment Effective Date”) when each of the following conditions shall have been satisfied (which may be concurrent with the occurrence of the First Amendment Effective Date in the case of clauses (viii), (ix), (x), (xi) and (xii) below):

 

(i)                                                             each of the Loan Parties, the Administrative Agent and each Incremental 2014 Term Lender shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of facsimile or other electronic transmission) the same to the Administrative Agent in accordance with the notice requirements set forth in Section 10.02 of the Credit Agreement;

 

(ii)                                                          the Administrative Agent shall have received such certificates of resolutions and other action, incumbency certificates and/or other certificates of Responsible Officers of each of the Loan Parties as the Administrative Agent may reasonably require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with the execution and delivery of this First Amendment and the other Loan Documents to which such Loan Party is a party or is to be a party on the First Amendment Effective Date and attaching copies of any amendments to the Organization Documents of each Loan Party since the Restatement Effective Date (or, with respect to Holdco, since August 30, 2013), certified by the Secretary of State of its jurisdiction of organization, together with a good standing certificate from the Secretary of State of its jurisdiction of organization, each dated as of a recent date prior to the First Amendment Effective Date, and such certificates and related documentation shall be in form and substance reasonably satisfactory to the Administrative Agent;

 

(iii)                                                       the Administrative Agent shall have received a certificate from the Chief Financial Officer of the Borrower attesting to the Solvency of the Loan Parties (taken as a whole) on the First Amendment Effective Date (after giving effect to the incurrence of the Incremental 2014 Term Loans and the other transactions contemplated to be consummated on such date), substantially in the form of the certificate delivered pursuant to Section 4.01(a)(vii) of the Credit Agreement (with appropriate modifications to reflect the incurrence of Incremental 2014 Term Loans on the First Amendment Effective Date) and otherwise in form and substance reasonably satisfactory to the Administrative Agent;

 

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(iv)                                                      the Administrative Agent shall have received a certificate from the Chief Financial Officer of the Borrower, dated the First Amendment Effective Date, in form and substance reasonably satisfactory to the Administrative Agent, containing a representation and warranty that (x) the incurrence of Incremental 2014 Term Loans on such date does not violate the terms of (I) the Indenture, dated as of December 19, 2013, among the Borrower, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee, governing the 57/8% Senior Subordinated Notes due 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “New Senior Subordinated Notes Indenture”) or (II) the Indenture, dated as of July 19, 2013, among Michaels FinCo Holdings, LLC, Michaels FinCo, Inc. and Law Debenture Trust Company of New York, as trustee, governing the 7.50%/8.25% Senior PIK Toggle Notes due 2018 (as amended, restated, supplemented or otherwise modified from time to time, the “PIK Notes Indenture”), (y) the incurrence of Incremental 2014 Term Loans on such date is permitted pursuant to Section 4.09(a) of each of the New Senior Subordinated Notes Indenture and the PIK Notes Indenture and (z) the Obligations of the type described in clause (x) of the definition of “Obligations” (including the Indebtedness evidenced by the Incremental 2014 Term Loans) constitute “Senior Indebtedness” and “Designated Senior Indebtedness” under the New Senior Subordinated Notes Indenture;

 

(v)                                                         the Administrative Agent shall have received (x) an opinion from Ropes & Gray LLP, counsel to the Loan Parties, and (y) opinions from local counsel to the Loan Parties, as applicable, in each case, in form and substance reasonably satisfactory to the Administrative Agent, to the extent reasonably requested by the Administrative Agent;

 

(vi)                                                      the Administrative Agent shall have received a Committed Loan Notice with respect to the initial Borrowing of Incremental 2014 Term Loans from a Responsible Officer of the Borrower, substantially in the form of Exhibit A to the Credit Agreement;

 

(vii)                                                   the Administrative Agent shall have received, for the account of each of the Incremental 2014 Term Lenders that have requested the same, an appropriate Note executed by the Borrower, in each case in the amount, maturity and otherwise as provided in the Credit Agreement and Section 1(c) of Part I of this First Amendment;

 

(viii)                                                (x) properly completed irrevocable redemption notice(s) in respect of the full principal amount of the outstanding Senior Notes shall have been delivered to the trustee under the Senior Notes Indenture in accordance with the terms thereof, (y) all amounts necessary to redeem in full the Senior Notes and pay all other obligations owing in respect thereof through the proposed date of redemption (including premiums and accrued but unpaid interest thereon to, but not including, the proposed date of redemption) shall have been irrevocably deposited in trust with the trustee under the Senior Notes Indenture and (z) the Senior Notes and all such other obligations under the Senior Notes Indenture shall have been satisfied and discharged in accordance with the terms of the Senior Notes Indenture;

 

(ix)                                                      The Michaels Companies, Inc., a Delaware corporation (“Topco”), shall have sold shares of its common stock pursuant to a bona fide underwritten sale to the public under a registration statement (other than on Form S-8 or any other form relating to securities issuable under any benefit plan of Topco, Holdco, the Borrower or any of its Restricted Subsidiaries, as the case may be) declared effective by the SEC;

 

(x)                                                         the Borrower shall have incurred Refinancing Indebtedness pursuant to, and in accordance with the requirements of, Section 7.03(b)(xiii) of the Credit Agreement in an aggregate principal amount equal to $250,000,000, which Refinancing Indebtedness shall

 

7

 

constitute additional Subordinated Indebtedness under the New Senior Subordinated Notes Indenture and the net cash proceeds of which shall have been applied to finance, in part, the refinancing transactions described in preceding clause (viii);

 

(xi)                                                      the Borrower shall have paid to each Incremental 2014 Term Lender an initial yield payment equal to 0.50% of its Incremental 2014 Term Commitment on the First Amendment Effective Date (as in effect immediately before giving effect to the termination thereof pursuant to Section 2.06 of the Credit Agreement (as amended by this First Amendment)), with such initial yield payment to be treated, for tax purposes only, as a payment described in Treas. Reg. Section 1.1273-2(g)(2);

 

(xii)                                                   the Borrower shall have paid all fees, costs and expenses required to be paid pursuant to Section 7 of Part II of this First Amendment and (without duplication) all fees, costs and expenses due and owing under that certain Fee Letter, dated as of June 9, 2014, by and among the Borrower and the Lead Arrangers so long as, with respect to fees, costs and expenses of counsel, such fees, costs and expenses have been invoiced at least two Business Days prior to the First Amendment Effective Date;

 

(xiii)                                                the Required Lenders under, and as defined in the ABL Credit Agreement shall have consented in writing to this First Amendment, the incurrence of the Incremental 2014 Term Loans and the granting of security and provision of guaranties therefor and a copy of such fully executed consent shall have been delivered to the Administrative Agent; and

 

(xiv)                                               all of the conditions specified in Section 2.17 of the Credit Agreement (as modified by this First Amendment) with respect to the incurrence of the Incremental 2014 Term Loans (including Section 2.17(d) of the Credit Agreement) shall have been satisfied and the Administrative Agent shall have received a certificate, dated as of the First Amendment Effective Date and signed on behalf of the Borrower by a Responsible Officer of the Borrower, certifying that (a) all of the conditions in clauses (i) through (xiii) (inclusive) above have been satisfied on such date, (b) the Borrower is in compliance with the requirements of Section 2.17 of the Credit Agreement and (c) the Incremental 2014 Term Loans were incurred in reliance on Section 2.17(d)(iv)(B) of the Credit Agreement;

 

provided, however, that unless each the foregoing conditions in this Section 5 shall have been satisfied on or prior to September 30, 2014, the First Amendment shall not become effective (and the First Amendment Effective Date shall not occur).

 

6.                                      By executing and delivering a counterpart hereof, (i) each Loan Party hereby agrees that all Loans incurred by the Borrower (including, without limitation, the Incremental 2014 Term Loans made available on the First Amendment Effective Date) shall be guaranteed pursuant to the various Guaranties in accordance with the terms and provisions thereof and shall be secured pursuant to the Collateral Documents in accordance with the terms and provisions thereof and (ii) each Loan Party hereby (A) agrees that, after giving effect to this First Amendment, the Collateral Documents continue to be in full force and effect and (B) affirms and confirms all of its obligations and liabilities under the Credit Agreement and each other Loan Document, in each case after giving effect to this First Amendment, including its guarantee of the Obligations and the pledge of and/or grant of a security interest in its assets as Collateral pursuant to the Collateral Documents to secure such Obligations, all as provided in the Collateral Documents, and acknowledges and agrees that such obligations, liabilities, guarantee, pledge and grant continue in full force and effect in respect of, and to secure, such Obligations under the Credit Agreement and the other Loan Documents, in each case, after giving effect to this First Amendment.

 

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7.                                      The Loan Parties hereby agree to reimburse the Administrative Agent for its reasonable and documented out-of-pocket expenses in connection with this First Amendment, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in each case, as required to be reimbursed pursuant to the Credit Agreement.

 

8.                                      From and after the First Amendment Effective Date, (i) all references in the Credit Agreement and each of the other Loan Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement, as modified hereby and (ii) this First Amendment shall be deemed to constitute a “Loan Document” for all purposes of the Credit Agreement.

 

*              *              *

 

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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this First Amendment as of the date first above written.

 

	
 
    	
MICHAELS STORES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
 
    	
Name:
    	
Charles M. Sonsteby
    
	
 
    	
 
    	
Title:
    	
Chief Administrative Officer & Chief Financial Officer
    

 

Signature page to First Amendment to Amended and Restated Credit Agreement — Michaels Stores, Inc.

 

 

	
 
    	
DEUTSCHE BANK AG NEW YORK   BRANCH, Individually as an Incremental 2014 Term Lender and as Administrative   Agent
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Scott Sartorius
    
	
 
    	
 
    	
Name:
    	
Scott Sartorius
    
	
 
    	
 
    	
Title:
    	
Managing Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Frank Fazio
    
	
 
    	
 
    	
Name:
    	
Frank Fazio
    
	
 
    	
 
    	
Title:
    	
Managing Director
    

 

Signature page to First Amendment to Amended and Restated Credit Agreement — Michaels Stores, Inc.

 

 

Each of the undersigned, each being a Guarantor (as defined in the Credit Agreement) hereby consents to the entering into of this First Amendment and agrees to the provisions hereof.

 

	
 
    	
MICHAELS FUNDING, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
 
    	
Name:
    	
Charles M. Sonsteby
    
	
 
    	
 
    	
Title:
    	
Chief Administrative Officer & Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
AARON BROTHERS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
 
    	
Name:
    	
Charles M. Sonsteby
    
	
 
    	
 
    	
Title:
    	
Chief Administrative Officer & Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
MICHAELS FINANCE COMPANY, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
 
    	
Name:
    	
Charles M. Sonsteby
    
	
 
    	
 
    	
Title:
    	
Chief Administrative Officer & Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
MICHAELS STORES CARD SERVICES, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
 
    	
Name:
    	
Charles M. Sonsteby
    
	
 
    	
 
    	
Title:
    	
Chief Administrative Officer & Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
MICHAELS STORES PROCUREMENT COMPANY, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
 
    	
Name:
    	
Charles M. Sonsteby
    
	
 
    	
 
    	
Title:
    	
Chief Administrative Officer & Chief Financial Officer
    

 

Signature page to First Amendment to Amended and Restated Credit Agreement — Michaels Stores, Inc.

 

 

	
 
    	
ARTISTREE, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles M. Sonsteby
    
	
 
    	
 
    	
Name:
    	
Charles M. Sonsteby
    
	
 
    	
 
    	
Title:
    	
Chief Administrative Officer & Chief Financial Officer
    

 

Signature page to First Amendment to Amended and Restated Credit Agreement — Michaels Stores, Inc.

 

 

ANNEX I

 

COMMITMENTS

 

	
Lender
    	
 
    	
Incremental 2014 Term
   Commitments
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Deutsche Bank AG New York   Branch
    	
 
    	
$
    	
850,000,000
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
TOTAL:
    	
 
    	
$
    	
850,000,000
    	
 
    

 

 

ANNEX II

 

SUMMARY OF TERMS

 

Dated as of June 10, 2014

 

	
Interest   Rates:
    	
 
    	
The   Applicable Rate with respect to the Incremental 2014 Term Loans will be a   percentage per annum equal to (i) for Eurocurrency Rate Loans, 3.00% and   (ii) for Base Rate Loans, 2.00%.

 

Notwithstanding   the foregoing, with respect to any new Class of Incremental Term Loans   incurred subsequent to the First Amendment Effective Date that are secured on   a pari passu basis with the Obligations,   the Effective Yield applicable to such Incremental Term Loans shall not be   greater than the applicable Effective Yield payable pursuant to the terms of   the Credit Agreement as amended through the date of such calculation with   respect to Incremental 2014 Term Loans plus 50 basis points per annum unless   the interest rate (together with, as provided in the proviso below, the   Eurocurrency Rate or Base Rate floor) with respect to the Incremental 2014   Term Loans is increased so as to cause the then applicable Effective Yield   under the Credit Agreement on the Incremental 2014 Term Loans to equal the   Effective Yield then applicable to such Incremental Term Loans minus 50 basis   points; provided that any increase in the   Effective Yield to the Incremental 2014 Term Loans due to the application or   imposition of a Eurocurrency Rate or Base Rate floor on any Incremental Term   Loan shall be effected solely through an increase in (or implementation of,   as applicable) any Eurocurrency Rate or Base Rate floor applicable to the   Incremental 2014 Term Loans.

 

With   respect to the computation of interest on the Incremental 2014 Term Loans,   the Eurocurrency Rate and Base Rate applicable to Incremental 2014 Term Loans   shall be subject to a floor of 1.00% and 2.00%, respectively, per annum.
    
	
 
    	
 
    	
 
    
	
Issuance   Price  
    	
 
    	
99.50%;   provided that the discount to par reflected in the issuance price of   Incremental 2014 Term Loans may, at the election of the Incremental 2014 Term   Lenders, be taken in the form of an upfront fee paid on the First Amendment   Effective Date. 
    
	
 
    	
 
    	
 
    
	
Maturity   Date:
    	
 
    	
With   respect to the Incremental 2014 Term Loans, January 28, 2020.
    
	
 
    	
 
    	
 
    
	
Scheduled   Amortization:
    	
 
    	
The   Borrower shall repay to the Administrative Agent for the ratable account of   the Term Lenders with outstanding Incremental 2014 Term Loans (i) on the   last Business Day of each July, October, January and April, commencing   with the last Business Day of October, 2014, an aggregate amount equal to   0.25% of the aggregate principal amount of all Incremental 2014 Term Loans   outstanding on the First Amendment 
    
	
 
    	
 
    	
 
    

 

 

	
 
    	
 
    	
Effective   Date (as such scheduled amortization amounts shall be reduced as a result of   the application of prepayments in accordance with the order of priority set   forth in Section 2.05 of the Credit Agreement or in connection with any   Extension as provided in Section 2.16 of the Credit Agreement) and   (ii) on the Maturity Date for such Incremental 2014 Term Loans, the   aggregate principal amount of all such Incremental 2014 Term Loans   outstanding on such date.

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