Document:

Exhibit 4.2

 

 

REGISTRATION RIGHTS AGREEMENT

 

Dated as of September 27, 2012

 

Among

 

MICHAELS STORES, INC.,

 

THE GUARANTORS LISTED ON SCHEDULE I HERETO

 

and

 

DEUTSCHE BANK SECURITIES INC.,

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

BARCLAYS CAPITAL INC.,

CREDIT SUISSE SECURITIES (USA) LLC,

GOLDMAN, SACHS & CO.,

J.P. MORGAN SECURITIES LLC,

MORGAN STANLEY & CO. LLC

 

and

 

WELLS FARGO SECURITIES, LLC

 

73⁄4% Senior Notes due 2018

 

 

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
1.
    	
Definitions
    	
1
    
	
 
    	
 
    	
 
    
	
2.
    	
Exchange Offer
    	
4
    
	
 
    	
 
    	
 
    
	
3.
    	
Shelf Registration
    	
8
    
	
 
    	
 
    	
 
    
	
4.
    	
Additional Interest
    	
9
    
	
 
    	
 
    	
 
    
	
5.
    	
Registration Procedures
    	
10
    
	
 
    	
 
    	
 
    
	
6.
    	
Registration Expenses
    	
17
    
	
 
    	
 
    	
 
    
	
7.
    	
Indemnification and Contribution
    	
18
    
	
 
    	
 
    	
 
    
	
8.
    	
Rule 144 and Rule 144A
    	
22
    
	
 
    	
 
    	
 
    
	
9.
    	
Underwritten Registrations
    	
22
    
	
 
    	
 
    	
 
    
	
10.
    	
Miscellaneous
    	
22
    

 

i

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is dated as of September 27, 2012, among MICHAELS STORES INC., a Delaware corporation (the “Issuer”), the guarantors listed on Schedule I hereto (the “Guarantors”) and DEUTSCHE BANK SECURITIES INC., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, BARCLAYS CAPITAL INC., CREDIT SUISSE SECURITIES (USA) LLC, GOLDMAN, SACHS & CO., J.P. MORGAN SECURITIES LLC, MORGAN STANLEY & CO. LLC and WELLS FARGO SECURITIES, LLC (together, the “Initial Purchasers”).

 

This Agreement is entered into in connection with the Purchase Agreement, dated September 20, 2012 (the “Purchase Agreement”), by and among the Issuer, the Guarantors and the Initial Purchasers, which provides for, among other things, the sale by the Issuer to the Initial Purchasers of $200,000,000 aggregate principal amount of the Issuer’s 73⁄4% Senior Notes due 2018 (the “Notes”).  The Notes are issued under an indenture, dated as of October 21, 2010 as supplemented by the supplemental indenture dated as of the date hereof (as amended or supplemented from time to time, the “Indenture”), among the Issuer, the Guarantors and Law Debenture Trust Company of New York, as trustee (the “Trustee”).  Pursuant to the Purchase Agreement and the Indenture, the Guarantors are required to guarantee (collectively, the “Guarantees”) the Issuer’s obligations under the Notes and the Indenture.  References to the “Securities” shall mean, collectively, the Notes and the Guarantees. In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Issuer has agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchasers and any subsequent holder or holders of the Securities.  The execution and delivery of this Agreement is a condition to the Initial Purchasers’ obligations under the Purchase Agreement.

 

The parties hereby agree as follows:

 

1.                                       Definitions

 

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

 

Additional Interest:  See Section 4(a) hereof.

 

Advice:  See the last paragraph of Section 5 hereof.

 

Agreement:  See the introductory paragraphs hereto.

 

Applicable Period:  See Section 2(b) hereof.

 

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

 

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

 

 

Effectiveness Period:  See Section 3(a) hereof.

 

Event Date:  See Section 4(b) hereof.

 

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

 

Exchange Notes:  See Section 2(a) hereof.

 

Exchange Offer:  See Section 2(a) hereof.

 

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

 

Exchange Securities:  See Section 2(a) hereof.

 

Filing Date:  The 90th day after the delivery of a Shelf Notice as required pursuant to Section 2(c) hereof; provided, however, that if the Filing Date would otherwise fall on a day that is not a Business Day, then the Filing Date shall be the next succeeding Business Day.

 

FINRA:  See Section 5(r).

 

Guarantees:  See the introductory paragraphs hereto.

 

Guarantors:  See the introductory paragraphs hereto.

 

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

 

Indenture:  See the introductory paragraphs hereto.

 

Information:  See Section 5(n) hereof.

 

Initial Purchasers:  See the introductory paragraphs hereto.

 

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

 

Inspectors:  See Section 5(n) hereof.

 

Issue Date:  September 27, 2012, the date of original issuance of the Notes.

 

Issuer:  See the introductory paragraphs hereto.

 

New Guarantees:  See Section 2(a) hereof.

 

Notes:  See the introductory paragraphs hereto.

 

Participant:  See Section 7(a) hereof.

 

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

 

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

 

Private Exchange:  See Section 2(b) hereof.

 

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

 

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

 

Purchase Agreement:  See the introductory paragraphs hereof.

 

Records:  See Section 5(n) hereof.

 

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

 

Registration Default: See Section 4(a) hereof.

 

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.

 

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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.

 

Shelf Notice:  See Section 2(c) hereof.

 

Shelf Registration:  See Section 3(b) hereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2.                                       Exchange Offer

 

(a)                                  Unless the Exchange Offer would violate applicable law or any applicable interpretation of the staff of the SEC, the Issuer and the Guarantors shall use their reasonable best efforts to file with the SEC a Registration Statement (the “Exchange Offer Registration Statement”) on an appropriate registration form with respect to a registered offer (the “Exchange Offer”) to exchange any and all of the Registrable Securities for a like aggregate principal amount of debt securities of the Issuer (the “Exchange Notes”), guaranteed, to the extent applicable, on an unsecured senior basis by the Guarantors (the “New Guarantees” and, together with the Exchange Notes, the “Exchange Securities”), that are identical

 

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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.

 

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

 

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(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;

 

(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

 

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(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 deems necessary for the consummation of the Exchange Offer or Private Exchange.

 

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

 

(c)                                  If, (i) because of any change in law or in currently prevailing interpretations of the staff of the SEC, the Issuer is not permitted to effect the Exchange Offer, (ii) the Exchange Offer is not consummated within 360 days of the Issue Date, (iii) any holder of Private Exchange Notes so requests in writing to the Issuer at any time within 30 days after the consummation of the Exchange Offer, or (iv) in the case of any Holder that participates in the Exchange Offer, such Holder does not receive Exchange Securities on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such Holder as an affiliate of the Issuer within the meaning of the Securities Act) and so notifies the Issuer within 30 days after such Holder first becomes

 

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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 to be included in the Initial Shelf Registration or any Subsequent Shelf Registration (as defined below).

 

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

 

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

 

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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) (each, a “Registration Default”), and then Additional Interest shall accrue on the principal amount of the Registrable Securities at a rate of 0.25% per annum (which rate will be increased by an additional 0.25% per annum for each subsequent 90 day period that such Additional Interest continues to accrue, provided that the rate at which such Additional Interest accrues may in no event exceed 1.00% per annum) (such Additional Interest to be calculated by the Issuer) commencing on the (x) 361st day after the Issue Date, in the case of (A) above, (y) the 361st day after the date such Shelf Registration Statement filing was requested or required in the case of (B) above or (z) the day such Shelf Registration ceases to be effective in the case of (C) above; provided, however, that upon the exchange of the Exchange Securities for all Securities tendered (in the case of clause (A) of this Section 4), upon the effectiveness of the applicable Shelf Registration Statement (in the case of (B) of this Section 4), or upon the effectiveness of the applicable Shelf Registration Statement which had ceased to remain effective (in the case of (C) of this Section 4), Additional Interest on the Registrable Securities in respect of which such events relate as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue.  Notwithstanding any other provisions of this Section 4, the Issuer shall not be obligated to pay Additional Interest provided in Sections 4(a)(B) and (C) during a Shelf

 

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Suspension Period permitted by Section 3(a) hereof.  Notwithstanding anything to the contrary herein, (i) the amount of Additional Interest payable shall not increase because more than one Registration Default has occurred and is continuing and (ii) a Holder or Participating Broker-Dealer that is not entitled to the benefits of the Shelf Registration shall not be entitled to Additional Interest with respect to any Registration Default that pertains to the Shelf Registration.

 

(b)                                 The Issuer shall notify the Trustee within one business day after each and every date on which a Registration Default occurs (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,

 

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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 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.

 

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

 

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

 

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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 Securities during the Applicable Period, upon the occurrence of any event contemplated by Section 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and (subject to Section 5(a) hereof) file with the SEC, at the sole expense of the Issuer, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder (with respect to a Registration Statement filed pursuant to Section 3 hereof) or to the purchasers of the Exchange Securities to whom such Prospectus will be delivered by a Participating Broker-Dealer (with respect to any such Registration Statement), any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

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(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, which shall be the same CUSIP number as the exchange notes issued pursuant to the exchange offer for the notes issued under the Indenture on October 21, 2010, unless it is not possible to obtain the same CUSIP number following the reasonable best efforts of the Issuer to do so.

 

(m)                               In connection with any underwritten offering of Registrable Securities pursuant to a Shelf Registration in accordance with Section 9 hereof, 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 

 

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

 

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

 

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(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 Financial Industry Regulatory Authority (“FINRA”).

 

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

 

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

 

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

 

Each Holder of Registrable Securities and each Participating Broker-Dealer agrees by its acquisition of such Registrable Securities or Exchange Securities to be sold by such Participating Broker-Dealer, as the case may be, that, upon actual receipt of any notice from the Issuer of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such Holder will forthwith

 

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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 FINRA in connection with an underwritten offering and (B) fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of counsel in connection with Blue Sky qualifications of the Registrable Securities or Exchange Securities and determination of the eligibility of the Registrable Securities or Exchange Securities for investment under the laws of such jurisdictions in the United States (x) where the holders of Registrable Securities are located, in the case of the Exchange Securities, or (y) as provided in Section 5(h) hereof, in the case of Registrable Securities or Exchange Securities to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses, including, without limitation, printing prospectuses if the printing of prospectuses is requested by the managing underwriter or underwriters, if any, by the Holders of a majority in aggregate principal amount of the Registrable Securities included in any Registration Statement or in respect of Registrable Securities or Exchange Securities to be sold by any Participating Broker-Dealer during the Applicable Period, as the case may be, (iii) fees and expenses of the Trustee, any exchange agent and their counsel, (iv) fees and disbursements of counsel for the Issuer and, in the case of a Shelf Registration, reasonable fees and disbursements of one special counsel for all of the sellers of Registrable Securities selected by the Holder of a majority in aggregate principal amount of Registrable Securities covered by such Shelf Registration (which counsel shall be reasonably satisfactory to the Issuer) exclusive of any counsel retained pursuant to Section 7 hereof), (v) fees and disbursements of all independent certified public accountants referred to in Section 5(m) hereof (including, without limitation, the expenses of any “cold comfort” letters required by or incident to such performance), (vi) rating agency fees, if any, and any fees associated with making the Registrable Securities or Exchange Securities eligible for trading through The Depository Trust Company, (vii) Securities Act liability insurance, if the Issuer desires such insurance, (viii) fees and expenses of all other Persons retained by the Issuer, (ix) internal expenses of the Issuer (including, without limitation, all salaries and expenses of officers and employees of the Issuer performing legal or accounting duties), (x) the expense of any annual audit, (xi) any fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, and the obtaining of a rating of the securities, in each case, if applicable and (xii) the expenses relating to printing, word

 

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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 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

 

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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 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,

 

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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.

 

(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

 

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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 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.

 

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8.                                       Rule 144 and Rule 144A

 

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

 

9.                                       Underwritten Registrations

 

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

 

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

 

10.                                 Miscellaneous

 

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

 

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

 

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

 

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

 

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

 

	
Deutsche   Bank Securities Inc.
    
	
60   Wall Street
    
	
New   York, New York 10005
    
	
 
    
	
with   a copy to:
    
	
 
    
	
Cahill   Gordon & Reindel LLP
    
	
80   Pine Street
    
	
New   York, New York 10005
    
	
Facsimile   No.: (212) 269-5420
    
	
Attention:
    	
John   A. Tripodoro, Esq.
    
	
 
    	
Jonathan   J. Frankel, Esq.
    

 

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

 

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

 

	
Michaels   Stores, Inc.
    
	
8000 Bent Branch   Drive
    

 

23

 

	
Irving, Texas   75063
    
	
Facsimile   No.: (972) 409-1965
    
	
Attention:   General Counsel
    
	
 
    
	
with   a copy to:
    
	
 
    
	
Ropes &   Gray LLP
    
	
Prudential   Tower, 800 Boylston Street
    
	
Boston   Massachusetts 02199
    
	
Facsimile   No.: (617) 951-7050
    
	
Attention:   David A. Fine, Esq.
    

 

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

 

24

 

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.

 

[Signature Pages Follow]

 

25

 

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

 

 

	
 
    	
MICHAELS   STORES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles M. Sonsteby
    
	
 
    	
 
    	
Name:   Charles M. Sonsteby
    
	
 
    	
 
    	
Title:
    	
Member   of the Interim Office of the Chief Executive Officer,
    
	
 
    	
 
    	
 
    	
Chief   Administrative Officer and
    
	
 
    	
 
    	
 
    	
Chief   Financial Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
AARON   BROTHERS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles M. Sonsteby
    
	
 
    	
 
    	
Name:   Charles M. Sonsteby
    
	
 
    	
 
    	
Title:   President — CAO and CFO
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
ARTISTREE, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles M. Sonsteby
    
	
 
    	
 
    	
Name:   Charles M. Sonsteby
    
	
 
    	
 
    	
Title:
    	
Chief   Administrative Officer and
    
	
 
    	
 
    	
 
    	
Chief   Financial Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
MICHAELS FINANCE   COMPANY, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles M. Sonsteby
    
	
 
    	
 
    	
Name:   Charles M. Sonsteby
    
	
 
    	
 
    	
Title:   President — CAO and CFO
    

 

Signature Page to Registration Rights Agreement

 

 

	
 
    	
MICHAELS STORES PROCUREMENT COMPANY, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles M. Sonsteby
    
	
 
    	
 
    	
Name:   Charles M. Sonsteby
    
	
 
    	
 
    	
Title:
    	
Chief   Administrative Officer and Chief
    
	
 
    	
 
    	
 
    	
Financial   Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
MICHAELS OF CANADA, ULC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles M. Sonsteby
    
	
 
    	
 
    	
Name:   Charles M. Sonsteby
    
	
 
    	
 
    	
Title:
    	
Chief   Administrative Officer and Chief
    
	
 
    	
 
    	
 
    	
Financial   Officer
    
	
 
    	
 
    
	
 
    	
MICHAELS STORES CARD SERVICES, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Charles M. Sonsteby
    
	
 
    	
 
    	
Name:   Charles M. Sonsteby
    
	
 
    	
 
    	
Title:   President — CAO and CFO
    

 

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.

MERRILL LYNCH, PIERCE, FENNER & SMITH

INCORPORATED

BARCLAYS CAPITAL INC.

CREDIT SUISSE SECURITIES (USA) LLC

GOLDMAN, SACHS & CO.

J.P. MORGAN SECURITIES LLC

MORGAN STANLEY & CO. LLC

WELLS FARGO SECURITIES, LLC

 

 

	
By:
    	
Deutsche   Bank Securities Inc.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
For itself and the other several Initial   Purchasers.
    	
 
    

 

Signature Page to Registration Rights Agreement

 

 

SCHEDULE I

 

THE GUARANTORS

 

AARON BROTHERS, INC.

MICHAELS FINANCE COMPANY, INC.

MICHAELS STORES PROCUREMENT COMPANY, INC. 
 MICHAELS OF CANADA, ULC
 MICHAELS STORES CARD SERVICES, LLC
 ARTISTREE, INC.Exhibit 10.1

 

DYNEGY SHAREHOLDERS TRUST DECLARATION

 

This Dynegy Shareholders Trust Declaration (the “Declaration”) dated as of September 28, 2012 (the “Execution Date”) is by and between Dynegy Inc. (collectively with its successors, the “Grantor”) and Wilmington Trust, National Association (the “Trustee”), for the benefit of the stockholders of the Grantor as of the Plan Effective Date (collectively, the “Beneficiaries”).

 

WITNESSETH

 

WHEREAS, on November 7, 2011, Dynegy Holdings, LLC (“DH”), Dynegy Northeast Generation, Inc., Hudson Power, L.L.C., Dynegy Danskammer, L.L.C., and Dynegy Roseton, L.L.C. (collectively, the “DH Debtors”), each filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York, Poughkeepsie Division (the “Court”) thereby commencing cases that are being jointly administered under case number 11-38111 (CGM) (collectively, the “DH Cases”);

 

WHEREAS, on June 1, 2012, the Court entered an order (the “Settlement Order”) approving the terms of that certain amended and restated settlement agreement, dated as of May 30, 2012 (the “Settlement Agreement”), by and among the DH Debtors, the Grantor, certain other non-debtor affiliates of the DH Debtors, and DH’s primary creditor constituencies;

 

WHEREAS, under Section II.a.(ii) of the Settlement Agreement and pursuant to paragraph 11 of the Settlement Order, the Grantor was granted an unliquidated allowed administrative claim pursuant to sections 503(b) and 507(a) of the Bankruptcy Code (the “Claim”), which claim, as set forth in the Settlement Agreement and as contemplated by the

 

 

Settlement Order, is to be assigned to a trust or otherwise transferred in an efficient manner for the benefit of the Grantor’s stakeholders (the “Assignment”);

 

WHEREAS, on June 18, 2012, DH filed the Modified Third Amended Chapter 11 Plan of Reorganization for Dynegy Holdings, LLC proposed by Dynegy Holdings, LLC and Dynegy Inc., which contemplated the merger of DH with and into the Grantor, with the Grantor as the “Surviving Entity” (the “Merger”);

 

WHEREAS, on June 18, 2012, DH and the Grantor (together, the “Plan Debtors”), filed the Motion of Dynegy Holdings, LLC and Dynegy Inc. for an Order Pursuant to Sections 105(a) and 363(b) of the Bankruptcy Code (a) Authorizing the Merger of Dynegy Holdings, LLC into Dynegy Inc. and (b) in Furtherance of Implementation of the Settlement Agreement (the “Implementation Motion”);

 

WHEREAS, pursuant to the Implementation Motion, to clarify and implement the terms of the Settlement Agreement and in aid of confirmation of the Plan, the Plan Debtors requested entry of an order (the “Implementation Order”) (a) authorizing the Grantor to effectuate the Assignment, as contemplated by the Settlement Agreement, at any time prior to the Merger (subject to certain procedures that would allow the Grantor to modify the proposed beneficiaries of the trust to which the Claim is assigned), (b) authorizing the Grantor and DH to effectuate the Merger on or prior to the effective date (the “Effective Date”) of the Plan (as defined below) (subject to the consent of certain parties as specified in the Implementation Motion), and (c) determining that the Implementation Order, and all relief granted therein, would apply in the Grantor’s chapter 11 case and be binding upon all creditors and equity interest holders of the Grantor; in each case, subject to certain conditions, including among others, the prior commencement of a chapter 11 case by the Grantor;

 

2

 

WHEREAS, on July 6, 2012, the Grantor filed in the Court a voluntary petition for relief under chapter 11 of the Bankruptcy Code, thereby commencing case number 12-36728 (CGM) (the “DI Case”);

 

WHEREAS, on July 10, 2012, the Court entered the Implementation Order in both the DH Cases and the DI Case approving the Implementation Motion, thus authorizing the Grantor to effectuate the Assignment of the Claim, subject only to the prior written consent of the official committee of unsecured creditors appointed in the DH Cases (the “Creditors’ Committee”);

 

WHEREAS, on July 12, 2012, the Grantor and DH each filed with the Court, in their respective cases, the Joint Plan of Reorganization for Dynegy Holdings, LLC and Dynegy Inc. (the “Plan”), which Plan is premised on and includes the proposed Merger;

 

WHEREAS, this Trust is created pursuant to, and in accordance with the Settlement Agreement, Settlement Order, and Implementation Order to effectuate the Assignment by the Grantor of the Claim to the Trust prior to the Merger for the benefit of the Beneficiaries;

 

WHEREAS, the Grantor will transfer the Claim to the Trust prior to the Merger Effective Time (as such term is defined in the Implementation Motion);

 

WHEREAS, the Grantor, the Trustee, and the Beneficiaries will treat the transfer to the Trust of the Claim as a transfer to the Beneficiaries on a pro rata basis in accordance with the Percentage Interests (defined below), followed by a transfer of the Claim by the Beneficiaries to the Trust for the benefit of the Beneficiaries, and will treat each Beneficiary as the grantor and owner of its Percentage Interest of the Claim;

 

3

 

WHEREAS, immediately prior to the Effective Date, the Trustee shall be deemed to have distributed the Claim to the Beneficiaries on a pro rata basis in accordance with their respective ownership interests in the Trust as of such date and in a manner determined by the Grantor (for each Beneficiary, its “Percentage Interest” and, together, the “Percentage Interests”), and the Trustee shall provide Reorganized Dynegy with a direction, in substantially the form attached hereto as Schedule A (the “Direction”), to distribute the Settlement Stock Pool and the Warrants in satisfaction of the Claim directly to the Beneficiaries on a pro rata basis in accordance with the Percentage Interests;

 

WHEREAS, the Trust is intended to qualify as a liquidating trust for federal income tax purposes, within the meaning of Treasury Regulations § 301.7701-4(d) and to be exempt from the requirements of the Investment Company Act of 1940 pursuant to Sections 7(a) and 7(b) thereof;

 

WHEREAS, the Trust is intended to be treated as a grantor trust for federal income tax purposes; and

 

WHEREAS, if the Trust shall fail or cease to qualify as a liquidating trust in accordance with Treasury Regulations § 301.7701-4(d), the parties intend that the Trustee take such action as it shall deem appropriate to have the Trust classified as a partnership for federal tax purposes under Treasury Regulations § 301.7701-3 (but not a publicly traded partnership within the meaning of Section 7704 of the Internal Revenue Code of 1986 (the “Code”)), including, if necessary, creating or converting it into a Delaware limited liability partnership or limited liability company that is so classified, the full costs of which, if any, shall be paid by the Grantor to the Trustee prior to the Trustee taking any such action.

 

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NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein, the Grantor and the Trustee agree as follows:

 

ARTICLE I

 

DEFINITIONS AND INTERPRETATIONS

 

1.1          Definitions.  Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Plan.

 

1.2          Interpretation.

 

1.2.1       The headings in this Declaration are for convenience of reference only and shall not limit or otherwise affect the provisions of this Declaration.

 

1.2.2       Words denoting the singular number shall include the plural number and vice versa, and words denoting one gender shall include the other gender.  Any reference herein to the Grantor, DH, the DH Debtors, or the Trustee shall include their respective successors and assigns, as applicable, or with respect to the Trustee, any replacements duly appointed in accordance with this Declaration.

 

1.2.3       Reference in the Declaration to any Section or Article is, unless otherwise specified, to that such Section or Article under this Declaration.  The words “hereto,” “herein,” “hereunder,” and similar terms shall refer to this Declaration and not to any particular Section or Article of this Declaration.

 

ARTICLE II

 

DECLARATION OF TRUST

 

2.1          Creation of Trust.  The Grantor and the Trustee, pursuant to this Declaration, hereby create a trust which shall be known as the “Dynegy Shareholders Trust”.  The Trustee is hereby named, constituted and appointed, to act and serve as Trustee of the Trust upon and subject to the terms and conditions set forth herein.  The Trustee is willing, and does

 

5

 

hereby accept, the appointment, to act and serve as Trustee of the Trust, and to hold and administer the Claim pursuant to the terms and conditions of this Declaration.

 

2.2          Purpose of Trust.  The Grantor and the Trustee hereby create the Trust to (i) receive the Claim prior to the Merger, (ii) distribute the Claim to the Beneficiaries immediately prior to the Effective Date, and (iii) effectuate the Direction by the Trustee to Reorganized Dynegy to distribute the Settlement Stock Pool and Warrants in satisfaction of the Claim on a pro rata basis to the Beneficiaries in accordance with the Percentage Interests.

 

2.3          Transfer of the Claim.  The Grantor hereby grants, releases, assigns, transfers and delivers, on behalf of the Beneficiaries, the Claim to the Trust as of the Execution Date, in trust to be held for the benefit of the Beneficiaries and to be applied as specified in this Declaration.  In addition to the foregoing, pursuant to this Declaration the Grantor shall advance $100,000 (the “Trustee Indemnification Payment”) to the Trust on the Execution Date to pay the reasonable costs and expenses associated with the administration of the Trust.  For the avoidance of doubt, the Trustee Indemnification Payment shall not be considered part of the Trust for any purpose.  Upon the termination of the Trust and the submission of federal tax returns to the Internal Revenue Service, the Trustee shall return the unused portion, if any, of the Trustee Indemnification Payment to the Grantor.  The Grantor shall from time to time as and when reasonably requested by the Trustee execute and deliver or cause to be executed and delivered all documents (in recordable form where necessary or appropriate), and the Grantor shall take or cause to be taken such further action as the Trustee may reasonably deem necessary or appropriate, to vest or perfect in or confirm to the Trustee title to and possession of the Claim.

 

2.4          Creditors’ Committee Approval.  The Grantor certifies to the Trustee that, pursuant to the Implementation Order, the Grantor has obtained the requisite written consent of

 

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the Creditors’ Committee to transfer, release, assign, grant and deliver the Claim to the Trust and/or the Beneficiaries.

 

ARTICLE III

 

ADMINISTRATION OF THE TRUST ESTATE

 

3.1          Rights, Powers and Privileges.  The Trustee shall have all of the rights, powers, privileges and standing expressly provided in this Declaration with respect to the Claim.  The Trustee shall have the power to take the actions granted in the subsections below and any powers reasonably incidental thereto which the Trustee, in its reasonable discretion, deems necessary or appropriate to fulfill the purpose of the Trust, unless otherwise specifically limited or restricted by this Declaration, including but not limited to the following:

 

3.1.1       Hold legal title to any and all rights in or arising from the Claim;

 

3.1.2       Prosecute, compromise, protect and enforce the rights to the Claim vested in the Trustee by this Declaration by any method deemed appropriate by the Trustee in his or her discretion, including, without limitation, by judicial proceedings or otherwise;

 

3.1.3       Make all distributions provided for in, or contemplated by, this Declaration;

 

3.1.4       Open and maintain bank accounts on behalf of or in the name of the Trust;

 

3.1.5       Make all tax withholdings, file tax information returns, make tax elections by and on behalf of the Trust and file returns for the Trust pursuant to Article 10 hereof;

 

3.1.6       Establish such reserves for taxes, assessments and other expenses of administration of the Trust as may be necessary and appropriate for the proper operation of matters incident to the Trust;

 

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3.1.7       Pay all expenses and make all other payments relating to the Claim;

 

3.1.8       Retain and pay third parties pursuant to Article 3.2 hereof;

 

3.1.9       Carry insurance coverage or obtain bonds in such amount as the Trustee deem advisable at the expense of the Trust;

 

3.1.10     Execute all powers provided the Trustee under this Declaration;

 

3.1.11     Seek relief from the appropriate court in the event the Trustee determines it is necessary prior to acting or not acting pursuant to this Declaration;

 

3.1.12     Institute and prosecute claims and causes of action in the appropriate court;

 

3.1.13     Have standing and capacity to institute all causes of action and any other claims, derivative or otherwise, which the owner of the Claim has;

 

3.1.14     Take any and all necessary actions as it shall deem appropriate to have the Trust classified as a partnership for federal tax purposes under Treasury Regulations § 301.7701-3 (but not a publicly traded partnership within the meaning of Section 7704 of the Code), including, if necessary, creating or converting the Trust into a Delaware limited liability partnership or limited liability company that is so classified, in the event that the Trust shall fail or cease to qualify as a liquidating trust within the meaning of Treasury Regulations § 301.7701-4(d); and

 

3.1.15     Take any and all other actions reasonably necessary to effectuate the purposes of the Trust.

 

3.2          Agents and Professionals.  The Trustee may retain, engage and consult with attorneys, accountants, appraisers, or other Persons deemed by the Trustee to be necessary

 

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to assist in the performance of the Trustee’s duties.  The Trustee may pay the reasonable salaries, fees and expenses of such professionals and other Persons out of the Trustee Indemnification Payment and may engage such professionals and other Persons upon such terms as the Trustee, in his or her sole discretion, deem appropriate and proper.

 

3.3          Safekeeping of the Claim.  The Claim received by the Trust shall, until distributed or paid over as herein provided, be held in trust for the benefit of the Beneficiaries, unless and to the extent required by law.  The Trustee shall administer the Claim as set forth herein.  The Trustee shall be under no liability for interest or producing income on the Claim.  The Trust will hold no operating assets and no listed stocks or securities or other readily marketable assets, and will not receive or retain cash or cash equivalents other than as set forth in Section 7.7.  The Trustee will make continuing efforts to dispose of the Claim in accordance with this Declaration and not unduly prolong the duration of the Trust.

 

3.4          Trustee Discretion.  Any right, power, or privilege of the Trustee to perform any discretionary act enumerated in this Declaration shall not be construed as a duty, and the Trustee shall be entitled, in its sole discretion, to require a formal direction from Beneficiaries collectively holding no less than a majority in interest of the Percentage Interests prior to performing any discretionary act enumerated in this Declaration; provided, however, that the Trustee shall be under no obligation to perform any discretionary act enumerated in this Declaration at the request or direction of any of the Beneficiaries unless the Trustee shall have received (from the Grantor or from the Beneficiaries) reasonable security or a cash indemnity against the cost, expenses, and liabilities which might be incurred by it in compliance with such request or direction.

 

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ARTICLE IV

 

DISTRIBUTIONS FROM THE TRUST

 

4.1          Distributions.  Immediately prior to the Effective Date, the Trustee shall be deemed to have distributed the Claim to the Beneficiaries on a pro rata basis in accordance with the Percentage Interests and shall direct Reorganized Dynegy to distribute the Settlement Stock Pool and Warrants in satisfaction thereof on a pro rata basis to the Beneficiaries in accordance with the Percentage Interests.

 

4.2          Withholding.  The Trustee may withhold from amounts distributable to any Beneficiary, any and all amounts, determined in the Trustee’s reasonable sole discretion to be required by any law, regulation, rule, ruling, directive or other governmental requirement.

 

4.3          Payments Limited to the Claim.  All payments to be made (or deemed to have been made) by the Trustee to or for the benefit of any Beneficiary shall be made only from the Claim.  Each Beneficiary shall have recourse only to the Claim for distributions under this Declaration.

 

4.4          Priorities of Distribution.  The Trustee must pay the operating expenses of the Trust before approving and paying distributions to or for the benefit of Beneficiaries.

 

4.5          Irrevocable Distributions.  All distributions made (or deemed to have been made) by the Trustee, once made, shall be irrevocable and shall not be subject to disgorgement.

 

ARTICLE V

 

BENEFICIARIES

 

5.1          Interest Beneficial Only.  The ownership of a Percentage Interest shall not entitle any Beneficiary to any title in or to the Claim or to any right to call for a partition or division of such Claim or to require an accounting, except as specifically provided herein.

 

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5.2                               Evidence of Beneficial Interest.  As soon as reasonably practicable but no later than the time for the distribution on the Claim, the Grantor shall advise the Trustee in writing of (a) the Percentage Interests and (b) such information regarding the Beneficiaries as the Trustee may reasonably require to effectuate the Trustee’s duties hereunder.  Ownership of a Percentage Interest shall not be evidenced by any certificate, security, or receipt or in any other form or manner whatsoever, except as maintained on the books and records of the Trust by the Trustee.

 

5.3                               Standing of Beneficiary.  No Beneficiary shall have standing to request that the appropriate court (a) remove the Trustee or (b) direct the Trustee to do or not to do any act other than as described herein.

 

ARTICLE VI

 

THIRD PARTY RIGHTS AND LIMITATION OF LIABILITY

 

6.1                               Parties Dealing with the Trust or a Trustee.  In the absence of actual knowledge to the contrary, any person dealing with the Trust or a Trustee shall be entitled to rely on the authority of the Trustee or any of the Trustee’s agents to act in connection with the Claim.  There is no obligation on any Person dealing with the Trustee to inquire into the validity or expediency or propriety of any transaction undertaken by the Trustee or any agent of the Trustee.

 

6.2                               Limitation of Trustee’s Liability.

 

6.2.1                     Except as otherwise specified herein, in exercising the rights and duties set forth herein, the Trustee shall exercise its best judgment, to the end that the affairs of the Trust shall be properly managed and the interests of all the Beneficiaries are safeguarded; but the Trustee shall not incur any responsibility or liability by reason of any error of law or of any matter or thing done or suffered or omitted to be done under this Declaration, except for willful misconduct or gross negligence of the Trustee.  No claim or cause of action shall lie against the

 

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Trustee for any action or lack of action taken by the Trustee in reasonable reliance upon the advice of any attorney or other professional engaged or consulted with in accordance with this Declaration.

 

6.2.2                     In addition to the provisions of Article 6.2.1, except as otherwise provided in this Declaration, the Trustee, together with his or her officers, directors, employees, agents, and representatives, are exculpated from any and all causes of action, arising out of the discharge of the powers and duties conferred upon the Trustee by this Declaration or applicable law, except solely for actions or omissions arising out of the Trustee’s gross negligence or willful misconduct.  No holder of a claim or an equity interest in the DH Cases or the DI Case shall have or shall be entitled to pursue any claim or cause of action against the Trustee or his or her officers, directors, employees, agents, and representatives arising from or relating to this Declaration.

 

6.3                               Indemnification.  The Trustee shall be indemnified and receive reimbursement against and from all loss, liability, claim, expense (including counsel fees) or damage which such Trustee may incur or sustain in the exercise and performance of such Trustee’s powers and duties under this Declaration to the full extent permitted by applicable law, except if such loss, liability, expense or damage is finally determined by a court of competent jurisdiction to result from such Trustee’s willful misconduct or gross negligence.  The amounts necessary for such indemnification and reimbursement shall be paid to such Trustee in full and in cash by the Grantor (to the extent any such amounts exceed any remaining portion of the Trustee Indemnification Payment), and the Trustee shall have no responsibility to pay any loss, liability, claim, expense (including counsel fees) or damage (to the extent any such amounts exceed any remaining portion of the Trustee Indemnification Payment) unless and until the Trustee actually receives from the Grantor cash in an amount sufficient to satisfy fully the applicable loss,

 

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liability, claim, expense, or damage.  The Trustee shall not be personally liable for the payment of any Trust expense or claim or other liability of the Trust, and no person shall look to a Trustee personally for the payment of any such expense or liability.  This indemnification shall survive the death, dissolution, resignation or removal (as may be applicable) of a Trustee, or the termination of the Trust, and shall inure to the benefit of the Trustee’s heirs and assigns.

 

ARTICLE VII

 

SELECTION, REMOVAL AND COMPENSATION OF TRUSTEE

 

7.1                               Initial Trustee.  The initial Trustee shall be Wilmington Trust, National Association.

 

7.2                               Term of Service.  The Trustee shall serve until the earlier of (a) termination of the Trust in accordance with this Declaration, or (b) the Trustee’s death, dissolution, resignation or removal (as may be applicable).

 

7.3                               Resignation and Removal of a Trustee.  A Trustee may resign at any time by giving the Beneficiaries and the Grantor at least thirty (30) days’ written notice of his or her intention to do so.  The Beneficiaries holding a majority of the Percentage Interests, acting through a vote or by written consent, may remove the Trustee at any time by giving the Trustee and the Grantor written notice of the Trustee’s removal.  In the event of a resignation or removal, the resigning or removed Trustee shall render a full and complete accounting of monies and assets received, disbursed, and held during the term of office of the Trustee.  The resignation or removal shall be effective on the later of (i) the date specified in the notice; or (ii) the date that is thirty (30) days after the date the notice is delivered.

 

7.4                               Appointment of Successor Trustee.  Upon the resignation or removal of a Trustee, the Grantor shall promptly appoint a successor Trustee.  Upon the death, incapacity, or removal of a Trustee, the Grantor shall promptly appoint a successor Trustee.  Any successor

 

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Trustee so appointed shall consent to and accept in writing the terms of this Declaration and agrees that the provisions of this Declaration shall be binding upon and inure to the benefit of the successor Trustee and all of its heirs and legal and personal representatives, successors or assigns.

 

7.5                               Powers and Duties of Successor Trustee.  A successor Trustee shall have all the rights, privileges, powers, and duties of his or her predecessor.

 

7.6                               Trust Continuance.  The death, dissolution, resignation or removal (as may be applicable) of one or more Trustees shall not terminate the Trust or revoke any existing agency created pursuant to this Declaration or invalidate any action theretofore taken by the Trustee.

 

7.7                               Compensation and Costs of Administration.

 

7.7.1                     On the Execution Date, the Grantor shall pay to the Trustee in immediately available funds the Trustee Indemnification Payment, of which $15,000 (the “Annual Administration Fee”) shall serve to compensate the Trustee its services contemplated hereby (but not its expenses or the fees and expenses of any professional advisors retained by the Trustee in connection herewith).  The Annual Administration Fee shall be due and payable and fully earned on and as of the Execution Date and on as of each anniversary of the Execution Date thereafter until the Trust terminates in accordance with the terms thereof.  The Annual Administration Fee shall be a liability of the Trust and a charge against the Trustee Indemnification Payment.

 

7.7.2                     In addition to the Annual Administration Fee, the Trustee may charge extraordinary administration fees in connection with services of the Trustee outside the scope of the services set forth herein.  Extraordinary administration fees also apply in the pursuit

 

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of any remedies by the Trustee or which may arise as a result of a chapter 11 or other filing pursuant to the Bankruptcy Code.  Extraordinary administration fees are billed at the rate of $490.00 per hour for Managing Directors, Senior Vice Presidents or Members of Senior Management, $475.00 per hour for corporate client services officers and $420.00 per hour for associates and administrative assistants.  Extraordinary administration fees, if any, shall be a liability of the Trust and a charge against the Trustee Indemnification Payment.

 

7.7.3                     Upon termination of the Trust and the fulfillment of the Trustee’s responsibilities with respect thereto, the Trustee shall remit the unused portion, if any, of the Trustee Indemnification Payment to the Grantor.

 

7.7.4                     After the Execution Date, to the extent that the Trustee Indemnification Payment has been exhausted, the Grantor shall promptly reimburse the Trustee for any and all costs, expenses, and obligations incurred by the Trustee (or professionals who may be employed by the Trustee in administering the Trust, in carrying out his responsibilities under this Declaration, or in any manner connected, incidental, or related thereto).

 

ARTICLE VIII

 

MAINTENANCE OF RECORDS

 

8.1                               The Trustee shall maintain books and records containing a description of all property from time to time constituting the Claim and an accounting of all receipts and disbursements.  The books shall be open to inspection by any Beneficiary at any reasonable time during normal business hours.  The Trustee shall furnish to any Beneficiary upon written request an annual statement of receipts and disbursements of the Trust.

 

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ARTICLE IX

 

DURATION OF TRUST

 

9.1                               Duration.  The Trust shall become effective upon the Execution Date. Thereupon, the Trust and its provisions herein shall remain and continue in full force and effect until the Trust is terminated in accordance with the terms hereof.

 

9.2                               Termination upon Distribution of the Claim.  Upon the payment of all costs, expenses, and obligations incurred in connection with administering the Trust (including those incurred in connection with completing all necessary tax returns), the distribution of the Claim in accordance with this Declaration, and the delivery of the Direction by the Trustee to Reorganized Dynegy, the Trust shall terminate and the Trustee shall have no further responsibility in connection therewith except as may be required to effectuate such termination under relevant law.

 

9.3                               Termination After Five Years.

 

9.3.1                     If the Trust has not been previously terminated pursuant to Article 9.2 hereof, the Trust will terminate on the fifth anniversary of the Execution Date, unless otherwise extended by the Grantor; provided, however, that no extension shall be obtained unless the Trustee receives a favorable ruling from the IRS that any further extension would not adversely affect the status of the Trust as a liquidating trust within the meaning of Treasury Regulations § 301.7701-4(d) for federal income tax purposes.  Upon termination pursuant to this Article 9.3.1, the Trustee shall pay all costs, expenses and obligations incurred in connection with administering the Trust (and the Trustee shall be entitled to reimbursement from the Grantor for such costs, expenses, and obligations), make the distributions specified in Article 4.1, and the Trustee shall have no further responsibility in connection therewith.

 

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9.3.2                     If the Trust terminates pursuant to Article 9.3.1, the Trustee is directed to designate one or more Beneficiaries as the remainder Beneficiaries of the Trust and distribute the Claim to such Beneficiaries in such proportions as the Trustee in his or her sole discretion shall determine.

 

ARTICLE X

 

TAX MATTERS

 

10.1                        For federal income tax purposes, the transfer by the Grantor of its title and interest in the Claim to the Trust shall be treated (and the Grantor and the Trustee hereby agree to treat the transfer) as a transfer of the title and interest in the Claim by Grantor to the Beneficiaries pro rata in accordance with their respective Percentage Interests followed by a transfer of such title and interest by the Beneficiaries to the Trust for the benefit of the Beneficiaries pro rata in accordance with their respective Percentage Interests.

 

10.2                        Consistent with Revenue Procedure 94-45, 1994-2 C.B. 684, and unless otherwise required by a determination within the meaning of Section 1313(a) of the Code, the Trust shall be treated as a “liquidating trust” pursuant to Treasury Regulation § 301.7701-4(d) and as a “grantor trust” for federal income tax purposes, pursuant to Sections 671 through 679 of the Code.  In the event that the Trust shall fail or cease to qualify as a liquidating trust in accordance with Treasury Regulations Section 301.7701-4(d), the Trustee shall take such action as it shall deem appropriate to have the Trust classified as a partnership for federal tax purposes under Treasury Regulations Section 301.7701-3 (but not a publicly traded partnership within the meaning of Section 7704 of the Code), including, if necessary, creating or converting it into a Delaware limited liability partnership or limited liability company that is so classified.  For federal income tax purposes, the Beneficiaries will be treated as the grantors and owners of the

 

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Trust and, therefore, will be responsible for the payment of tax on their respective allocable share of the taxable income of the Trust.

 

10.3                        All of the Trust’s trust income will be treated as subject to tax on a current basis.  The Trustee shall cause taxable income and taxable loss of the Trust to be allocated among the Beneficiaries pro rata in accordance with their respective Percentage Interests.

 

10.4                        The Trustee will file or cause to be filed federal returns for the Trust as a grantor trust pursuant to Section 1.671-4(a) of the administrative regulations issued by the U.S. Department of Treasury.  The Trustee will also file or cause to be filed any state and local tax returns for the Trust that the Trustee determines are required to be filed.

 

10.5                        The Grantor shall be responsible for all tax and information reporting requirements with respect to the distribution of the Claim to the Beneficiaries prior to the Merger Effective Date.

 

10.6                        All amounts required to be withheld pursuant to the Code or any provision of any state or local tax law with respect to any payment or distribution to the Beneficiaries shall be treated as amounts distributed to such Beneficiaries for all purposes of this Declaration.

 

ARTICLE XI

 

MISCELLANEOUS

 

11.1                        Limitation on Transferability.  It is understood and agreed that the Percentage Interests herein shall be non-assignable by a Beneficiary during the term of this Declaration.

 

11.2                        Notices.  All notices to be given to Beneficiaries may be given by regular mail or may be delivered personally.  Any notice or other communication which may be or is required to be given, served, or sent to the Trustee shall be in writing and shall be sent by

 

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registered or certified United States mail, return receipt requested, postage prepaid, or transmitted by hand delivery or facsimile (if receipt is confirmed) addressed as follows:

 

If to the Trustee:

 

Wilmington Trust, National Association

50 South Sixth Street, Suite 1290

Minneapolis, MN 55402

Attention: Nicholas D. Tally

 

or to such other address as may from time to time be provided in written notice by the Trustee.

 

With a contemporaneous copy to:

 

Ropes & Gray LLP

1211 Avenue of the Americas

New York, NY 10036

Attention: Mark R. Somerstein

 

11.3                        Wire Transfers.  Wire transfers to the Trustee shall be made to the following account:

 

Wilmington Trust

ABA 031100092

Account Name: 102605-001

Account Name: Dynegy Shareholders Trust

Attn: Mary Alice Stopyra/Global Capital Markets

 

Wire transfers to the Grantor shall be made to the following account:

 

Dynegy Inc.

JP Morgan Chase Bank, NA

Account #744446634

ABA #021000021

 

11.4                        No Bond.  Notwithstanding any state law to the contrary, the Trustee (including any successor) shall be exempt from giving any bond or other security in any jurisdiction.

 

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11.5                        Governing Law.  This Declaration shall be governed by and construed in accordance with the laws of the State of Delaware without regard to conflicts of laws provisions.

 

11.6                        Successors and Assigns.  This Declaration shall inure to the benefit of and shall be binding upon the parties hereto and their respective successors and assigns.

 

11.7                        No Execution.  All funds in the Trust shall be deemed in custodia legis until such times as the funds have actually been paid to or for the benefit of a Beneficiary, and no Beneficiary or any other Person can execute upon, garnish or attach the Claim or the Trustee in any manner or compel payment from the Trust except by order of the appropriate court.  Payment of the Trust proceeds whether to the Beneficiaries or in administration of the Trust shall be solely governed by this Declaration.  The Claim is not subject to and shall not be subject to any liens, claims, encumbrances or security interests in favor of any person.  If any conflicting claims or demands are made or asserted with respect to a Beneficiary’s rights to distribution, the Trustee shall be entitled, at his or her sole election, to refuse to comply with any such conflicting claims or demands.  In so refusing, the Trustee may elect to make no payment or distribution with respect to the disputed claim represented by the claims or demands involved, or any part thereof, and to refer such conflicting claims or demands to the appropriate court, which shall have exclusive jurisdiction over resolution of such conflicting claims or demands.  In so doing, the Trustee shall not be or become liable to any party for his or her refusal to comply with any of such conflicting claims or demands.  The Trustee shall be entitled to refuse to act until either (i) the rights of the adverse claimants have been adjudicated by a final order of the appropriate court, or (ii) all differences have been resolved by a written agreement among all of such parties and the Trustee, which agreement shall include a complete release of the Trustee.

 

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11.8                        Intention of Parties.  This Declaration is intended to create a trust which is a grantor trust for United States federal income tax purposes and, to the extent provided by law, shall be governed and construed in all respects as a grantor trust.

 

11.9                        Amendment.  This Declaration may be amended only by order of a court with jurisdiction of the subject matter hereof.  Notwithstanding this Article 11.9, any amendments to this Declaration shall not be inconsistent with the purpose and intention of the Trust to liquidate in an orderly manner the Claim (which will maximize the value of such Claim) in accordance with Treasury Regulations § 301.7701-4(d), or in the alternative, as allowed under Delaware law applicable to limited liability companies or limited liability partnerships.  In the event that the Trust shall fail or cease to qualify as a liquidating trust in accordance with Treasury Regulations § 301.7701-4(d), this Declaration may be amended by the Trustee to the extent necessary for the Trustee to take such action as it shall deem appropriate to have the Trust classified as a partnership for federal tax purposes under Treasury Regulations § 301.7701-3 (but not a publicly traded partnership within the meaning of Section 7704 of the Code), including, if necessary, creating or converting it into a Delaware limited liability partnership or limited liability company that is so classified.

 

11.10                 Further Assurances.  From and after the Execution Date, the parties hereto covenant and agree to execute and deliver all documents and notices and to take all such further actions as may reasonably be required from time to time to carry out the intent and purposes of this Declaration, and to consummate the transactions hereby contemplated.

 

11.11                 Severability.  If any term, provision, covenant or restriction contained in this Declaration is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants

 

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and restrictions contained in this Declaration shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

 

11.12                 Irrevocability.  The Trust is irrevocable, but is subject to amendment as provided for herein.

 

11.13                 Counterparts.  This Declaration may be executed in one or more counterparts (via facsimile or otherwise), each of which shall be deemed an original but which together shall constitute but one and the same instrument.

 

11.14                 Effectiveness.  This Declaration shall become effective on the Execution Date.

 

11.15                 Investment Company Act.  The Trust is organized as a liquidating entity in the process of liquidation, and therefore should not be considered, and the Trust does not and will not hold itself out as, an “investment company” or an entity “controlled” by an “investment company”, as such terms are defined in the Investment Company Act, 15 U.S.C. § 80a-1 et seq.

 

11.16                 Jurisdiction.  The Court shall have jurisdiction over the Trust, the Trustee and the Claim, including, without limitation, jurisdiction to determine all disputes regarding the administration and activities of the Trust, the Trustee, the provisions of this Declaration and any modifications to this Declaration.  Notwithstanding anything herein to the contrary, the Trustee may commence and prosecute claims and causes of action in any state or federal court or other tribunal where venue and jurisdiction is otherwise proper.

 

[Signatures on following page]

 

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IN WITNESS WHEREOF, the parties have executed this Declaration (or are deemed to have so executed this Declaration) as of the day and year written below.

 

DATED as of this 28th day of September, 2012.

 

 

	
 
    	
TRUSTEE:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Nicholas D. Tally
    
	
 
    	
Nicholas D. Tally
    
	
 
    	
Wilmington Trust, National Association
    
	
 
    	
Vice President
    
	
 
    	
 
    
	
 
    	
GRANTOR:
    
	
 
    	
 
    
	
 
    	
Dynegy Inc.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Catherine B. Callaway
    
	
 
    	
By:
    
	
 
    	
Name:
    	
Catherine B. Callaway
    
	
 
    	
Title:
    	
EVP, General Counsel &
    
	
 
    	
 
    	
Chief Compliance Officer
    

 

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