AMENDMENT NO. 2 TO AMENDED, MODIFIED AND RESTATED
MASTER LEASE AGREEMENT
THIS AMENDMENT NO. 2 TO AMENDED, MODIFIED AND RESTATED MASTER LEASE
AGREEMENT is dated as of July 11, 1996 (the "AMENDMENT NO. 2"), is between
JACKSONVILLE FUNDING ENTERPRISES, LLC, a Delaware limited liability company
and successor in interest to Jacksonville Funding Corporation (the "LESSOR");
and
MICHAELS STORES, INC., a Delaware corporatIon (the "LESSEE"); and
amends that certain Amended, Modified and Restated Master Lease Agreement
dated as of December 18, 1995 (as amended by Amendment No. 1 to Amended,
Modified and Restated Master Lease Agreement dated as of April 22, 1996, the
"ORIGINAL LEASE AGREEMENT") between Jacksonville Funding Corporation (a
corporation which merged into the Lessor with the Lessor being the surviving
entity of such merger) and the Lessee.
NOW, THEREFORE, the parties hereto agree as follows:
1. Section 11.02 in the Original Lease Agreement is deleted in its
entirety and replaced with the following:
"SECTION 11.02. FINANCIAL COVENANTS. Lessee will comply with the
following financial covenants and demonstrate such compliance as of the end
of each fiscal quarter of Lessee pursuant to a Lessee Compliance
Certificate delivered to Lessor in accordance with the terms of Section
11.01 hereof:
(a) RATIO OF FUNDED DEBT TO TOTAL CAPITALIZATION. Lessee will not
permit the ratio of Funded Debt to Total Capitalization at any time during
Lessee's (i) second and third fiscal quarters each year during the Term to
be greater than 55%, and (ii) first and fourth fiscal quarters each year
during the Term to be greater than 45%.
(b) FIXED CHARGES COVERAGE RATIO. Lessee will not permit the Fixed
Charges Coverage Ratio at any time during the Lessee's fiscal quarters
ending (i) October 27, 1996, February 2, 1997, May 4, 1997 and August 3,
1997, to be less than 1.35 to 1.00, and (ii) thereafter during the Term to
be less than 1.50 to 1.00.
(c) CURRENT RATIO. Lessee will not permit the ratio of (i) Current
Assets to (ii) the sum of (A) Current Liabilities plus (B) amounts
outstanding under the Revolving Credit
Agreement as Advances, at any time after July 28, 1996 to be less than 1.75
to 1.00.
(d) MODIFIED LEVERAGE RATIO. Lessee will not permit the ratio,
measured at the end of each quarter (beginning with the fourth quarter of
fiscal year 1996), of (i) Adjusted Total Debt to (ii) the sum of (A)
consolidated income of Lessee and its Subsidiaries before income taxes for
the preceding twelve month period (excluding extraordinary cash gains or
losses for the preceding twelve month period), plus (B) interest expense
for the preceding twelve month period, plus (C) operating lease expense for
the preceding twelve month period plus (D) depreciation and amortization
expense for the preceding twelve month period, at any time to be greater
than six (6) to one (1).
(e) LIMITATION ON CAPITAL EXPENDITURES. Lessee shall not permit
aggregate consolidated Capital Expenditures (including the cash portion of
each acquisition) of the Lessee and its Subsidiaries, to exceed $70,000,000
during any fiscal year during the Term, provided that, capital lease
obligations of Lessee in connection with the point-of-sale equipment and
store systems and services and equipment supporting such equipment and
systems, commencing fiscal year 1996 and thereafter, up to a maximum
aggregate amount of $32,000,000 throughout the Term, shall be excluded from
Capital Expenditures for the purposes of determining compliance with this
Section 11.02(e).
The financial covenants specified above in this Section 11.02 shall
automatically be deemed to be amended and modified at such times as (and in the
same manner and to the same extent as) the corresponding financial covenants
under the Revolving Credit Agreement are amended and modified; PROVIDED,
HOWEVER, notwithstanding the foregoing, to the extent (i) the Revolving Credit
Agreement is terminated or expires prior to the termination or expiration of the
Term or (ii) NationsBank or Credit Lyonnais, for whatever reason, ceases to be a
lender under the Revolving Credit Agreement prior to the termination or
expiration of the Term, then in each such case, the financial covenants under
this Lease thereafter shall be identical to those in existence (A) as of the
date the Revolving Credit Agreement terminates or expires (in the case of
subsection (i) of this proviso) or (B) as of the date such Lender ceases to be a
lender under the Revolving Credit Agreement (in the case of subsection (ii) of
this proviso)."
2. DEFINED TERMS. The following definitions shall be added to or amended
in APPENDIX A of the Original Lease Agreement, as appropriate, to read as
follows:
"Capital Expenditures" means capital expenditures, as defined in
accordance with GAAP.
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"Fixed Charges" means for the Lessee and its Subsidiaries as of any
determination date for the preceding 12-month period, the sum of (a)
interest expense for such period, plus (b) scheduled principal payments on
Funded Debt permitted to be incurred under Section 7.02(iv) of the
Revolving Credit Agreement or such period, plus (c) operating lease expense
for such period, all as determined and consolidated in accordance with
GAAP.
"Fixed Charges Coverage Ratio" means for the Lessee and its
SubsidiarIes as of any determination date for the preceding 12-month
period, the ratio of (a) the sum of (i) consolidated income of the Lessee
and its Subsidiaries before income taxes for such period (excluding
extraordinary cash gains or losses for such period), plus (ii) interest
expense for such period plus (iii) operating lease expense for such period
plus (iv) depreciation and amortization for such period to (b) Fixed
Charges, all as determined and consolidated in accordance with GAAP.
"Funded Debt" means money borrowed and Total Debt represented by notes
payable and drafts accepted representing extensions of credit, all
obligations evidenced by bonds, debentures, notes or other similar
instruments (including all obligations secured by any Lien to which any
property or asset owned by a Person is subject, whether or not the
obligation secured thereby shall have been assumed), all Total Debt upon
which interest charges are customarily paid by a Person (excluding trade
payables), all Total Debt evidenced in writing (including capitalized lease
obligations) issued or assumed by such Person as full or partial payment
for property or services, whether or not any such notes, drafts,
obligations or Total Debt represent Total Debt for money borrowed, provided
that, Funded Debt shall not include any Total Debt among (a) the Lessee and
(b) the Lessee's Subsidiaries.
"LIBOR Rate" shall mean the sum of (a) 1.40% plus (b) the interest
rate per annum (rounded upwards, if necessary to the nearest one-sixteenth
of one percent) which is the quotient of (A) the rate per annum at which
dollar deposits in immediately available funds are offered to NationsBank
two Business Days before the first day of such applicable Payment Period by
prime banks in the interbank Eurodollar market as at or about 11:00 A.M.,
Dallas, Texas time, for delivery on the first day of such applicable Rent
Payment Period, for the number of days comprised therein and in an amount
equal to the aggregate amount bearing such interest rate to be outstanding
for such applicable Rent Payment Period, divided by (B) the remainder of
1.00 MINUS the Eurodollar Reserve Percentage applicable to such amounts.
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"Total Capitalization" means, on any date of determination for the
Lessee and its Subsidiaries, on a consolidated basis, the sum of (a) Net
Worth on such date of determination plus (b) the aggregate outstanding
amount of Funded Debt for the Lessee and its Subsidiaries on such date of
determination.
3. The Lessee represents and warrants that (a) this Amendment No. 2
constitutes its legal, valid, and binding obligation, enforceable in accordance
with the terms hereof (subject as to enforcement of remedies to any applicable
bankruptcy, reorganization, moratorium, or other laws or principles of equity
affecting the enforcement of creditors' rights generally), (b) there exists no
Lease Event of Default after giving effect to this Amendment No. 2, (c) its
representations and warranties set forth in the Original Lease Agreement and the
other Operative Documents are true and correct on the date hereof after giving
effect to this Amendment No. 2, (d) it has complied with all agreements and
conditions to be complied with by it under the Original Lease Agreement and the
other Operative Documents by the date hereof after giving effect to this
Amendment No. 2, (e) the Original Lease Agreement, as amended hereby, and the
other Operative Documents remain in full force and effect, and (f) no notice to,
or consent of, any Person is required under the terms of any agreement of the
Lessee in connection with the execution of this Amendment No. 2.
4. The Lessee shall execute and deliver such further agreements,
documents, instruments, and certificates in form and substance satisfactory to
the Lessor, the Agent to the Lenders and the Co-Agent to the Lenders as any such
Person or any Lender may deem reasonably necessary or appropriate in connection
with this Amendment No. 2.
5. Except as hereby modified, the terms and conditions of the Original
Lease Agreement remain in full force and effect.
6. This Amendment No. 2 has been delivered in, and shall in all respects
be governed by, and construed in accordance with, the laws of the State of
Texas applicable to agreements made and to be performed entirely within such
State, including all matters of construction, validity and performance;
PROVIDED, notwithstanding the foregoing, to the extent relating to the creation
and perfection of liens on real estate in the State of Florida or any other
state, this Amendment No. 2 shall be governed by, and construed in accordance
with, the laws of the State of Florida or such other state.
7. This Amendment No. 2 may be executed in any number of counterparts,
each of which shall be deemed an original and all of which taken together shall
constitute but one and the same instrument.
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8. All capitalized terms used but not otherwise defined herein shall have
the meanings set forth therefor in the Original Lease Agreement and/or APPENDIX
A thereto.
(Signature page follows)
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2
as of the above-written date.
JACKSONVILLE FUNDING ENTERPRISES, LLC, as a
successor in interest to Jacksonville Funding
Corporation, by its members
By First Security Bank, National Association,
as Owner Trustee for Michaels Stores Trust
1995-1
By /s/ Xxxxx X. Xxxx
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Title Vice President
----------------------------------------
By First Security Bank, National Association,
as Owner Trustee for Michaels Stores Trust
1995-2
By /s/ Xxxxx X. Xxxx
-------------------------------------------
Title Vice President
----------------------------------------
MICHAELS STORES, INC.
By
-------------------------------------------
Title
----------------------------------------
ACKNOWLEDGED AND AGREED:
NATIONSBANK OF TEXAS, N.A., as Agent
to the Lenders and as a Lender
By
---------------------------------
Title
------------------------------
CREDIT LYONNAIS NEW YORK BRANCH, as Co-Agent
to the Lenders and as a Lender
By
---------------------------------
Title
------------------------------
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2
as of the above-written date.
JACKSONVILLE FUNDING ENTERPRISES, LLC, as a
successor in interest to Jacksonville Funding
Corporation, by its members
By First Security Bank, National Association,
as Owner Trustee for Michaels Stores Trust
1995-1
By
-------------------------------------------
Title
----------------------------------------
By First Security Bank, National Association,
as Owner Trustee for Michaels Stores Trust
1995-2
By
-------------------------------------------
Title
----------------------------------------
MICHAELS STORES, INC.
By /s/ X.X. Xxxxxxxx
-------------------------------------------
Title Vice President
----------------------------------------
ACKNOWLEDGED AND AGREED:
NATIONSBANK OF TEXAS, N.A., as Agent
to the Lenders and as a Lender
By
---------------------------------
Title
------------------------------
CREDIT LYONNAIS NEW YORK BRANCH, as Co-Agent
to the Lenders and as a Lender
By
---------------------------------
Title
------------------------------
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2
as of the above-written date.
JACKSONVILLE FUNDING ENTERPRISES, LLC, as a
successor in interest to Jacksonville Funding
Corporation, by its members
By First Security Bank, National Association,
as Owner Trustee for Michaels Stores Trust
1995-1
By
-------------------------------------------
Title
----------------------------------------
By First Security Bank, National Association,
as Owner Trustee for Michaels Stores Trust
1995-2
By
-------------------------------------------
Title
----------------------------------------
MICHAELS STORES, INC.
By
-------------------------------------------
Title
----------------------------------------
ACKNOWLEDGED AND AGREED:
NATIONSBANK OF TEXAS, N.A., as Agent
to the Lenders and as a Lender
By /s/ Xxxxxxx Xxxxxxxxxxx
---------------------------------
Title Vice President
------------------------------
CREDIT LYONNAIS NEW YORK BRANCH, as Co-Agent
to the Lenders and as a Lender
By
---------------------------------
Title
------------------------------
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2
as of the above-written date.
JACKSONVILLE FUNDING ENTERPRISES, LLC, as a
successor in interest to Jacksonville Funding
Corporation, by its members
By First Security Bank, National Association,
as Owner Trustee for Michaels Stores Trust
1995-1
By
-------------------------------------------
Title
----------------------------------------
By First Security Bank, National Association,
as Owner Trustee for Michaels Stores Trust
1995-2
By
-------------------------------------------
Title
----------------------------------------
MICHAELS STORES, INC.
By
-------------------------------------------
Title
----------------------------------------
ACKNOWLEDGED AND AGREED:
NATIONSBANK OF TEXAS, N.A., as Agent
to the Lenders and as a Lender
By
---------------------------------
Title
------------------------------
CREDIT LYONNAIS NEW YORK BRANCH, as Co-Agent
to the Lenders and as a Lender
By /s/ Xxxxxx Xxxxxxxxx
---------------------------------
Title XXXXXX XXXXXXXXX
------------------------------
SENIOR VICE PRESIDENT
