FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
CONFORMED
COPY
FIRST AMENDMENT TO
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this “Amendment”) is made as of
this 1st day of September, 2006, among Xxxx Paste Mergerco, Inc., a Delaware corporation (“Xxxx
MergerCo”), Blackstone Paste Mergerco, Inc., a Delaware corporation (“Blackstone
MergerCo” and, together with Xxxx MergerCo, “MergerCos”), Xxxx Paste Xxxxx, LLC, a
Delaware limited liability company (“Xxxx XxxXx”), Blackstone Paste Xxxxx, LLC, a Delaware
limited liability company (“Blackstone XxxXx” and, together with Xxxx Xxxxx,
“FinCos”; MergerCos and Fincos, collectively, the “Sponsor Entities”), and Michaels
Stores, Inc., a Delaware corporation (the “Company”).
WHEREAS, the Sponsor Entities and the Company entered into a certain Agreement and Plan of
Merger, dated as of June 30, 2006 (the “Merger Agreement”);
WHEREAS, pursuant to the terms of the Merger Agreement the Company and the Sponsor Entities
have agreed to use their reasonable best efforts to assist and cooperate with the other parties to
the Merger Agreement in doing all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other transactions
contemplated by the Merger Agreement;
WHEREAS, the Sponsor Entities have requested the Company to enter into this Amendment in order
to facilitate the consummation by the Sponsor Entities of the Merger and the other transactions
contemplated by the Merger Agreement; and
WHEREAS, the Equity Financing Commitments remain in full force and effect, notwithstanding the
execution and delivery of this Amendment, and the Funds are obligated, subject to the terms and
conditions of the Equity Financing Commitments, to provide the full amount of the equity
contribution set forth therein, notwithstanding that, following the effectiveness of this
Amendment, (i) the Rollover Shares will not be paid the Merger Consideration but will continue to
be outstanding as shares of the Surviving Corporation Common Stock and (ii) the Rollover Options
will not be converted into the right to receive cash but will continue to be outstanding as options
to acquire shares of the Surviving Corporation Common Stock.
NOW, THEREFORE, in consideration of the premises, mutual covenants and agreements contained
herein, the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms not otherwise defined herein shall have the
respective meanings ascribed to them in the Merger Agreement.
2. Amendment of Merger Agreement. Effective as of the date hereof, the
Merger Agreement is hereby amended as follows:
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2.1. Amendment of First Recital. The first recital to the Merger Agreement is hereby
amended and restated in its entirety as follows:
“WHEREAS, the Board of Directors of the Company and each MergerCo has approved and declared
advisable, and the Board of Managers of each Xxxxx has approved, this Agreement and the merger of
each MergerCo with and into the Company (the “Merger”), upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding share of common stock,
par value $0.10 per share, of the Company (“Company Common Stock”), other than (a) shares
of Company Common Stock directly owned by the Company, as treasury stock, or by any Sponsor Entity,
(b) the Appraisal Shares and (c) the Rollover Shares will be converted into the right to receive
$44.00 in cash ;”
2.2. Amendment of Section 2.01(a). Section 2.01(a) of the Merger Agreement is hereby
amended and restated in its entirety as follows:
“(a) Capital Stock of MergerCos. Each share of capital stock of each MergerCo (the
“MergerCo Shares”) issued and outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and nonassessable share of the common
stock, par value $0.10 per share, of the Surviving Corporation (the “Surviving Corporation
Common Stock”).”
2.3. Amendment of Section 2.01(c). Section 2.01(c) of the Merger Agreement is hereby
amended and restated in its entirety as follows:
“(c) Conversion of Company Common Stock. Each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (including shares of Company Restricted
Stock, but excluding (i) shares to be canceled in accordance with Section 2.01(b), (ii) except as
provided in Section 2.01(d), the Appraisal Shares and (iii) the Rollover Shares) shall be converted
into the right to receive $44.00 in cash, without interest (the “Merger Consideration”).
At the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and
shall automatically be canceled and shall cease to exist, and each holder of a certificate that
immediately prior to the Effective Time represented any such shares of Company Common Stock (each,
a “Certificate”) shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration and any dividends declared in accordance with Section 4.01(a) with
a record date prior to the Effective Time that remain unpaid at the Effective Time and that are due
to such holder.”
2.4. Addition of Section 2.01(e). A new Section 2.01(e) is hereby added to the Merger
Agreement as follows:
“(e) Rollover Shares. Each share of Company Common Stock that is issued and
outstanding immediately prior to the Effective Time and that (i) is owned, beneficially or of
record, by any person that is a party to the Rollover Agreement, in the form
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previously
agreed upon by the Company and MergerCos (a
“Non-Employee Rollover Agreement”), or, with respect to any person that is an employee of
the Company or any of its Subsidiaries, an Employee Rollover Agreement, in the form to be agreed
upon by the Company and MergerCos (an “Employee Rollover Agreement”), and (ii) is
contemplated by any Non-Employee Rollover Agreement or any Employee Rollover Agreement, as the case
may be, to continue outstanding as a share of the Surviving Corporation Common Stock (a
“Rollover Share”), shall remain outstanding as a validly issued, fully paid and
nonassessable share of the Surviving Corporation Common Stock.”
2.5. Amendment of Section 2.02. Section 2.02 of the Merger Agreement is hereby
amended and restated in its entirety as follows:
“SECTION 2.02. Exchange Fund. (a) Paying Agent. Prior to the Closing Date,
the Sponsor Entities shall appoint a bank or trust company reasonably acceptable to the Company to
act as paying agent (the “Paying Agent”) for the payment of the Merger Consideration and
the Option Amounts in accordance with this Article II and, in connection therewith, shall enter
into an agreement with the Paying Agent in a form reasonably acceptable to the Company. At or
prior to the Effective Time, the Sponsor Entities shall deposit, or shall cause the Surviving
Corporation to deposit, with the Paying Agent, cash in an amount sufficient to pay the aggregate
Merger Consideration and the aggregate Option Amount, in each case as required to be paid pursuant
to this Agreement (such cash being hereinafter referred to as the “Exchange Fund”).
(b) Certificate Exchange Procedures. As promptly as practicable after the Effective
Time, but in any event within two business days thereafter, the Surviving Corporation shall cause
the Paying Agent to mail to each holder of record of a Certificate (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent and
which shall otherwise be in customary form) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. Each holder of record of a
Certificate shall, upon surrender to the Paying Agent of such Certificate, together with such
letter of transmittal, duly executed, and such other documents as may reasonably be required by the
Paying Agent, be entitled to receive in exchange therefor the amount of cash which the number of
shares of Company Common Stock previously represented by such Certificate shall have been converted
into the right to receive pursuant to Section 2.01(c), and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Company Common Stock which is
not registered in the transfer records of the Company, payment of the Merger Consideration may be
made to a person other than the person in whose name the Certificate so surrendered is registered
if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment shall pay any fiduciary or surety bonds or any transfer or
other similar taxes required by reason of the payment of the Merger Consideration to a person other
than the registered holder of such Certificate or establish to the reasonable satisfaction of the
Surviving Corporation that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.02(b), each Certificate shall be deemed
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at any time after the
Effective Time to represent only the right to receive upon such surrender the Merger Consideration
which the holder thereof has the right to receive in respect of such Certificate pursuant to this
Article II and any dividends declared in accordance with Section 4.01(a) with a record date prior
to the Effective Time that remain unpaid at the Effective Time and that are due to such holder. No
interest shall be paid or will accrue on any cash payable to holders of Certificates pursuant to
the provisions of this Article II.
(c) Surrender of Rollover Shares and MergerCo Shares. Each holder of a certificate
representing the Rollover Shares or the MergerCo Shares, upon surrender to the Surviving
Corporation of such certificate and such other documents as may reasonably be required by the
Surviving Corporation, shall be entitled to receive a certificate or certificates representing the
number of shares of Surviving Corporation Common Stock to which such holder is entitled pursuant to
Section 2.01(a) or 2.01(e), as applicable, and the certificates so surrendered shall forthwith be
canceled.
(d) No Further Ownership Rights in Company Common Stock. All cash paid upon the
surrender of Certificates in accordance with the terms of this Article II shall be deemed to have
been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock
formerly represented by such Certificates, subject, however, to the Surviving
Corporation’s obligation to pay all dividends that may have been declared by the Company in
accordance with Section 4.01(a) and that remain unpaid at the Effective Time. At the close of
business on the day on which the Effective Time occurs, the stock transfer books of the Company
shall be closed and there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the close of business on the day on which the
Effective Time occurs, any Certificate or any certificate representing any Rollover Shares is
presented to the Surviving Corporation for transfer, it shall be canceled and exchanged as provided
in this Article II.
(e) Termination of the Exchange Fund. Any portion of the Exchange Fund that remains
undistributed to the holders of the Certificates for 12 months after the Effective Time shall be
delivered to the Surviving Corporation, upon demand, and any holders of the Certificates who have
not theretofore complied with this Article II shall thereafter look only to the Surviving
Corporation for, and the Surviving Corporation shall remain liable for, payment of their claims for
the Merger Consideration pursuant to the provisions of this Article II.
(f) No Liability. None of the Company, the Surviving Corporation, the Sponsor
Entities or the Paying Agent shall be liable to any person in respect of any cash from the Exchange
Fund delivered to a public official in compliance with any applicable state, Federal or other
abandoned property, escheat or similar Law. If any Certificate shall
not have been surrendered prior to the date on which the related Merger Consideration would
escheat to or become the property of any Governmental Entity, any such Merger Consideration shall,
to the extent permitted by applicable Law, immediately prior to such time become the property of
the Surviving Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
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(g) Investment of Exchange Fund. The Paying Agent shall invest the cash in the
Exchange Fund as directed by the Surviving Corporation; provided, however, that
such investments shall be in obligations of or guaranteed by the United States of America or any
agency or instrumentality thereof and backed by the full faith and credit of the United States of
America, in commercial paper obligations rated A-1 or P-1 or better by Xxxxx’x Investors Service,
Inc. or Standard & Poor’s Corporation, respectively, or in certificates of deposit, bank repurchase
agreements or banker’s acceptances of commercial banks with capital exceeding $1.0 billion (based
on the most recent financial statements of such bank that are then publicly available). Any
interest and other income resulting from such investments shall be paid solely to the Surviving
Corporation. Nothing contained herein and no investment losses resulting from investment of the
Exchange Fund shall diminish the rights of any holder of Certificates to receive the Merger
Consideration or any holder of a Company Stock Option to receive the Option Amount, in each case as
provided herein.
(h) Lost Certificates. If any Certificate or certificate representing any Rollover
Shares shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond or surety in such reasonable amount as
the Surviving Corporation may direct as indemnity against any claim that may be made against it
with respect to such certificate, (i) the Paying Agent shall deliver in exchange for such lost,
stolen or destroyed Certificate the applicable Merger Consideration with respect thereto or (ii)
the Surviving Corporation shall issue a certificate or certificates representing the number of
shares of Surviving Corporation Common Stock as provided in Section 2.01(e) represented by such
lost, stolen or destroyed certificate representing Rollover Shares.
(i) Withholding Rights. The Surviving Corporation or the Paying Agent shall be
entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of shares of Company Common Stock or any holder of a Company Stock Option such
amounts as the Surviving Corporation or the Paying Agent are required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the
“Code”), or any provision of state, local or foreign tax Law. To the extent that amounts
are so withheld and paid over to the appropriate taxing authority by the Surviving Corporation or
the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Common Stock or the holder of the Company
Stock Option, as the case may be, in respect of which such deduction and withholding was made by
the Surviving Corporation or the Paying Agent.”
2.6. Amendment of Section 2.03(a). Section 2.03(a) of the Merger Agreement is hereby
amended by inserting “(other than the Rollover Options)” after the first reference therein to
“Company Stock Options”.
2.7. Addition of Section 2.03(c). A new Section 2.03(c) is hereby added to the Merger
Agreement as follows:
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“(c) Rollover Options. Each unexercised Company Stock Option that is outstanding
immediately prior to the Effective Time and that (i) is held by any person that is a party to an
Employee Rollover Agreement and (ii) is contemplated by such Employee Rollover Agreement to remain
outstanding as an option to acquire shares of the Surviving Corporation Common Stock (a
“Rollover Option”) shall not be converted into the right to receive cash pursuant to
Section 2.03(a) and shall remain outstanding as an option to acquire shares of the Surviving
Corporation Common Stock, with such changes thereto as are described in such Employee Rollover
Agreement.”
2.8. Amendment of Section 5.09(a). Section 5.09(a) of the Merger Agreement is hereby
amended by inserting the following sentence at the end thereof:
“MergerCos shall take all actions to ensure that each Rollover Share represents, immediately
after the Effective Time, value per share equivalent to the Merger Consideration and, in furtherance of the foregoing, that portion of the shares of the Surviving Corporation Common Stock
issued and outstanding immediately after the Effective Time equal to a quotient obtained by
dividing $44.00 by the aggregate amount of the equity financing of the Merger (including the Rollover Shares, valued at the Merger Consideration) and the other
transactions contemplated hereby.”
3. No Breach by the Company. Each of the Sponsor Entities hereby agrees that no
representation or warranty of the Company set forth in the Merger Agreement shall be deemed to be
inaccurate, whether as of the date of the Merger Agreement or as of the Closing Date, and no
covenant or agreement of the Company set forth in the Merger Agreement shall be deemed to be
breached, in each case, as a result of the Company having entered into, or contemplating entering
into, any Non-Employee Rollover Agreement or any Employee Rollover Agreement.
4. Governing Law. This Amendment shall be governed by, and construed in accordance
with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
5. Counterparts. This Amendment may be executed in one or more counterparts
(including by facsimile), all of which shall be considered one and the same agreement and shall
become effective when one or more counterparts have been signed by each of the parties and
delivered to the other parties.
6. Effect of this Amendment; No Other Modifications. From and after the date of this
Amendment, all references in the Merger Agreement to “this Agreement”,
“hereof”, “herein”, “hereunder” and words or expressions of similar import shall be deemed to
be references to the Merger Agreement as amended by this Agreement, provided that, for the
avoidance of doubt, all references to the “date hereof”, the “date of this Agreement” and words and
expressions of similar import shall refer to June 30, 2006. Except as amended hereby, the terms
and conditions of the Merger Agreement shall continue in full force and effect.
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IN WITNESS WHEREOF, Xxxx MergerCo, Blackstone MergerCo, Xxxx XxxXx, Blackstone XxxXx and the
Company have caused this Amendment to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
XXXX PASTE MERGERCO, INC. |
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| By: | /s/ Xxxxxxx X. Xxxxx | |||
| Name: Xxxxxxx X. Xxxxx | ||||
| Title: President | ||||
BLACKSTONE PASTE MERGERCO, INC. |
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| By: | /s/ Xxxxxxx X. Xxxxxxx | |||
| Name: Xxxxxxx X. Xxxxxxx | ||||
| Title: Vice President, Secretary & Treasurer | ||||
XXXX PASTE XXXXX, LLC |
||||
| By: | /s/ Xxxxxxx X. Xxxxx | |||
| Name: Xxxxxxx X. Xxxxx | ||||
| Title: President | ||||
BLACKSTONE PASTE XXXXX, LLC |
||||
| By: | /s/ Xxxxxxx X. Xxxxxxx | |||
| Name: Xxxxxxx X. Xxxxxxx | ||||
| Title: Vice President, Secretary & Treasurer | ||||
MICHAELS STORES, INC. |
||||
| By: | /s/ Xxxxxxx X. Xxxxx | |||
| Name: Xxxxxxx X. Xxxxx | ||||
| Title: President and Chief Financial Officer | ||||
