MICHAELS STORES INC
EX-10.2 FORM OF DIRECTOR INDEMNIFICATION AGREEMENT
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<TYPE>EX-10.2
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<FILENAME>d11171exv10w2.htm
<DESCRIPTION>EX-10.2 FORM OF DIRECTOR INDEMNIFICATION AGREEMENT
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<P align="right"><FONT size="2"><B>Exhibit&nbsp;10.2</B>
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<P align="center"><FONT size="2"><B>DIRECTOR INDEMNIFICATION AGREEMENT
</B>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Director Indemnification Agreement, dated as of
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, 2003
(this &#147;<B><I>Agreement</I></B>&#148;), is made by and between Michaels Stores, Inc., a Delaware
corporation (the &#147;<B><I>Company</I></B>&#148;), and <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> (&#147;<B><I>Indemnitee</I></B>&#148;).
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<P align="center"><FONT size="2"><B>RECITALS:
</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;Section&nbsp;141 of the Delaware General Corporation Law provides that the
business and affairs of a corporation shall be managed by or under the
direction of its board of directors.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;By virtue of the managerial prerogatives vested in the directors of a
Delaware corporation, directors act as fiduciaries of the corporation and its
stockholders.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;Thus, it is critically important to the Company and its stockholders
that the Company be able to attract and retain the most capable persons
reasonably available to serve as directors of the Company.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;In recognition of the need for corporations to be able to induce
capable and responsible persons to accept positions in corporate management,
Delaware law authorizes (and in some instances requires) corporations to
indemnify their directors and officers, and further authorizes corporations to
purchase and maintain insurance for the benefit of their directors and
officers.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E.&nbsp;The Delaware courts have recognized that indemnification by a
corporation serves the dual policies of (1)&nbsp;allowing corporate officials to
resist unjustified lawsuits, secure in the knowledge that, if vindicated, the
corporation will bear the expense of litigation and (2)&nbsp;encouraging capable
women and men to serve as corporate directors and officers, secure in the
knowledge that the corporation will absorb the costs of defending their honesty
and integrity.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F.&nbsp;The number of lawsuits challenging the judgment and actions of
directors of Delaware corporations, the costs of defending those lawsuits, and
the threat to directors&#146; personal assets have all materially increased over the
past several years, chilling the willingness of capable women and men to
undertake the responsibilities imposed on corporate directors.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G.&nbsp;Recent federal legislation and rules adopted by the Securities and
Exchange Commission and the national securities exchanges have imposed
additional disclosure and corporate governance obligations on directors of
public companies and have exposed such directors to new and substantially
broadened civil liabilities.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;H.&nbsp;These legislative and regulatory initiatives have also exposed
directors of public companies to a significantly greater risk of criminal
proceedings, with attendant defense costs and potential criminal fines and
penalties.
</FONT>
<P align="center"><FONT size="2">&nbsp;
</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I.&nbsp;Under Delaware law, a director&#146;s right to be reimbursed for the costs
of defense of criminal actions, whether such claims are asserted under state or
federal law, does not depend upon the merits of the claims asserted against the
director and is separate and distinct from any right to indemnification the
director may be able to establish, and indemnification of the director against
criminal fines and penalties is permitted if the director satisfies the
applicable standard of conduct.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;J.&nbsp;Indemnitee is a director of the Company and his/her willingness to
serve in such capacity is predicated, in substantial part, upon the Company&#146;s
willingness to indemnify him/her in accordance with the principles reflected
above, to the fullest extent permitted by the laws of the state of Delaware,
and upon the other undertakings set forth in this Agreement.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;K.&nbsp;Therefore, in recognition of the need to provide Indemnitee with
substantial protection against personal liability, in order to procure
Indemnitee&#146;s continued service as a director of the Company and to enhance
Indemnitee&#146;s ability to serve the Company in an effective manner, and in order
to provide such protection pursuant to express contract rights (intended to be
enforceable irrespective of, among other things, any amendment to the Company&#146;s
certificate of incorporation or bylaws (collectively, the <B><I>&#147;Constituent
Documents&#148;</I></B>), any change in the composition of the Company&#146;s Board of Directors
(the <B><I>&#147;Board&#148;</I></B>) or any change-in-control or business combination transaction
relating to the Company), the Company wishes to provide in this Agreement for
the indemnification of and the advancement of Expenses (as defined in Section
1(c)) to Indemnitee as set forth in this Agreement and for the continued
coverage of Indemnitee under the Company&#146;s directors&#146; and officers&#146; liability
insurance policies.
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;L.&nbsp;In light of the considerations referred to in the preceding recitals,
it is the Company&#146;s intention and desire that the provisions of this Agreement
be construed liberally, subject to their express terms, to maximize the
protections to be provided to Indemnitee hereunder.
</FONT>
<P align="center"><FONT size="2"><B>AGREEMENT:
</B>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, the parties hereby agree as follows:
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.&nbsp;Certain Definitions. </B>In addition to terms defined elsewhere herein,
the following terms have the following meanings when used in this Agreement
with initial capital letters:
</FONT>
<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
<B><I>&#147;Claim&#148;</I></B> means (i)&nbsp;any threatened, asserted, pending or completed
claim, demand, action, suit or proceeding, whether civil, criminal,
administrative, arbitrative, investigative or other, and whether made pursuant
to federal, state or other law; and (ii)&nbsp;any
inquiry or investigation, whether made, instituted or conducted by the
Company or any other party, including without limitation any federal, state or
other governmental entity, that Indemnitee determines might lead to the
institution of any such claim, demand, action, suit or proceeding.
</FONT>
<P align="center"><FONT size="2">2
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<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <B><I>&#147;Controlled Affiliate&#148; </I></B>means any corporation, limited liability
company, partnership, joint venture, trust or other entity or enterprise,
whether or not for profit, that is directly or indirectly controlled by the
Company. For purposes of this definition, &#147;control&#148; means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of an entity or enterprise, whether through the
ownership of voting securities, through other voting rights, by contract or
otherwise; <I>provided </I>that direct or indirect beneficial ownership of capital
stock or other interests in an entity or enterprise entitling the holder to
cast 20% or more of the total number of votes generally entitled to be cast in
the election of directors (or persons performing comparable functions) of such
entity or enterprise shall be deemed to constitute control for purposes of this
definition.
</FONT>
<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <B><I>&#147;Disinterested Director&#148;</I></B> means a director of the Company who is not
and was not a party to the Claim in respect of which indemnification is sought
by Indemnitee.
</FONT>
<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)
<B><I>&#147;Expenses&#148;</I></B> means attorneys&#146; and experts&#146; fees and expenses and all
other costs and expenses paid or payable in connection with investigating,
defending, being a witness in or participating in (including on appeal), or
preparing to investigate, defend, be a witness in or participate in (including
on appeal), any Claim.
</FONT>
<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <B><I>&#147;Incumbent Directors&#148; </I></B>means the individuals who, as of the date
hereof, are Directors of the Company and any individual becoming a Director
subsequent to the date hereof whose election, nomination for election by the
Company&#146;s stockholders, or appointment, was approved by a vote of at least
two-thirds of the then Incumbent Directors (either by a specific vote or by
approval of the proxy statement of the Company in which such person is named as
a nominee for director, without objection to such nomination); <I>provided</I>,
<I>however</I>, that an individual shall not be an Incumbent Director if such
individual&#146;s election or appointment to the Board occurs as a result of an
actual or threatened election contest (as described in Rule&nbsp;14a-12(c) of the
Exchange Act) with respect to the election or removal of Directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board.
</FONT>
<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)
<B><I>&#147;Indemnifiable Claim&#148;</I></B> means any Claim based upon, arising out of or
resulting from (i)&nbsp;any actual, alleged or suspected act or failure to act by
Indemnitee in his or her capacity as a director, officer, employee or agent of
the Company or as a director, officer, employee, member, manager, trustee or
agent of any other corporation, limited liability company, partnership, joint
venture, trust or other entity or enterprise, whether or not for profit, as to
which Indemnitee is or was serving at the request of the Company as a director,
officer, employee, member, manager, trustee or agent, (ii)&nbsp;any actual, alleged
or suspected act or failure to act by Indemnitee in respect of any business,
transaction,
communication, filing, disclosure or other activity of the Company or any
other entity or enterprise referred to in clause (i)&nbsp;of this sentence, or (iii)
Indemnitee&#146;s status as a current or former director, officer, employee or agent
of the Company or as a current or former director, officer, employee, member,
manager, trustee or agent of the Company or any other entity or enterprise
referred to in clause (i)&nbsp;of this sentence or any actual, alleged or suspected
act or failure to act by Indemnitee in connection with any obligation or
restriction
</FONT>
<P align="center"><FONT size="2">3
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<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">imposed upon Indemnitee by reason of such status. In addition to
any service at the actual request of the Company, for purposes of this
Agreement, Indemnitee shall be deemed to be serving or to have served at the
request of the Company as a director, officer, employee, member, manager,
trustee or agent of another entity or enterprise if Indemnitee is or was
serving as a director, officer, employee, member, manager, trustee or agent of
such entity or enterprise and (i)&nbsp;such entity or enterprise is or at the time
of such service was a Controlled Affiliate, (ii)&nbsp;such entity or enterprise is
or at the time of such service was an employee benefit plan (or related trust)
sponsored or maintained by the Company or a Controlled Affiliate, or (iii)&nbsp;the
Company or a Controlled Affiliate directly or indirectly caused Indemnitee to
be nominated, elected, appointed, designated, employed, engaged or selected to
serve in such capacity.
</FONT>
<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)
<B><I>&#147;Indemnifiable Losses&#148; </I></B>means any and all Losses relating to, arising
out of or resulting from any Indemnifiable Claim.
</FONT>
<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) <B><I>&#147;Independent Counsel&#148;</I></B> means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither presently is, nor
in the past five years has been, retained to represent: (i)&nbsp;the Company or
Indemnitee in any matter material to either such party (other than with respect
to matters concerning the Indemnitee under this Agreement, or of other
indemnitees under similar indemnification agreements), or (ii)&nbsp;any other party
to the Indemnifiable Claim giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term &#147;Independent Counsel&#148; shall
not include any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in representing
either the Company or Indemnitee in an action to determine Indemnitee&#146;s rights
under this Agreement.
</FONT>
<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
<B><I>&#147;Losses&#148;</I></B> means any and all Expenses, damages, losses, liabilities,
judgments, fines, penalties (whether civil, criminal or other) and amounts paid
in settlement, including without limitation all interest, assessments and other
charges paid or payable in connection with or in respect of any of the
foregoing.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.&nbsp;Indemnification Obligation. </B>Subject to Section&nbsp;7, the Company shall
indemnify, defend and hold harmless Indemnitee, to the fullest extent permitted
by the laws of the State of Delaware in effect on the date hereof or as such
laws may from time to time hereafter be amended to increase the scope of such
permitted indemnification, against any and all Indemnifiable Claims and
Indemnifiable Losses; <I>provided</I>, <I>however</I>, that, except as provided in Sections&nbsp;5
and 20, Indemnitee shall not be entitled to indemnification pursuant to this
Agreement in connection with any Claim initiated by Indemnitee against the
Company or any director or officer of the Company unless the Company has
joined in or consented to the initiation of such Claim.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.&nbsp;Advancement of Expenses. </B>Indemnitee shall have the right to
advancement by the Company prior to the final disposition of any Indemnifiable
Claim of any and all Expenses relating to, arising out of or resulting from any
Indemnifiable Claim paid or incurred by Indemnitee or which Indemnitee
determines are reasonably likely to be paid or incurred by Indemnitee.
Indemnitee&#146;s right to such advancement is not subject to the
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<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">satisfaction of
any standard of conduct. Without limiting the generality or effect of the
foregoing, within five business days after any request by Indemnitee, the
Company shall, in accordance with such request (but without duplication), (a)
pay such Expenses on behalf of Indemnitee, (b)&nbsp;advance to Indemnitee funds in
an amount sufficient to pay such Expenses, or (c)&nbsp;reimburse Indemnitee for such
Expenses; <I>provided </I>that Indemnitee shall repay, without interest any amounts
actually advanced to Indemnitee that, at the final disposition of the
Indemnifiable Claim to which the advance related, were in excess of amounts
paid or payable by Indemnitee in respect of Expenses relating to, arising out
of or resulting from such Indemnifiable Claim. In connection with any such
payment, advancement or reimbursement, Indemnitee shall execute and deliver to
the Company an undertaking, which need not be secured and shall be accepted
without reference to Indemnitee&#146;s ability to repay the Expenses, by or on
behalf of the Indemnitee, to repay any amounts paid, advanced or reimbursed by
the Company in respect of Expenses relating to, arising out of or resulting
from any Indemnifiable Claim in respect of which it shall have been determined,
following the final disposition of such Indemnifiable Claim and in accordance
with Section&nbsp;7, that Indemnitee is not entitled to indemnification hereunder.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.&nbsp;Indemnification for Additional Expenses. </B>Without limiting the
generality or effect of the foregoing, the Company shall indemnify and hold
harmless Indemnitee against and, if requested by Indemnitee, shall reimburse
Indemnitee for, or advance to Indemnitee, within five business days of such
request, any and all Expenses paid or incurred by Indemnitee or which
Indemnitee determines are reasonably likely to be paid or incurred by
Indemnitee in connection with any Claim made, instituted or conducted by
Indemnitee for (a)&nbsp;indemnification or reimbursement or advance payment of
Expenses by the Company under any provision of this Agreement, or under any
other agreement or provision of the Constituent Documents now or hereafter in
effect relating to Indemnifiable Claims, and/or (b)&nbsp;recovery under any
directors&#146; and officers&#146; liability insurance policies maintained by the
Company, regardless in each case of whether Indemnitee ultimately is determined
to be entitled to such indemnification, reimbursement, advance or insurance
recovery, as the case may be; <I>provided</I>, <I>however</I>, that Indemnitee shall return,
without interest, any such advance of Expenses (or portion thereof) which
remains unspent at the final disposition of the Claim to which the advance
related.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.&nbsp;Partial Indemnity. </B>If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a portion of any
Indemnifiable Loss but not for all of the total amount thereof, the Company
shall nevertheless indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.&nbsp;Procedure
for Notification.</B> To obtain indemnification under this
Agreement in respect of an Indemnifiable Claim or Indemnifiable Loss,
Indemnitee shall submit to the Company a written request therefor, including a
brief description (based upon information then available to Indemnitee) of such
Indemnifiable Claim or Indemnifiable Loss. If, at the time of the receipt of
such request, the Company has directors&#146; and officers&#146; liability insurance in
effect under which coverage for such Indemnifiable Claim or Indemnifiable Loss
is potentially available, the Company shall give prompt written notice of such
Indemnifiable Claim or Indemnifiable Loss to the applicable insurers in
accordance with the
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<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">procedures set forth in the applicable policies. The
Company shall provide to Indemnitee a copy of such notice delivered to the
applicable insurers, and copies of all subsequent correspondence between the
Company and such insurers regarding the Indemnifiable Claim or Indemnifiable
Loss, in each case substantially concurrently with the delivery or receipt
thereof by the Company. The failure by Indemnitee to timely notify the Company
of any Indemnifiable Claim or Indemnifiable Loss shall not relieve the Company
from any liability hereunder unless, and only to the extent that, the Company
did not otherwise learn of such Indemnifiable Claim or Indemnifiable Loss and
such failure results in forfeiture by the Company of substantial defenses,
rights or insurance coverage.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.&nbsp;Determination
of Right to Indemnification.</B>
</FONT>
<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) To the extent that Indemnitee shall have been successful on the merits
or otherwise in defense of any Indemnifiable Claim or any portion thereof or in
defense of any issue or matter therein, including without limitation dismissal
without prejudice, Indemnitee shall be indemnified against all Indemnifiable
Losses relating to, arising out of or resulting from such Indemnifiable Claim
in accordance with Section&nbsp;2 and no Standard of Conduct Determination (as
defined in Section&nbsp;7(b)) shall be required.
</FONT>
<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) To the extent that the provisions of Section 7(a) are inapplicable to
an Indemnifiable Claim that shall have been finally disposed of, any
determination of whether Indemnitee has satisfied any applicable standard of
conduct under Delaware law that is a legally required condition precedent to
indemnification of Indemnitee hereunder against Indemnifiable Losses relating
to, arising out of or resulting from such Indemnifiable Claim (a &#147;<B><I>Standard of
Conduct Determination</I></B>&#148;) shall be made as follows: (i)&nbsp;by a majority vote of
the Disinterested Directors, even if less than a quorum of the Board, (ii)&nbsp;if
such Disinterested Directors so direct, by a majority vote of a committee of
Disinterested Directors designated by a majority vote of all Disinterested
Directors, or (iii)&nbsp;if there are no such Disinterested Directors or if
requested by Indemnitee, by Independent Counsel in a written opinion addressed
to the Board, a copy of which shall be delivered to Indemnitee. Indemnitee
will cooperate with the person or persons making such Standard of Conduct
Determination, including providing to such person or persons, upon reasonable
advance request, any documentation or information which is not privileged or
otherwise protected from disclosure and which is reasonably available to
Indemnitee and reasonably necessary to such determination. The Company shall
indemnify and hold harmless Indemnitee against and, if requested by Indemnitee,
shall reimburse Indemnitee for, or advance to Indemnitee, within five business
days of such request, any and all costs and expenses (including attorneys&#146;
and experts&#146; fees and expenses) incurred by Indemnitee in so cooperating
with the person or persons making such Standard of Conduct Determination.
</FONT>
<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Company shall use its reasonable best efforts to cause any
Standard of Conduct Determination required under Section 7(b) to be made as
promptly as practicable. If (i)&nbsp;the person or persons empowered or selected
under Section&nbsp;7 to make the Standard of Conduct Determination shall not have
made a determination within 30&nbsp;days after the later of (A)&nbsp;receipt by the
Company of written notice from Indemnitee advising the Company of the final
disposition of the applicable Indemnifiable Claim (the date of such receipt
being the
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<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2"><B><I>&#147;Notification Date&#148;</I></B>) and (B)&nbsp;the selection of an Independent Counsel,
if such determination is to be made by Independent Counsel, that is permitted
under the provisions of Section 7(e) to make such determination and (ii)
Indemnitee shall have fulfilled its obligations set forth in the second
sentence of Section&nbsp;7(b), then Indemnitee shall be deemed to have satisfied the
applicable standard of conduct; <I>provided </I>that such 30-day period may be
extended for a reasonable time, not to exceed an additional 30&nbsp;days, if the
person or persons making such determination in good faith requires such
additional time for the obtaining or evaluation or documentation and/or
information relating thereto.
</FONT>
<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) If (i)&nbsp;Indemnitee shall be entitled to indemnification hereunder
against any Indemnifiable Losses pursuant to Section&nbsp;7(a), (ii)&nbsp;no
determination of whether Indemnitee has satisfied any applicable standard of
conduct under Delaware law is a legally required condition precedent to
indemnification of Indemnitee hereunder against any Indemnifiable Losses, or
(iii)&nbsp;Indemnitee has been determined or deemed pursuant to Section 7(b) or (c)
to have satisfied any applicable standard of conduct under Delaware law which
is a legally required condition precedent to indemnification of Indemnitee
hereunder against any Indemnifiable Losses, then the Company shall pay to
Indemnitee, within five business days after the later of (x)&nbsp;the Notification
Date in respect of the Indemnifiable Claim or portion thereof to which such
Indemnifiable Losses are related, out of which such Indemnifiable Losses arose
or from which such Indemnifiable Losses resulted and (y)&nbsp;the earliest date on
which the applicable criterion specified in clause (i), (ii)&nbsp;or (iii)&nbsp;above
shall have been satisfied, an amount equal to the amount of such Indemnifiable
Losses.
</FONT>
<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) If a Standard of Conduct Determination is to be made by Independent
Counsel pursuant to Section&nbsp;7(b), the Independent Counsel shall be selected by
the Board of Directors, and the Company shall give written notice to Indemnitee
advising him or her of the identity of the Independent Counsel so selected.
Indemnitee may, within five business days after receiving written notice of
selection from the Company, deliver to the Company a written objection to such
selection; <I>provided</I>, <I>however</I>, that such objection may be asserted only on the
ground that the Independent Counsel so selected does not satisfy the criteria
set forth in the definition of &#147;Independent Counsel&#148; in Section&nbsp;1(h), and the
objection shall set forth with particularity the factual basis of such
assertion. Absent a proper and timely objection, the person or firm so
selected shall act as Independent Counsel. If such written objection is
properly and timely made and substantiated, the Independent Counsel so selected
may not serve as Independent Counsel unless and until such objection is
withdrawn or a court has determined that such objection is without merit. If
no Independent Counsel that is
permitted under the foregoing provisions of this Section 7(e) to make the
Standard of Conduct Determination shall have been selected within 30&nbsp;days after
the Company gives its initial notice pursuant to the first sentence of this
Section&nbsp;7(e), either the Company or Indemnitee may petition the Court of
Chancery of the State of Delaware for resolution of any objection which shall
have been made by Indemnitee to the Company&#146;s selection of Independent Counsel
and/or for the appointment as Independent Counsel of a person selected by the
Court or by such other person as the Court shall designate, and the person or
firm with respect to whom all objections are so resolved or the person or firm
so appointed will act as Independent Counsel. In all events, the Company shall
pay all of the reasonable
</FONT>
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<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">fees and expenses of the Independent Counsel incurred
in connection with the Independent Counsel&#146;s determination pursuant to Section
7(b).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.&nbsp;Presumption of Entitlement. </B>In making any Standard of Conduct
Determination, the person or persons making such determination shall presume
that Indemnitee has satisfied the applicable standard of conduct, and the
Company may overcome such presumption only by its adducing clear and convincing
evidence to the contrary. Any Standard of Conduct Determination that is
adverse to Indemnitee may be challenged by the Indemnitee in the Court of
Chancery of the State of Delaware. No determination by the Company (including
by its directors or any Independent Counsel) that Indemnitee has not satisfied
any applicable standard of conduct shall be a defense to any Claim by
Indemnitee for indemnification or reimbursement or advance payment of Expenses
by the Company hereunder or create a presumption that Indemnitee has not met
any applicable standard of conduct.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.&nbsp;No Other Presumption. </B>For purposes of this Agreement, the termination
of any Claim by judgment, order, settlement (whether with or without court
approval) or conviction, or upon a plea of <I>nolo contendere </I>or its equivalent,
will not create a presumption that Indemnitee did not meet any applicable
standard of conduct or that indemnification hereunder is otherwise not
permitted.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.&nbsp;Non-Exclusivity. </B>The rights of Indemnitee hereunder will be in
addition to any other rights Indemnitee may have under the Constituent
Documents, or the substantive laws of the Company&#146;s jurisdiction of
incorporation, any other contract or otherwise (collectively, &#147;<B><I>Other Indemnity
Provisions</I></B>&#148;); <I>provided</I>, <I>however</I>, that (a)&nbsp;to the extent that Indemnitee
otherwise would have any greater right to indemnification under any Other
Indemnity Provision, Indemnitee will be deemed to have such greater right
hereunder and (b)&nbsp;to the extent that any change is made to any Other Indemnity
Provision which permits any greater right to indemnification than that provided
under this Agreement as of the date hereof, Indemnitee will be deemed to have
such greater right hereunder. The Company will not adopt any amendment to any
of the Constituent Documents the effect of which would be to deny, diminish or
encumber Indemnitee&#146;s right to indemnification under this Agreement or any
Other Indemnity Provision.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.&nbsp;Liability Insurance and Funding. </B>For the duration of Indemnitee&#146;s
service as a director and/or officer of the Company, and thereafter for so long
as Indemnitee shall be
subject to any pending or possible Indemnifiable Claim, the Company shall
use commercially reasonable efforts (taking into account the scope and amount
of coverage available relative to the cost thereof) to cause to be maintained
in effect policies of directors&#146; and officers&#146; liability insurance providing
coverage for directors and/or officers of the Company that is at least
substantially comparable in scope and amount to that provided by the Company&#146;s
current policies of directors&#146; and officers&#146; liability insurance. The Company
shall provide Indemnitee with a copy of all directors&#146; and officers&#146; liability
insurance applications, binders, policies, declarations, endorsements and other
related materials, and shall provide Indemnitee with a reasonable opportunity
to review and comment on the same. Without limiting the generality or effect
of the two immediately preceding sentences, the Company
</FONT>
<P align="center"><FONT size="2">8
</FONT>
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<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">shall not discontinue
or significantly reduce the scope or amount of coverage from one policy period
to the next (i)&nbsp;without the prior approval thereof by a majority vote of the
Incumbent Directors, even if less than a quorum, or (ii)&nbsp;if at the time that
any such discontinuation or significant reduction in the scope or amount of
coverage is proposed there are no Incumbent Directors, without the prior
written consent of Indemnitee (which consent shall not be unreasonably withheld
or delayed). In all policies of directors&#146; and officers&#146; liability insurance
obtained by the Company, Indemnitee shall be named as an insured in such a
manner as to provide Indemnitee the same rights and benefits, subject to the
same limitations, as are accorded to the Company&#146;s directors and officers most
favorably insured by such policy. The Company may, but shall not be required
to, create a trust fund, grant a security interest or use other means,
including without limitation a letter of credit, to ensure the payment of such
amounts as may be necessary to satisfy its obligations to indemnify and advance
expenses pursuant to this Agreement.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.&nbsp;Subrogation. </B>In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the related
rights of recovery of Indemnitee against other persons or entities (other than
Indemnitee&#146;s successors), including any entity or enterprise referred to in
clause (i)&nbsp;of the definition of &#147;Indemnifiable Claim&#148; in Section&nbsp;1(f).
Indemnitee shall execute all papers reasonably required to evidence such rights
(all of Indemnitee&#146;s reasonable Expenses, including attorneys&#146; fees and
charges, related thereto to be reimbursed by or, at the option of Indemnitee,
advanced by the Company).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>13.&nbsp;No Duplication of Payments. </B>The Company shall not be liable under
this Agreement to make any payment to Indemnitee in respect of any
Indemnifiable Losses to the extent Indemnitee has otherwise actually received
payment (net of Expenses incurred in connection therewith) under any insurance
policy, the Constituent Documents and Other Indemnity Provisions or otherwise
(including from any entity or enterprise referred to in clause (i)&nbsp;of the
definition of &#147;Indemnifiable Claim&#148; in Section&nbsp;1(f)) in respect of such
Indemnifiable Losses otherwise indemnifiable hereunder.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.&nbsp;Defense of Claims. </B>The Company shall be entitled to participate in
the defense of any Indemnifiable Claim or to assume the defense thereof, with
counsel reasonably satisfactory to the Indemnitee; <I>provided </I>that if Indemnitee
believes, after consultation with counsel selected by Indemnitee, that (a)&nbsp;the
use of counsel chosen by the Company to represent Indemnitee would present such
counsel with an actual or potential conflict, (b)&nbsp;the
named parties in any such Indemnifiable Claim (including any impleaded
parties) include both the Company and Indemnitee and Indemnitee shall conclude
that there may be one or more legal defenses available to him or her that are
different from or in addition to those available to the Company, or (c)&nbsp;any
such representation by such counsel would be precluded under the applicable
standards of professional conduct then prevailing, then Indemnitee shall be
entitled to retain separate counsel (but not more than one law firm plus, if
applicable, local counsel in respect of any particular Indemnifiable Claim) at
the Company&#146;s expense. The Company shall not be liable to Indemnitee under
this Agreement for any amounts paid in settlement of any threatened or
</FONT>
<P align="center"><FONT size="2">9
</FONT>
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<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">pending
Indemnifiable Claim effected without the Company&#146;s prior written consent. The
Company shall not, without the prior written consent of the Indemnitee, effect
any settlement of any threatened or pending Indemnifiable Claim which the
Indemnitee is or could have been a party unless such settlement solely involves
the payment of money and includes a complete and unconditional release of the
Indemnitee from all liability on any claims that are the subject matter of such
Indemnifiable Claim. Neither the Company nor Indemnitee shall unreasonably
withhold its consent to any proposed settlement; <I>provided </I>that Indemnitee may
withhold consent to any settlement that does not provide a complete and
unconditional release of Indemnitee.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>15.&nbsp;Successors and Binding Agreement. </B>(a)&nbsp;The Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance satisfactory to
Indemnitee and his or her counsel, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent the Company would be
required to perform if no such succession had taken place. This Agreement
shall be binding upon and inure to the benefit of the Company and any successor
to the Company, including without limitation any person acquiring directly or
indirectly all or substantially all of the business or assets of the Company
whether by purchase, merger, consolidation, reorganization or otherwise (and
such successor will thereafter be deemed the &#147;<B><I>Company</I></B>&#148; for purposes of this
Agreement), but shall not otherwise be assignable or delegatable by the
Company.
</FONT>
<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) This Agreement shall inure to the benefit of and be enforceable by the
Indemnitee&#146;s personal or legal representatives, executors, administrators,
heirs, distributees, legatees and other successors.
</FONT>
<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign or delegate this Agreement or
any rights or obligations hereunder except as expressly provided in Sections
15(a) and 15(b). Without limiting the generality or effect of the foregoing,
Indemnitee&#146;s right to receive payments hereunder shall not be assignable,
whether by pledge, creation of a security interest or otherwise, other than by
a transfer by the Indemnitee&#146;s will or by the laws of descent and distribution,
and, in the event of any attempted assignment or transfer contrary to this
Section&nbsp;15(c), the Company shall have no liability to pay any amount so
attempted to be assigned or transferred.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>16.&nbsp;Notices. </B>For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder shall be in writing and shall be deemed to
have been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five business days
after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid or one business day after having been sent
for next-day delivery by a nationally recognized overnight courier service,
addressed to the Company (to the attention of the Secretary of the Company) and
to Indemnitee at the addresses shown on the signature page hereto, or to such
other address as any party may have furnished to the other in writing and in
accordance herewith, except that notices of changes of address will be
effective only upon receipt.
</FONT>
<P align="center"><FONT size="2">10
</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>17.&nbsp;Governing Law. </B>The validity, interpretation, construction and
performance of this Agreement shall be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to
the principles of conflict of laws of such State. The Company and Indemnitee
each hereby irrevocably consent to the jurisdiction of the Chancery Court of
the State of Delaware for all purposes in connection with any action or
proceeding which arises out of or relates to this Agreement and agree that any
action instituted under this Agreement shall be brought only in the Chancery
Court of the State of Delaware.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>18.&nbsp;Validity. </B>If any provision of this Agreement or the application of
any provision hereof to any person or circumstance is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstance shall not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal shall be reformed to the extent, and only to the extent, necessary to
make it enforceable, valid or legal. In the event that any court or other
adjudicative body shall decline to reform any provision of this Agreement held
to be invalid, unenforceable or otherwise illegal as contemplated by the
immediately preceding sentence, the parties thereto shall take all such action
as may be necessary or appropriate to replace the provision so held to be
invalid, unenforceable or otherwise illegal with one or more alternative
provisions that effectuate the purpose and intent of the original provisions of
this Agreement as fully as possible without being invalid, unenforceable or
otherwise illegal.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>19.&nbsp;Miscellaneous. </B>No provision of this Agreement may be waived, modified
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by Indemnitee and the Company. No waiver by either party hereto
at any time of any breach by the other party hereto or compliance with any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, expressed or implied with respect to the subject matter
hereof have been made by either party that are not set forth expressly in this
Agreement. References to Sections are to references to Sections of this
Agreement.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>20.&nbsp;Legal Fees and Expenses. </B>It is the intent of the Company that
Indemnitee not be required to incur legal fees and or other Expenses associated
with the interpretation, enforcement or defense of Indemnitee&#146;s rights under
this Agreement by litigation or otherwise because the cost and expense thereof
would substantially detract from the benefits intended to be extended to
Indemnitee hereunder. Accordingly, without limiting the generality or effect
of any other provision hereof, if it should appear to Indemnitee that the
Company has failed to comply with any of its obligations under this Agreement
or in the event that the Company or any other person takes or threatens to take
any action to declare this Agreement void or unenforceable, or institutes any
litigation or other action or proceeding designed to deny, or to recover from,
Indemnitee the benefits provided or intended to be provided to Indemnitee
hereunder, the Company irrevocably authorizes the Indemnitee from time to time
to retain counsel of Indemnitee&#146;s choice, at the expense of the Company as
hereafter provided, to advise and represent Indemnitee in connection with any
such interpretation, enforcement or defense, including without limitation the
initiation or
</FONT>
<P align="center"><FONT size="2">11
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<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">defense of any litigation or other legal action, whether by or
against the Company or any director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction. Notwithstanding any existing
or prior attorney-client relationship between the Company and such counsel, the
Company irrevocably consents to Indemnitee&#146;s entering into an attorney-client
relationship with such counsel, and in that connection the Company and
Indemnitee agree that a confidential relationship shall exist between
Indemnitee and such counsel. Without respect to whether Indemnitee prevails,
in whole or in part, in connection with any of the foregoing, the Company will
pay and be solely financially responsible for any and all attorneys&#146; and
related fees and expenses incurred by Indemnitee in connection with any of the
foregoing.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>21.&nbsp;Certain Interpretive Matters. </B>No provision of this Agreement shall be
interpreted in favor of, or against, either of the parties hereto by reason of
the extent to which any such party or its counsel participated in the drafting
thereof or by reason of the extent to which any such provision is inconsistent
with any prior draft hereof or thereof.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>22.&nbsp;Entire
Agreement.</B> This Agreement and the Constituent Documents
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, between the parties hereto with respect
to the subject matter of this Agreement. Any prior agreements or
understandings between the parties hereto with respect to indemnification are
hereby terminated and of no further force or effect.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>23.&nbsp;Counterparts. </B>This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
together shall constitute one and the same agreement.
</FONT>
<P align="center"><FONT size="2"><B>&#091;Signatures Appear On Following Page&#093;
</B>
</FONT>


<P align="center"><FONT size="2">12
</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, Indemnitee has executed and the Company has caused its
duly authorized representative to execute this Agreement as of the date first
above written.
</FONT>
<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
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    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" valign="top" align="left"><FONT size="2">MICHAELS STORES, INC.<BR>
8000 Bent Branch Drive<BR>
Irving, Texas 75063</FONT></TD>
</TR>

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    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
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    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
By:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">R. Michael Rouleau</FONT></TD>
</TR>

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    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">President and Chief Executive</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;&nbsp;&nbsp;Officer</FONT></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
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    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>&#091;INDEMNITEE&#093;</B><BR>
8000 Bent Branch Drive<BR>
Irving, TX 75063</FONT></TD>
</TR>

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    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
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    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
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<HR size="1" noshade></FONT></TD>
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    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top"><FONT size="2">
<B>&#091;Indemnitee&#093;</B></FONT></TD>
</TR>
</TABLE>
</DIV>



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