Exhibit 10.2
     [FORM OF] CHANGE IN CONTROL SEVERANCE AGREEMENT (this “Agreement”) dated as
of April 26, 2006, between Michaels Stores, Inc., a Delaware corporation (the
“Company”), and [NAME] (the “Executive”).
          WHEREAS the Executive is a skilled and dedicated employee of the
Company who has important management responsibilities and talents that benefit
the Company;
          WHEREAS the Board of Directors of the Company (the “Board”) considers
it essential to the best interests of the Company and its stockholders to assure
that the Company and its subsidiaries will have the continued dedication of the
Executive, notwithstanding the possibility, threat or occurrence of a Change in
Control (as defined below); and
          WHEREAS the Board believes that it is imperative to diminish the
distraction of the Executive by virtue of the uncertainties and risks created by
the circumstances surrounding a Change in Control and to ensure the Executive’s
full attention to the Company and its subsidiaries during such a period of
uncertainty;
          NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
          SECTION 1. Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
     (a) “280G Gross-Up Payment” shall have the meaning set forth in
Section 7(a).
     (b) “409A Gross-Up Payment” shall have the meaning set forth in Section 13.
     (c) “Accounting Firm” shall have the meaning set forth in Section 7(b).
     (d) “Accrued Rights” shall have the meaning set forth in Section 6(a).
     (e) “Affiliate(s)” means, with respect to any specified Person, any other
Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
     (f) “Annual Base Salary” shall have the meaning set forth in Section 4(a).
     (g) “Annual Bonus” shall have the meaning set forth in Section 4(b).
     (h) “Average Annual Incentive Award” means, as of the Termination Date, the
average annual incentive award payable or actually paid to the Executive in
respect of the three fiscal years preceding the Termination Date; provided,
however, that (i) for any fiscal year during which an annual incentive award
that was paid or is payable to the Executive was prorated because of less than a
full fiscal year of plan participation or employment, such award shall be
annualized and (ii) if the Executive was not employed during any of the three
fiscal years immediately preceding the Termination Date or otherwise was not
eligible to receive an

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annual incentive award for such fiscal year, the Average Annual Incentive Award
shall be determined on the basis of the number of fiscal years during such
period with respect to which the Executive was eligible to receive such an
award.
     (i) “Cause” means the occurrence of any one of the following:
     (i) the Executive is convicted of, or pleads guilty or nolo contendere to,
a felony involving moral turpitude or that involves misappropriation of the
assets of the Company or a Subsidiary;
     (ii) the Executive commits one or more acts or omissions constituting fraud
or willful misconduct that have a material detrimental effect on the Company; or
     (iii) the Executive’s willful and continued failure to perform
substantially the Executive’s employment duties in any material respect (other
than as a result of incapacity due to physical or mental illness or after
delivery by the Executive of a Notice of Termination for Good Reason) after a
written demand for substantial performance is delivered to the Executive that
specifically identifies the manner in which the Company believes the Executive
has failed to perform his or her duties, and after the Executive has failed to
resume substantial performance of the Executive’s duties on a continuous basis
within 30 days of receiving such demand.
               For purposes of this provision, no act or failure to act on the
part of the Executive shall be considered “willful” unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive’s action or omission was in the best interests of the
Company. The termination of employment of the Executive for Cause shall not be
effective unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the entire membership of the Board (excluding the Executive) at
a meeting of the Board called and held for such purpose (after reasonable notice
is provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of the conduct described in clause
(i), (ii) or (iii) above and specifying the particulars thereof in detail.
     (j) “Change in Control” means the occurrence of any of the following:
     (i) individuals who, as of the date of this Agreement, were members of the
Board (the “Incumbent Directors”) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date of this Agreement whose election, or nomination
for election, by the Company’s stockholders was approved by a vote of at least a
majority of the Incumbent Directors shall be considered as though such
individual were an Incumbent Director, but excluding, for purposes of this
proviso, any such individual whose assumption of office after the date of this
Agreement occurs as a result of an actual or threatened proxy contest with
respect to election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a “person” (as such term
is used in Section 13(d) of the Exchange Act) (each, a “Person”), other than the
Board;

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     (ii) the consummation of (A) a merger, consolidation, statutory share
exchange or similar form of corporate transaction involving (x) the Company or
(y) any of its Subsidiaries, but in the case of this clause (y) only if Company
Voting Securities (as defined below) are issued or issuable (each of the events
referred to in this clause (A) being hereinafter referred to as a
“Reorganization”) or (B) a sale or other disposition of all or substantially all
the assets of the Company (a “Sale”), unless, immediately following such
Reorganization or Sale, (1) all or substantially all the individuals and
entities who were the “beneficial owners” (as such term is defined in Rule 13d-3
under the Exchange Act (or a successor rule thereto)) of shares of the Company’s
common stock or other securities eligible to vote for the election of the Board
outstanding immediately prior to the consummation of such Reorganization or Sale
(such securities, the “Company Voting Securities”) beneficially own, directly or
indirectly, more than 60% of the combined voting power of the then outstanding
voting securities of the corporation or other entity resulting from such
Reorganization or Sale (including a corporation or other entity that, as a
result of such transaction, owns the Company or all or substantially all the
Company’s assets either directly or through one or more subsidiaries) (the
“Continuing Entity”) in substantially the same proportions as their ownership,
immediately prior to the consummation of such Reorganization or Sale, of the
outstanding Company Voting Securities (excluding any outstanding voting
securities of the Continuing Entity that such beneficial owners hold immediately
following the consummation of the Reorganization or Sale as a result of their
ownership prior to such consummation of voting securities of any corporation or
other entity involved in or forming part of such Reorganization or Sale other
than the Company or a Subsidiary), (2) no Person (excluding any employee benefit
plan (or related trust) sponsored or maintained by the Continuing Entity or any
corporation or other entity controlled by the Continuing Entity) beneficially
owns, directly or indirectly, 20% or more of the combined voting power of the
then outstanding voting securities of the Continuing Entity and (3) at least a
majority of the members of the board of directors or other governing body of the
Continuing Entity were Incumbent Directors at the time of the execution of the
definitive agreement providing for such Reorganization or Sale or, in the
absence of such an agreement, at the time at which approval of the Board was
obtained for such Reorganization or Sale;
     (iii) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company; or
     (iv) any Person, corporation or other entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) becomes the beneficial
owner, directly or indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company Voting Securities; provided,
however, that for purposes of this subparagraph (iv), the following acquisitions
shall not constitute a Change in Control: (A) any acquisition directly from the
Company, (B) any acquisition by the Company or any Subsidiary, (C) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Subsidiary, (D) any acquisition by an
underwriter temporarily holding such Company Voting Securities pursuant to an
offering of such securities or (E) any acquisition pursuant to a Reorganization
or Sale that does not constitute a Change in Control for purposes of
Section 1(j)(ii).

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     (k) “COBRA” shall have the meaning set forth in Section 6(b)(iii).
     (l) “Code” means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated thereunder.
     (m) “Company Voting Securities” shall have the meaning set forth in
Section 1(j)(ii).
     (n) “Continuing Entity” shall have the meaning set forth in
Section 1(j)(ii).
     (o) “Disability” shall have the meaning set forth in Section 6(c)(ii).
     (p) “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated thereunder.
     (q) “Exchange Act” means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute thereto.
     (r) “Excise Tax” means the excise tax imposed by Section 4999 of the Code,
together with any interest or penalties imposed with respect to such tax.
     (s) “Extension Date” shall have the meaning set forth in Section 24.
     (t) “Good Reason” means, without the Executive’s express written consent,
the occurrence of any one or more of the following at any time during the
Retention Period:
     (i) any failure by the Company to comply with the provisions of Section 3
of this Agreement, including the assignment to the Executive of duties and
responsibilities that are materially inconsistent with the Executive’s status,
offices, titles and reporting relationships as in effect immediately prior to
the Retention Start Date (but in no event prior to the date of this Agreement),
but excluding for this purpose an isolated, insubstantial and inadvertent action
not taken in bad faith and which is remedied by the Company within ten business
days after receipt of notice thereof given by the Executive;
     (ii) any failure by the Company to comply with any of the provisions of
Section 4 or 5 of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company within ten business days after receipt of notice thereof given by the
Executive;
     (iii) a change of the Executive’s principal place of employment to a
location more than 50 miles from the Executive’s principal place of employment
immediately prior to the Retention Start Date;
     (iv) any failure of the Company to pay the Executive any compensation when
due (other than an inadvertent failure that is remedied within ten business days
after receipt of notice thereof given by the Executive);
     (v) delivery by the Company or any Subsidiary of a notice to the Executive
of the intent to terminate the Executive’s employment for any reason, other than
for Cause or

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Disability, in each case in accordance with this Agreement, regardless of
whether such termination is intended to become effective during or after the
Retention Period; or
     (vi) any failure by the Company to comply with and satisfy Section 14(c) of
this Agreement.
          The Executive’s right to terminate employment for Good Reason shall
not be affected by the Executive’s incapacity due to physical or mental illness.
A termination of employment by the Executive for Good Reason for purposes of
this Agreement shall be effectuated by giving the Company written notice
(“Notice of Termination for Good Reason”) of the termination setting forth in
reasonable detail the specific conduct of the Company that constitutes Good
Reason and the specific provision(s) of this Agreement on which the Executive
relied. Unless the parties agree otherwise, a termination of employment by the
Executive for Good Reason shall be effective on the 30th day following the date
when the Notice of Termination for Good Reason is given, unless the notice sets
forth a later date (which date shall in no event be later than 60 days after the
notice is given); provided, however, that so long as an event that constitutes
Good Reason occurs during the Retention Period and the Executive delivers the
Notice of Termination for Good Reason at any time prior to the expiration of the
Retention Period, for purposes of the payments, benefits and other entitlements
set forth in Section 6(b), the termination of the Executive’s employment
pursuant thereto shall be deemed to be a resignation for Good Reason during the
Retention Period. If the Company disputes the existence of Good Reason, the
Company shall have the burden of proof to establish that Good Reason does not
exist. If the Executive continues to provide services to the Company after one
of the events giving rise to Good Reason has occurred, the Executive shall not
be deemed to have consented to such event or to have waived the Executive’s
right to terminate his or her employment at any time during the Retention Period
for Good Reason in connection with such event.
     (u) “Incumbent Directors” shall have the meaning set forth in
Section 1(j)(i).
     (v) “Notice of Termination for Good Reason” shall have the meaning set
forth in Section 1(t).
     (w) “Payment” means any payment, benefit or distribution (or combination
thereof) by the Company, any of its Affiliates or any trust established by the
Company or its Affiliates, to or for the benefit of the Executive, whether paid,
payable, distributed, distributable or provided pursuant to this Agreement or
otherwise, including any payment, benefit or other right that constitutes a
“parachute payment” within the meaning of Section 280G of the Code.
     (x) “Person” shall have the meaning set forth in Section 1(j)(i).
     (y) “Reimbursement Period” shall have the meaning set forth in Section 9.
     (z) “Release Effective Date” shall have the meaning set forth in
Section 6(b)(i).
     (aa) “Reorganization” shall have the meaning set forth in Section 1(j)(ii).
     (bb) “Retention Period” means the period commencing on the Retention Start
Date and ending on the earlier of (i) the second anniversary of the Retention
Start Date and (ii) the

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Termination Date. For the avoidance of doubt, in the event that the Retention
Period ends on the Termination Date, the Retention Period shall be deemed
(including for purposes of Section 6(b)) to include the Termination Date.
     (cc) “Retention Start Date” means the date on which a Change in Control
occurs during the Term; provided, however, that if, prior to the date on which
such Change in Control occurs, the Executive’s employment with the Company or
its Subsidiaries is terminated by the Company or its Subsidiaries other than for
Cause or Disability and such termination took place (i) at the request or
direction of a third party who took action that caused, or is involved in or
forms a part of, a Change in Control or (ii) in contemplation of an event that
would constitute or give rise to a Change in Control, the Retention Start Date
shall be deemed to have occurred immediately prior to the Termination Date.
     (dd) “Retirement Plan” means any “employee pension benefit plan” within the
meaning of Section 3(2) of ERISA, including any tax-qualified, nonqualified,
excess benefit and supplemental defined benefit and defined contribution plan.
     (ee) “Sale” shall have the meaning set forth in Section 1(j)(ii).
     (ff) “Section 409A Tax” shall have the meaning set forth in Section 13.
     (gg) “Subsidiary” means any entity in which the Company, directly or
indirectly, possesses 50% or more of the total combined voting power of all
classes of its stock.
     (hh) “Successor” shall have the meaning set forth in Section 14(c).
     (ii) “Term” shall have the meaning set forth in Section 24.
     (jj) “Termination Date” means the date on which the termination of the
Executive’s employment is effective, in accordance with the terms of this
Agreement.
     (kk) “Underpayment” shall have the meaning set forth in Section 7(b).
               SECTION 2. Continued Employment. The Company hereby agrees to
continue, or to cause its Subsidiaries to continue, the Executive’s employment
and the Executive hereby agrees to remain in the employ of the Company or its
Subsidiaries during the Retention Period. Notwithstanding the foregoing, this
Agreement does not alter the status of the Executive as an at-will employee, and
nothing herein shall reduce or eliminate the right of the Company and its
Subsidiaries to terminate the Executive’s employment at any time for any reason
or the right of the Executive to resign at any time for any reason, in each
case, subject to the terms, conditions and obligations set forth in this
Agreement.
               SECTION 3. Position and Duties. During the Retention Period, the
Executive’s status, offices, titles and reporting relationships with the Company
and its Subsidiaries shall be commensurate with those in effect immediately
prior to the Retention Start Date. The duties and responsibilities assigned to
the Executive may be increased, decreased or otherwise changed during the
Retention Period, provided that the duties and responsibilities assigned to the
Executive at any given time are not materially inconsistent with the Executive’s
status, offices, titles and reporting relationships as in effect immediately
prior to the Retention Start Date.

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               SECTION 4. Compensation and Benefits During the Retention Period.
(a) Annual Base Salary. During the Retention Period, the Executive shall be paid
an annual base salary (“Annual Base Salary”), in equal biweekly installments, at
least equal to the annual rate of base salary being paid to the Executive by the
Company and its Subsidiaries as of the Retention Start Date. The Annual Base
Salary shall be reviewed at least annually and shall be increased during the
Retention Period in a manner that is substantially consistent with increases in
base salary generally awarded to other peer executives of the Company and its
Subsidiaries. Annual Base Salary shall not be reduced after any such increase,
and the term “Annual Base Salary” as used in this Agreement shall refer to
Annual Base Salary as so increased.
     (b) Annual Bonus. For each fiscal year ending during the Retention Period,
the Executive shall be awarded an annual cash bonus (“Annual Bonus”) that is
equal to or greater than the annual incentive award paid or payable to the
Executive with respect to the fiscal year preceding the fiscal year in which the
Retention Start Date occurs. Each such Annual Bonus shall be paid no later than
the date that is two and a half months following the end of the fiscal year for
which the Annual Bonus is awarded.
     (c) Long-Term Incentive Compensation. During the Retention Period, the
Executive shall be entitled to participate in all long-term incentive
compensation plans, practices, policies and programs applicable generally to
other peer executives of the Company and its Subsidiaries, but in no event shall
such plans, practices, policies and programs provide the Executive with
long-term incentive opportunities and potential benefits, both as to amount and
percentage of compensation (but without regard to transfer restrictions or other
limits on resale that may be applicable if the common stock of the Company
ceases to be publicly traded), that are less favorable, in the aggregate, than
the opportunities and benefits provided by the Company and its Subsidiaries to
the Executive under the Company’s equity-compensation and other long-term
incentive compensation plans (including stock options, stock appreciation
rights, restricted stock awards, restricted stock units, performance shares and
performance units) as in effect immediately prior to the Retention Start Date
or, if more favorable to the Executive, those provided generally at any time
after the Retention Start Date to other peer executives of the Company and its
Subsidiaries.
     (d) Savings and Retirement Plan Benefits. During the Retention Period, the
Executive shall be entitled to participate in all savings and retirement plans,
practices, policies and programs applicable generally to other peer executives
of the Company and its Subsidiaries, but in no event shall such plans,
practices, policies and programs provide the Executive with savings
opportunities and retirement benefit opportunities, in each case, that are less
favorable (without regard to whether Company stock is available as an investment
alternative), in the aggregate, than the opportunities provided by the Company
and its Subsidiaries to the Executive immediately prior to the Retention Start
Date or, if more favorable to the Executive, those provided generally at any
time after the Retention Start Date to other peer executives of the Company and
its Subsidiaries.
     (e) Welfare and Fringe Benefits. During the Retention Period, the Executive
or the Executive’s family, as the case may be, shall be eligible to participate
in, and shall receive all benefits under, the welfare benefit and fringe benefit
plans, practices, policies and programs provided by the Company and its
Subsidiaries (including medical, executive medical, executive physical
examination, prescription drug, dental, vision, short-term disability, long-term

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disability, salary continuance, paid vacation and time-off, employee life, group
life, executive life, accidental death and dismemberment and business travel
accident insurance plans, practices, policies and programs) to the extent
applicable generally to other peer executives of the Company and its
Subsidiaries, but in no event shall such plans, practices, policies and programs
provide the Executive with benefits less favorable, in the aggregate, than the
benefits in effect for the Executive immediately prior to the Retention Start
Date or, if more favorable to the Executive, those provided generally at any
time after the Retention Start Date to other peer executives of the Company and
its Subsidiaries.
               SECTION 5. Impact of a Change in Control on Long-Term Incentive
Compensation Awards. In the event of a Change in Control during the Term,
notwithstanding any provision to the contrary in any of the Company’s
equity-based, equity-related or other long-term incentive compensation plans,
practices, policies and programs (including the Company’s Amended and Restated
1997 Stock Option Plan, the Company’s Second Amended and Restated 2001 General
Stock Option Plan, the Company’s Second Amended and Restated 2001 Employee Stock
Option Plan and the Company’s 2005 Incentive Compensation Plan) or any award
agreements thereunder, (a) all outstanding stock options, stock appreciation
rights and similar rights and awards then held by the Executive that are
unexercisable or otherwise unvested shall automatically become fully vested and
immediately exercisable, as the case may be, (b) all outstanding equity-based,
equity-related and other long-term incentive awards then held by the Executive
that are subject to performance-based vesting criteria shall automatically
become fully vested and earned at a deemed performance level equal to the
maximum performance level with respect to such awards and (c) all other
outstanding equity-based, equity-related and long-term incentive awards, to the
extent not covered by the foregoing clause (a) or (b), then held by the
Executive that are unvested or subject to restrictions or forfeiture shall
automatically become fully vested and all restrictions and forfeiture provisions
related thereto shall lapse.
               SECTION 6. Termination of Employment. (a) Termination by the
Company for Cause; Voluntary Resignation by the Executive without Good Reason.
If, during the Retention Period, the Executive’s employment is terminated either
by the Company or its Subsidiaries for Cause or by resignation of the Executive
without Good Reason, the Executive shall not be entitled to any compensation or
benefits hereunder other than (i) payment of any unpaid annual base salary,
annual bonus or other amount accrued through the Termination Date and for
payment of any unreimbursed business expenses incurred through the Termination
Date, (ii) as explicitly set forth in any other benefit plans, practices,
policies and programs in which the Executive participates, (iii) as otherwise
expressly required by applicable law and (iv) any payments the Company is or
becomes obligated to make pursuant to Sections 7, 8, 9, 11, 13 or 16 (the
amounts described in clauses (i), (ii), (iii) and (iv) of this Section 6(a) are
referred to herein as the “Accrued Rights”).
     (b) Termination During the Retention Period by the Company Without Cause or
by the Executive for Good Reason. Subject to Section 6(b)(vii), if the
Executive’s employment is terminated either by the Company or its Subsidiaries
other than for Cause or Disability or by resignation of the Executive with Good
Reason, in each case during the Retention Period, then, in addition to the
Accrued Rights, the Executive shall be entitled to the following payments and
benefits:

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               (i) Severance Pay. The Company shall pay the Executive an amount
equal to [MULTIPLE] 1 times the sum of (A) the Executive’s Annual Base Salary in
effect on the Termination Date (without regard to any reduction giving rise to
Good Reason) and (B) the greater of the Average Annual Incentive Award and the
target Annual Bonus in effect as of the Termination Date, in a lump-sum payment
payable on the tenth business day after the date the release described in
Section 6(b)(vii) becomes effective and irrevocable (the “Release Effective
Date”); provided, however, that such amount shall be paid in lieu of, and the
Executive hereby waives the right to receive, any other cash severance payment
relating to salary or bonus continuation the Executive is otherwise eligible to
receive upon termination of employment under any severance plan, practice,
policy or program of the Company or any Subsidiary, other than the Executive’s
rights under the Change in Control Bonus Program or any other change in control
or other retention bonus plan, practice, policy or program of the Company or any
Subsidiary.
               (ii) Prorated Annual Bonus. The Company shall pay the Executive
an amount equal to the product of (A) the Executive’s target Annual Bonus in
effect as of the Termination Date and (B) a fraction, the numerator of which is
the number of days in the current fiscal year through the Termination Date, and
the denominator of which is 365, in a lump-sum payment on the tenth business day
after the Release Effective Date. Provided that the Release Effective Date has
occurred, in the event that the Company or its Subsidiaries make payments under
the annual incentive plan in which the Executive participates immediately prior
to the Termination Date to participants who remain actively employed by the
Company or its Subsidiaries throughout the remainder of the fiscal year in which
the Termination Date occurs at a level that exceeds the target level for such
participants, the Company shall make an additional payment to the Executive
(such payment, an “Additional Annual Bonus Payment”), in an amount equal to the
product of (1) the excess of (x) the Annual Bonus the Executive would have
received during such fiscal year had he or she remained actively employed and
been paid at the same level as such other participants over (y) the Executive’s
target Annual Bonus in effect as of the Termination Date and (2) a fraction, the
numerator of which is the number of days in the year of termination through the
Termination Date, and the denominator of which is 365, in a lump sum at the time
payments under such plan are made to such other participants.
               (iii) Continued Welfare and Fringe Benefits. Commencing on the
Release Effective Date and for [MULTIPLE] 1 years thereafter (such period, the
“Continuation Period”), the Company shall continue to provide welfare benefits
and fringe benefits to the Executive and the Executive’s spouse and dependents
at least equal to the levels described in Section 4(e); provided, however, that
(A) if the Executive becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer-provided plan,
the medical and other welfare benefits described herein shall be secondary to
those provided under such other plan during such applicable period of
eligibility and (B) to the extent that it is commercially impracticable for the
Company to continue to provide the Executive with any of the benefits described
in Section 4(e) at the level described in Section 4(e) following termination of
the Executive’s employment, the Company shall instead be permitted to make a
lump-sum
 

1   For the President and Chief Financial Officer and the President and Chief
Operating Officer, the Multiple will be 3. For each of the other Executives, the
Multiple will be 2. A list of Executives who have entered into Change in Control
Severance Agreements is attached as Schedule A hereto.

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cash payment to the Executive in an amount equal to the Company’s aggregate cost
of providing such benefit at such level to a similarly situated active employee
of the Company or any Subsidiary during the Continuation Period. Nothing in this
Section 6(b)(iii) shall operate to reduce, or be construed as reducing, the
Executive’s group health plan continuation rights under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended (“COBRA”), in any manner and, upon
the end of the Continuation Period, the Executive, if otherwise eligible, shall
be entitled to elect COBRA continuation coverage for the full period applicable
as if the last date of the Continuation Period were the date of the Executive’s
termination of employment.
               (iv) Long-Term Incentive Compensation Awards. Notwithstanding any
provision to the contrary in any of the Company’s or any of its Affiliate’s
equity-based, equity-related or other long-term incentive compensation plans,
practices, policies and programs or any award agreements thereunder, upon the
Release Effective Date, (A) all outstanding stock options, stock appreciation
rights and similar rights and awards then held by the Executive that are
unexercisable or otherwise unvested shall automatically become fully vested and
immediately exercisable, as the case may be, and all stock options and stock
appreciation rights then held by the Executive (whether vested or unvested as of
immediately prior to the Release Effective Date) shall remain exercisable until
the earlier of the end of the maximum period of time permissible without the
imposition of the Section 409A Tax and their originally scheduled expiration
dates, (B) all outstanding equity-based, equity-related and other long-term
incentive awards then held by the Executive that are subject to
performance-based vesting criteria shall automatically become fully vested and
earned at a deemed performance level equal to the maximum performance level with
respect to such awards and (C) all other outstanding equity-based,
equity-related and long-term incentive awards, to the extent not covered by the
foregoing clause (A) or (B), then held by the Executive that are unvested or
subject to restrictions or forfeiture shall automatically become fully vested
and all restrictions and forfeiture provisions related thereto shall lapse.
               (v) Savings and Retirement Plan Benefits. For purposes of
computing the Executive’s accrued benefits under any Retirement Plan that is a
defined benefit plan, the Company shall credit the Executive with [MULTIPLE] 2
years of participation in the Retirement Plan and [MULTIPLE] 2 years of age, in
addition to the actual years of participation and age credited to the Executive
under such Retirement Plan as of the Termination Date. For purposes of computing
the Executive’s accrued benefits under any Retirement Plan that is a defined
contribution plan, the Company shall credit the Executive with additional
Company contributions to such Retirement Plan in an amount that would be equal
to the amount of Company contributions the Executive would have been entitled to
receive pursuant to such Retirement Plan (or any successor plan) in accordance
with Section 4(d) if the Executive (A) had remained an active participant in
such Retirement Plan during the Continuation Period and (B) had made pre-tax and
after-tax contributions at the highest rate permitted by the applicable
Retirement Plan. In the event that the Company is prohibited under the terms of
a Retirement Plan or under applicable law (including ERISA or the Code) from
crediting the Executive with additional accrued benefits pursuant to any such
Retirement Plan as required pursuant to this
 

2   For the President and Chief Financial Officer and the President and Chief
Operating Officer, the Multiple will be 3. For each of the other Executives, the
Multiple will be 2. A list of Executives who have entered into Change in Control
Severance Agreements is attached as Schedule A hereto.

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11

Section 6(b)(v), the Company shall instead make a lump-sum cash payment to the
Executive on the tenth business day following the Release Effective Date in an
amount equal to the value of (1) the actuarial equivalent of such additional
benefits, if such Retirement Plan is a defined benefit plan, or (2) the amount
of any such Company contributions, if such Retirement Plan is a defined
contribution plan.
               (vi) Outplacement Counseling. The Executive shall be entitled to
reimbursement from the Company, upon the Executive’s presentation to the Company
of a written invoice from the applicable vendor requesting payment, for the cost
of executive level outplacement services offered by a reputable and experienced
vendor selected by the Executive (including Right Management Consultants),
provided that (A) the cost of such services shall not exceed $50,000 and (B) the
Executive commences such services not later than six months following the
Release Effective Date.
               (vii) Release of Claims. Notwithstanding any provision of this
Agreement to the contrary, the Company shall not be obligated to make any
payments or provide any benefits described in this Section 6(b), other than
payments or benefits in respect of the Accrued Rights, unless and until such
time as the Executive has executed a Separation Agreement and Release
substantially in the form of Exhibit A hereto and such release has become
effective and irrevocable in accordance with its terms.
     (c) Termination on Account of Death or Disability. (i) The Executive’s
employment shall terminate automatically upon the Executive’s death or
Disability. In the event of a termination as a result of death or Disability,
the Executive shall not be entitled to any additional payments from the Company,
other than payments with respect to the Accrued Rights.
               (ii) For purposes of this Agreement, the Executive shall be
deemed to have a “Disability” in the event of the Executive’s absence for a
period of 180 consecutive business days as a result of incapacity due to a
physical or mental condition, illness or injury which is determined to be total
and permanent by a physician mutually acceptable to the Company and the
Executive or the Executive’s legal representative (such acceptance not to be
unreasonably withheld) after such physician has completed an examination of the
Executive. The Executive agrees to make himself available for such examination
upon the reasonable request of the Company.
               SECTION 7. Certain Additional Payments by the Company.
(a) Notwithstanding anything in this Agreement to the contrary and except as set
forth below, in the event it shall be determined that any Payment that is paid
or payable during the Term would be subject to the Excise Tax, the Executive
shall be entitled to receive an additional payment (a “280G Gross-Up Payment”)
in an amount such that, after payment by the Executive of all taxes (and any
interest or penalties imposed with respect to such taxes), including any income
and employment taxes (and any interest and penalties imposed with respect
thereto) and Excise Taxes imposed upon the 280G Gross-Up Payment, the Executive
retains an amount of the 280G Gross-Up Payment equal to the Excise Tax imposed
upon such Payments. The Company’s obligation to make 280G Gross-Up Payments
under this Section 7 shall not be conditioned upon the Executive’s termination
of employment and shall survive and apply after the Executive’s termination of
employment.

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12

     (b) Subject to the provisions of Section 7(c), all determinations required
to be made under this Section 7, including whether and when a 280G Gross-Up
Payment is required, the amount of such 280G Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made in
accordance with the terms of this Section 7 by a nationally recognized certified
public accounting firm that shall be designated by the Executive (the
“Accounting Firm”). The Accounting Firm shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment or such
earlier time as is requested by the Company. For purposes of determining the
amount of any 280G Gross-Up Payment, the Executive shall be deemed to pay
Federal income tax at the highest marginal rate applicable to individuals in the
calendar year in which any such 280G Gross-Up Payment is to be made and deemed
to pay state and local income taxes at the highest marginal rates applicable to
individuals in the state or locality of the Executive’s residence or place of
employment in the calendar year in which any such 280G Gross-Up Payment is to be
made, net of the maximum reduction in Federal income taxes that can be obtained
from deduction of state and local taxes, taking into account limitations
applicable to individuals subject to Federal income tax at the highest marginal
rate. All fees and expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this Section 7, shall
be paid by the Company to the Executive within 5 business days of the receipt of
the Accounting Firm’s determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall so indicate to the Executive in
writing. Any determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the application of
the Excise Tax, at the time of the initial determination by the Accounting Firm
hereunder, it is possible that the amount of the 280G Gross-Up Payment
determined by the Accounting Firm to be due to the Executive, consistent with
the calculations required to be made hereunder, will be lower than the amount
actually due (an “Underpayment”). In the event the Company exhausts its remedies
pursuant to Section 7(c) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be paid by the
Company to the Executive within 5 business days of the receipt of the Accounting
Firm’s determination.
     (c) The Executive shall notify the Company in writing of any written claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of a 280G Gross-Up Payment. Such notification shall be given as
soon as practicable, but no later than 10 business days after the Executive is
informed in writing of such claim. Failure to give timely notice shall not
prejudice the Executive’s right to 280G Gross-Up Payments and rights of
indemnity under this Section 7. The Executive shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid.
The Executive shall not pay such claim prior to the expiration of the 30-day
period following the date on which the Executive gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that the Company desires to
contest such claim, the Executive shall (i) give the Company any information
reasonably requested by the Company relating to such claim, (ii) take such
action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including accepting legal representation
with respect to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to contest
such claim and (iv) permit the Company to participate in any proceedings
relating to such claim; provided, however, that the Company shall

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13

bear and pay directly all costs and expenses (including additional income taxes,
interest and penalties) incurred in connection with such contest, and shall
indemnify and hold the Executive harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest or penalties) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 7(c), the Company shall control all
proceedings taken in connection with such contest, and, at its sole discretion,
may pursue or forgo any and all administrative appeals, proceedings, hearings
and conferences with the applicable taxing authority in respect of such claim
and may, at its sole discretion, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that (A) if
the Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties) imposed with respect to such advance or with respect to any imputed
income in connection with such advance and (B) if such contest results in any
extension of the statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such contested amount is
claimed to be due, such extension must be limited solely to such contested
amount. Furthermore, the Company’s control of the contest shall be limited to
issues with respect to which the 280G Gross-Up Payment would be payable
hereunder, and the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
     (d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 7(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company’s
complying with the requirements of Section 7(c)) promptly pay to the Company the
amount of such refund received (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 7(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of the 30-day
period after such determination, then such advance shall be forgiven and shall
not be required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of 280G Gross-Up Payment required to be paid.
               SECTION 8. No Mitigation or Offset; Enforcement of this
Agreement. (a) The Company’s obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as otherwise expressly
provided for in this Agreement, such amounts shall not be reduced whether or not
the Executive obtains other employment.
     (b) The Company shall reimburse, upon the Executive’s demand, any and all
reasonable legal fees and expenses that the Executive may incur as a result of
any contest, dispute or proceeding (regardless of whether formal legal
proceedings are ever commenced and

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14

regardless of the outcome thereof and including all stages of any contest,
dispute or proceeding) by the Company, the Executive or any other Person with
respect to the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive regarding the amount of any payment owed
pursuant to this Agreement), and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any tax (including Excise Tax) imposed on
the Executive as a result of payment by the Company of such legal fees and
expenses.
               SECTION 9. Other Expenses. The Company shall (a) reimburse, upon
the Executive’s demand, any and all reasonable fees and expenses (whether
advisory or otherwise) actually incurred by the Executive during the Term in
connection with a Change in Control or a potential Change in Control that arise
from or relate to (i) the review, negotiation, amendment, modification or
termination of any existing employment, employment-related or compensation
(whether cash, equity, incentive, deferred or otherwise) agreement, plan or
other arrangement between the Executive, on the one hand, and the Company or a
Subsidiary, on the other hand, including the rollover, assumption, substitution
or other treatment of existing equity compensation awards, or (ii) the
negotiation, preparation or review of, or the entry into, any new employment,
consulting or other service-related or other compensation (whether cash, equity,
incentive, deferral or otherwise) agreement, plan or other arrangement with any
Person, corporation or other entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) that is or is proposed to be a
party to, or expresses in writing to the Company an intention to take any action
that would result in, a Change in Control (including the Company and its
Subsidiaries and any Affiliate of such Person, corporation, other entity or
group), provided that, in each case, such amended, modified, terminated or new
agreements, plans or other arrangements are in connection with or relate to the
Executive’s continued services with the Company or its Subsidiaries or with such
Person, corporation, other entity or group following the occurrence of such
Change in Control, and (b) indemnify and hold the Executive harmless, on an
after-tax basis, for any tax (including Excise Tax) imposed on the Executive as
a result of payment by the Company of such fees and expenses. For the avoidance
of doubt, the Executive’s rights under this Section 9 shall become effective
immediately upon entry into this Agreement, shall remain in effect for the
duration of the Term and are not contingent upon the occurrence of the Retention
Start Date or the consummation of a Change in Control. In the event that the
Executive’s employment with the Company or its Subsidiaries terminates for any
reason prior to the Retention Start Date, the Executive shall only be entitled
to reimbursement under this Section 9 for fees and expenses incurred prior to
the date that the Executive’s employment terminated.
               SECTION 10. Non-Exclusivity of Rights. Except as specifically
provided in Section 6(b)(i), nothing in this Agreement shall prevent or limit
the Executive’s continuing or future participation in any plan, practice, policy
or program provided by the Company or a Subsidiary for which the Executive may
qualify, nor shall anything in this Agreement limit or otherwise affect any
rights the Executive may have under any contract or agreement with the Company
or a Subsidiary. Vested benefits and other amounts that the Executive is
otherwise entitled to receive under any incentive compensation (including any
equity award agreement), deferred compensation or other plan, practice, policy
or program of, or any contract or agreement with, the Company or a Subsidiary
shall be payable in accordance with the terms of each such plan, practice,
policy, program, contract or agreement, as the case may be, except as explicitly
modified by this Agreement.

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15

               SECTION 11. Insurance and Indemnification. Commencing upon the
Retention Start Date and for so long thereafter as the Executive could be
subject to liability, the Company shall keep in place a directors’ and officers’
liability insurance policy (or policies) providing comprehensive coverage to the
Executive for claims relating to the Executive’s service as an employee, officer
or director of the Company or its Subsidiaries, at a level that is no less
favorable to the Executive (e.g., with respect to scope, amounts and
deductibles) than the level in effect with respect to the Executive at the
Retention Start Date or, if more favorable to the Executive, the level provided
to then-current officers and directors of the Company and its Subsidiaries. The
Company shall indemnify the Executive to the fullest extent permitted by the
Company’s Restated Certificate of Incorporation and Amended and Restated Bylaws,
any officer indemnification agreement between the Executive and the Company and
the general laws of the State of Delaware and shall provide indemnification
expenses in advance to the extent permitted thereby. The indemnification and
advance of expenses provided by the Company pursuant to this Agreement shall not
be deemed exclusive of any other rights to which the Executive may be entitled
under any law (common or statutory), or any agreement, vote of stockholders or
disinterested directors or other provision that is consistent with law, both as
to action in his or her official capacity and as to action in another capacity
while holding office or while employed or acting as agent for the Company, and
such rights shall continue in respect of all events occurring while the
Executive was a director of or employed by the Company that continue after the
Executive has ceased to be a director of or employed by the Company, and shall
inure to the benefit of the estate, heirs, executors and administrators of the
Executive.
               SECTION 12. Withholding. The Company may deduct and withhold from
any amounts payable under this Agreement such Federal, state, local, foreign or
other taxes as are required to be withheld pursuant to any applicable law or
regulation.
               SECTION 13. Section 409A. It is the intention of the Company and
the Executive that the provisions of this Agreement comply with Section 409A of
the Code, and all provisions of this Agreement shall be construed and
interpreted in a manner consistent with Section 409A of the Code. To the extent
necessary to avoid imposition of any additional tax or interest penalties under
Section 409A (such tax and interest penalties, a “Section 409A Tax”),
notwithstanding the timing of payment provided in any other Section of this
Agreement, the timing of any payment, distribution or benefit pursuant to this
Agreement shall be subject to a six-month delay in a manner consistent with
Section 409A(a)(2)(B)(i) of the Code, provided that (a) the Executive shall be
credited with interest in respect of such payment, distribution or benefit
during such six-month period at the rate set forth in Section 16 and (b) if the
Executive dies during such six-month period, any such delayed payments shall not
be further delayed, and shall be immediately payable to the Executive’s devisee,
legatee or other designee or, should there be no such designee, to the
Executive’s estate in accordance with the applicable provisions of this
Agreement. From and after the Retention Start Date and for the remainder of the
Term, (i) the Company shall administer and operate this Agreement and any
“nonqualified deferred compensation plan” (as defined in Section 409A of the
Code) (and any other arrangement that could reasonably be expected to constitute
such a plan) in which the Executive participates and the Executive’s rights and
benefits hereunder and thereunder in compliance with Section 409A of the Code
and any rules, regulations or other guidance promulgated thereunder as in effect
from time to time, (ii) in the event that the Company determines that any
provision of this Agreement or any such plan or arrangement does not comply with
Section 409A of the Code or any such rules, regulations or guidance and that the
Executive may become subject to a Section

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16

409A Tax, the Company and the Executive shall negotiate in good faith to amend
or modify such provision to avoid the application of such Section 409A Tax,
provided that such amendment or modification shall not (and the Executive shall
not be obligated to consent to any such amendment or modification that would)
reduce the economic value to the Executive of such provision, and (iii) in the
event that, notwithstanding the foregoing, the Executive is subject to a Section
409A Tax with respect to any such provision, then except to the extent such
Section 409A Tax is attributable to the Executive’s breach of the Executive’s
obligations under clause (ii) above, the Executive shall be entitled to receive
an additional payment from the Company (a “409A Gross-Up Payment”) in an amount
such that, after payment by the Executive of all taxes (and any interest or
penalties imposed with respect to such taxes), including any income and
employment taxes (and any interest and penalties imposed with respect thereto)
and any Section 409A Tax imposed upon the 409A Gross-Up Payment, the Executive
retains an amount of the 409A Gross-Up Payment equal to the Section 409A Tax
imposed with respect to such provision. The provisions of Sections 7(c) and (d)
shall apply mutatis mutandis to any claim by the Internal Revenue Service that,
if successful, would give rise to a 409A Gross-Up Payment by the Company.
               SECTION 14. Assignment. (a) This Agreement is personal to the
Executive and, without the prior written consent of the Company, shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution, and any assignment in violation of this Agreement shall be void.
     (b) Notwithstanding the foregoing Section 14(a), this Agreement and all
rights of the Executive hereunder shall inure to the benefit of, and be
enforceable by, the Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts would still be payable to him or her
hereunder if he or she had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the Executive’s devisee, legatee or other designee or, should there be no such
designee, to the Executive’s estate.
     (c) The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business or assets of the Company (a “Successor”) to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
have been required to perform it if no such succession had taken place. As used
in this Agreement, the term “Company” shall mean the Company as hereinbefore
defined and any Successor and any permitted assignee to which this Agreement is
assigned.
               SECTION 15. Dispute Resolution. (a) Except as otherwise
specifically provided herein, the Executive and the Company each hereby
irrevocably submit to the exclusive jurisdiction of the United States District
Court for the Northern District of Texas (or, if subject matter jurisdiction in
that court is not available, in any state court located within the city of
Dallas, Texas) over any dispute arising out of or relating to this Agreement.
Except as otherwise specifically provided in this Agreement, the parties
undertake not to commence any suit, action or proceeding arising out of or
relating to this Agreement in a forum other than a forum described in this
Section 15(a); provided, however, that nothing herein shall preclude the Company
or the Executive from bringing any suit, action or proceeding in any other court
for the

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17

purposes of enforcing the provisions of this Section 15 or enforcing any
judgment obtained by the Company or the Executive.
     (b) The agreement of the parties to the forum described in Section 15(a) is
independent of the law that may be applied in any suit, action or proceeding and
the parties agree to such forum even if such forum may under applicable law
choose to apply non-forum law. The parties hereby waive, to the fullest extent
permitted by applicable law, any objection that they now or hereafter have to
personal jurisdiction or to the laying of venue of any such suit, action or
proceeding brought in an applicable court described in Section 15(a), and the
parties agree that they shall not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court. The
parties agree that, to the fullest extent permitted by applicable law, a final
and non-appealable judgment in any suit, action or proceeding brought in any
applicable court described in Section 15(a) shall be conclusive and binding upon
the parties and may be enforced in any other jurisdiction.
     (c) The parties hereto irrevocably consent to the service of any and all
process in any suit, action or proceeding arising out of or relating to this
Agreement by the mailing of copies of such process to such party at such party’s
address specified in Section 22.
     (d) Each party hereto hereby waives, to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in respect of any suit,
action or proceeding arising out of or relating to this Agreement. Each party
hereto (i) certifies that no representative, agent or attorney of any other
party has represented, expressly or otherwise, that such party would not, in the
event of any suit, action or proceeding, seek to enforce the foregoing waiver
and (ii) acknowledges that it and the other parties hereto have been induced to
enter into this Agreement by, among other things, the mutual waiver and
certifications in this Section 15(d).
               SECTION 16. Default in Payment. Any payment not made within ten
business days after it is due in accordance with this Agreement shall thereafter
bear interest, compounded annually, at the prime rate in effect from time to
time at Citibank, N.A., or any successor thereto.
               SECTION 17. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE
MADE IN THE STATE OF TEXAS, AND THE VALIDITY, INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT IN ALL RESPECTS SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF TEXAS WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.
               SECTION 18. Amendment; No Waiver. No provision of this Agreement
may be amended, modified, waived or discharged except by a written document
signed by the Executive and a duly authorized officer of the Company. The
failure of a party to insist upon strict adherence to any term of this Agreement
on any occasion shall not be considered a waiver of such party’s rights or
deprive such party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. No failure or delay by either
party in exercising any right or power hereunder will operate as a waiver
thereof, nor will any single or partial exercise of any such right or power, or
any abandonment of any steps to enforce such right or power, preclude any other
or further exercise thereof or the exercise of any other right or power. No
agreements or representations, oral or otherwise, express or implied, with
respect to the

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18

subject matter hereof have been made by either party, which are not set forth
expressly in this Agreement.
               SECTION 19. Severability. If any term or provision of this
Agreement is invalid, illegal or incapable of being enforced by any applicable
law or public policy, all other conditions and provisions of this Agreement
shall nonetheless remain in full force and effect so long as the economic and
legal substance of the transactions contemplated by this Agreement is not
affected in any manner materially adverse to any party. Upon any such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the fullest
extent possible.
               SECTION 20. Entire Agreement. This Agreement sets forth the
entire agreement of the parties hereto in respect of the subject matter
contained herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto, and any
prior agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and canceled. None of the parties shall be liable or
bound to any other party in any manner by any representations and warranties or
covenants relating to such subject matter except as specifically set forth
herein.
               SECTION 21. Survival. The rights and obligations of the parties
under the provisions of this Agreement, including Sections 6, 7, 8, 9, 11, 13,
14, 15 and 16, shall survive and remain binding and enforceable, notwithstanding
the expiration of the Retention Period or the Term, the termination of this
Agreement, the termination of the Executive’s employment with the Company for
any reason or any settlement of the financial rights and obligations arising
from the Executive’s employment hereunder, to the extent necessary to preserve
the intended benefits of such provisions.
               SECTION 22. Notices. All notices or other communications required
or permitted by this Agreement will be made in writing and all such notices or
communications will be deemed to have been duly given when delivered or (unless
otherwise specified) mailed by United States certified or registered mail,
return receipt requested, postage prepaid, addressed as follows:

     
If to the Company:
  Michaels Stores, Inc.
 
  8000 Bent Branch Drive
 
  Irving, Texas 75063
 
   
 
  Attention: (1) SVP, General Counsel and Secretary
 
                    (2) SVP — Human Resources
 
   
 
  Fax: (1) 972-409-1965
 
          (2) 972-409-1772    
If to the Executive:
  To the Executive’s address as most recently supplied to the
Company and set forth in the Company’s records;

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or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
               SECTION 23. Headings and References. The headings of this
Agreement are inserted for convenience only and neither constitute a part of
this Agreement nor affect in any way the meaning or interpretation of this
Agreement. When a reference in this Agreement is made to a Section, such
reference shall be to a Section of this Agreement unless otherwise indicated.
               SECTION 24. Counterparts; Effectiveness and Termination. This
Agreement may be executed in one or more counterparts (including via facsimile),
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument. This Agreement shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party and shall remain in effect until the third
anniversary of the date it becomes effective (such period, including any
extension thereof pursuant to the remainder of this Section 24, the “Term”);
provided, however, that (a) beginning on the second anniversary of the effective
date and on each anniversary thereafter (each, an “Extension Date”), the Term
shall be automatically extended for an additional one-year period, unless the
Company or the Executive provides the other party with 60 days’ prior written
notice before the applicable Extension Date that the Term shall not be so
extended, and (b) except as specifically provided in Section 9, this Agreement
and the Term shall terminate automatically in the event that the Termination
Date occurs prior to the Retention Start Date. Notwithstanding the foregoing, in
the event of a Change in Control during the Term, this Agreement shall not
terminate and shall remain in effect in accordance with its terms, and the Term
shall be extended, until the Company and its Subsidiaries have performed all
their obligations hereunder with no future performance being possible; provided,
however, that, notwithstanding any extension of the Term, this Agreement shall
only be effective with respect to the first Change in Control that occurs during
the Term and the Executive shall not be entitled to any payments or benefits
pursuant to this Agreement with respect to any subsequent Change in Control.
               SECTION 25. Interpretation. For purposes of this Agreement, the
words “include” and “including”, and variations thereof, shall not be deemed to
be terms of limitation but rather shall be deemed to be followed by the words
“without limitation”. The term “or” is not exclusive. The word “extent” in the
phrase “to the extent” shall mean the degree to which a subject or other thing
extends, and such phrase shall not mean simply “if”.
[Signature Page Follows]

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

            MICHAELS STORES, INC.
      By:           Name:           Title:           EXECUTIVE                
[NAME]        

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EXHIBIT A
SEPARATION AGREEMENT AND RELEASE
I. Release. For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the undersigned, with the intention of binding
himself/herself, his/her heirs, executors, administrators and assigns, does
hereby release and forever discharge Michaels Stores, Inc., a Delaware
corporation (the “Company”), and its present and former officers, directors,
executives, agents, employees, affiliated companies, subsidiaries, successors,
predecessors and assigns (collectively, the “Released Parties”), from any and
all claims, actions, causes of action, demands, rights, damages, debts,
accounts, suits, expenses, attorneys’ fees and liabilities of whatever kind or
nature in law, equity, or otherwise, whether now known or unknown (collectively,
the “Claims”), which the undersigned now has, owns or holds, or has at any time
heretofore had, owned or held against any Released Party, arising out of or in
any way connected with the undersigned’s employment relationship with the
Company, its subsidiaries, predecessors or affiliated entities, or the
termination thereof, under any Federal, state or local statute, rule, or
regulation, or principle of common, tort or contract law, including but not
limited to, the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. §§ 201
et seq., the Family and Medical Leave Act of 1993, as amended (the “FMLA”), 29
U.S.C. §§ 2601 et seq., Title VII of the Civil Rights Act of 1964, as amended,
42 U.S.C. §§ 2000e et seq., the Age Discrimination in Employment Act of 1967, as
amended, 29 U.S.C. §§ 621 et seq., the Americans with Disabilities Act of 1990,
as amended, 42 U.S.C. §§ 12101 et seq., the Worker Adjustment and Retraining
Notification Act of 1988, as amended, 29 U.S.C. §§ 2101 et seq., the Employee
Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001 et seq.,
and any other equivalent or similar Federal, state, or local statute; provided,
however, that nothing herein shall release the Company of its obligations under
that certain Change in Control Severance Agreement between the undersigned and
the Company. The undersigned understands that, as a result of executing this
Separation Agreement and Release, he/she will not have the right to assert that
the Company or any other Released Party unlawfully terminated his/her employment
or violated any of his/her rights in connection with his/her employment or
otherwise.
The undersigned affirms that he/she has not filed, caused to be filed, or
presently is a party to any Claim, complaint or action against any Release Party
in any forum or form and that he/she knows of no facts which may lead to any
Claim, complaint or action being filed against any Release Party in any forum by
the undersigned or by any agency, group, etc. The undersigned further affirms
that he/she has been paid and/or has received all leave (paid or unpaid),
compensation, wages, bonuses, commissions, and/or benefits to which he/she may
be entitled and that no other leave (paid or unpaid), compensation, wages,
bonuses, commissions and/or benefits are due to him/her from the Company and its
subsidiaries, except as specifically provided in this Separation Agreement and
Release. The undersigned furthermore affirms that he/she has no known workplace
injuries or occupational diseases and has been provided and/or has not been
denied any leave requested under the FMLA. If any agency or court assumes
jurisdiction of any such Claim, complaint or action against any Released Party
on behalf of the undersigned, the undersigned will request such agency or court
to withdraw the matter.
The undersigned further declares and represents that he/she has carefully read
and fully understands the terms of this Separation Agreement and Release and
that he/she has been

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2

advised and had the opportunity to seek the advice and assistance of counsel
with regard to this Separation Agreement and Release, that he/she may take up to
and including 21 days from receipt of this Separation Agreement and Release, to
consider whether to sign this Separation Agreement and Release, that he/she may
revoke this Separation Agreement and Release within seven calendar days after
signing it by delivering to the Company written notification of revocation, and
that he/she knowingly and voluntarily, of his/her own free will, without any
duress, being fully informed and after due deliberate action, accepts the terms
of and signs the same as his own free act.
[To effect a full and complete general release as described above, the
undersigned expressly waives and relinquishes all rights and benefits of
Section 1542 of the Civil Code of the State of California, and the undersigned
does so understanding and acknowledging the significance and consequence of
specifically waiving Section 1542. Section 1542 of the Civil Code of the State
of California states as follows:
A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.
Thus, notwithstanding the provisions of Section 1542, and to implement a full
and complete release and discharge of the Released Parties, the undersigned
expressly acknowledges this Separation Agreement and Release is intended to
include in its effect, without limitation, all Claims the undersigned does not
know or suspect to exist in the undersigned’s favor at the time of signing this
Separation Agreement and Release, and that this Separation Agreement and Release
contemplates the extinguishment of any such Claim or Claims.]3
II. Protected Rights. The Company and the undersigned agree that nothing in this
Separation Agreement and Release is intended to or shall be construed to affect,
limit or otherwise interfere with any non-waivable right of the undersigned
under any Federal, state or local law, including the right to file a charge or
participate in an investigation or proceeding conducted by the Equal Employment
Opportunity Commission (“EEOC”) or to exercise any other right that cannot be
waived under applicable law. The undersigned is releasing, however, his/her
right to any monetary recovery or relief should the EEOC or any other agency
pursue Claims on his/her behalf. Further, should the EEOC or any other agency
obtain monetary relief on his/her behalf, the undersigned assigns to the Company
all rights to such relief.
III. Nonsolicitation/Non-Interference with Business Relationships. The
undersigned further agrees that during the one-year period commencing on the
date of his/her termination of employment with the Company or its subsidiaries,
he/she will not, directly or indirectly, (i) solicit, recruit or hire any person
who is at such time, or who at any time during the six-month period prior to
such solicitation or hiring had been, an employee of, or exclusive consultant
then under contract with, the Company or its subsidiaries, without the Company’s
prior written consent; (ii) solicit or encourage any employee of the Company or
its subsidiaries to leave the
 

3   Only include for employees who were employed by the Company or its
subsidiaries in California.

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3

employment of the Company or its subsidiaries; (iii) intentionally interfere
with the relationship of the Company or any of its subsidiaries with any
employee of, or exclusive consultant then under contract with, the Company or
any such subsidiary; or (iv) intentionally interfere with, disrupt or attempt to
disrupt any past, present or prospective relationship, contractual or otherwise,
between the Company or any of its subsidiaries, on the one hand, and any of
their respective customers or suppliers, on the other hand.
IV. Equitable Remedies. The undersigned acknowledges that a violation by the
undersigned of any of the covenants contained in Section II would cause
irreparable damage to the Company and its subsidiaries in an amount that would
be material but not readily ascertainable, and that any remedy at law (including
the payment of damages) would be inadequate. Accordingly, the undersigned agrees
that, notwithstanding any provision of this Separation Agreement and Release to
the contrary, the Company shall be entitled (without the necessity of showing
economic loss or other actual damage) to injunctive relief (including temporary
restraining orders, preliminary injunctions and/or permanent injunctions) in any
court of competent jurisdiction for any actual or threatened breach of any of
the covenants set forth in Section II in addition to any other legal or
equitable remedies it may have.
V. Third-Party Litigation. The undersigned agrees to be available to the Company
and its affiliates on a reasonable basis in connection with any pending or
threatened claims, charges or litigation in which the Company or any of its
affiliates is now or may become involved, or any other claims or demands made
against or upon the Company or any of its affiliates, regardless of whether or
not the undersigned is a named defendant in any particular case.
VI. Return of Property. The undersigned shall return to the Company on or before
[10 DAYS AFTER TERMINATION DATE], all property of the Company in the
undersigned’s possession or subject to the undersigned’s control, including
without limitation any laptop computers, keys, credit cards, cellular telephones
and files. The undersigned shall not alter any of the Company’s records or
computer files in any way after [TERMINATION DATE].
VII. Confidential Information. The undersigned agrees to hold confidential, and
not to disclose to any person, firm, corporation, partnership or agency, any
trade secret or Confidential Information (as defined below) gained in the course
of the undersigned’s employment with the Company concerning the Company or any
of its affiliates, except if such disclosure is required by law or legal
process. “Confidential Information” shall include, without limitation,
information concerning financial affairs, business plans or strategies, product
pricing information, operating policies and procedures, vendor information and
proprietary statistics or reports. The undersigned agrees not to remove any
Confidential Information from the Company, not to request that others do so on
the undersigned’s behalf and to return any Confidential Information currently in
the undersigned’s possession to the Company.
VIII. Severability. If any term or provision of this Separation Agreement and
Release is invalid, illegal or incapable of being enforced by any applicable law
or public policy, all other conditions and provisions of this Separation
Agreement and Release shall nonetheless remain in full force and effect so long
as the economic and legal substance of the transactions contemplated by this
Separation Agreement and Release is not affected in any manner materially
adverse to any party.

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IX. GOVERNING LAW. THIS SEPARATION AGREEMENT AND RELEASE SHALL BE DEEMED TO BE
MADE IN THE STATE OF TEXAS, AND THE VALIDITY, INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT IN ALL RESPECTS SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF TEXAS WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.
Effective on the eighth calendar day following the date set forth below.

            MICHAELS STORES, INC.
      By:       
 
      Name:           Title:           EXECUTIVE                 [NAME]        
  Date:                        

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SCHEDULE A

1.   Form of Change in Control Severance Agreement, dated as of April 26, 2006,
between the Company and Jeffrey N. Boyer (President and Chief Financial Officer)
  2.   Form of Change in Control Severance Agreement, dated as of April 26,
2006, between the Company and Gregory A. Sandfort (President and Chief Operating
Officer)   3.   Form of Change in Control Severance Agreement, dated as of
April 26, 2006, between the Company and Thomas M. Bazzone (Executive Vice
President — Specialty Businesses)   4.   Form of Change in Control Severance
Agreement, dated as of April 26, 2006, between the Company and Thomas C. DeCaro
(Executive Vice President — Supply Chain)   5.   Form of Change in Control
Severance Agreement, dated as of April 26, 2006, between the Company and Harvey
S. Kanter (Executive Vice President — Chief Merchant)   6.   Form of Change in
Control Severance Agreement, dated as of April 26, 2006, between the Company and
Edward F. Sadler (Executive Vice President — Store Opertations)