exv10w3



 



Exhibit 10.3



OFFICER INDEMNIFICATION AGREEMENT




     This
Officer Indemnification Agreement, dated as of ________, 2003
(this “Agreement”), is made by and between Michaels Stores, Inc., a Delaware
corporation (the “Company”), and ________ (“Indemnitee”).


RECITALS:




     A. Section 141 of the Delaware General Corporation Law provides that the
business and affairs of a corporation shall be managed under the direction of
its board of directors.


     B. Pursuant to Sections 141 and 142 of the Delaware General Corporation
Law, significant authority with respect to the management of the Company has
been delegated to the officers of the Company.


     C. By virtue of the managerial prerogatives vested in the officers of a
Delaware corporation, officers act as fiduciaries of the corporation and its
stockholders.


     D. 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 officers of the Company.


     E. 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.


     F. The Delaware courts have recognized that indemnification by a
corporation serves the dual policies of (1) allowing corporate officials to
resist unjustified lawsuits, secure in the knowledge that, if vindicated, the
corporation will bear the expense of litigation and (2) 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.


     G. The number of lawsuits challenging the judgment and actions of officers
of Delaware corporations, the costs of defending those lawsuits, and the threat
to officers’ 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 officers.


     H. 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 officers of
public companies and have exposed such officers to new and substantially
broadened civil liabilities.


 







 


     I. These legislative and regulatory initiatives have also exposed officers
of public companies to a significantly greater risk of criminal proceedings,
with attendant defense costs and potential criminal fines and penalties.


     J. Under Delaware law, an officer’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
officer and is separate and distinct from any right to indemnification the
officer may be able to establish, and indemnification of the officer against
criminal fines and penalties is permitted if the officer satisfies the
applicable standard of conduct.


     K. Indemnitee is an officer of the Company and his/her willingness to
serve in such capacity is predicated, in substantial part, upon the Company’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.


     L. Therefore, in recognition of the need to provide Indemnitee with
substantial protection against personal liability, in order to procure
Indemnitee’s continued service as an officer of the Company and to enhance
Indemnitee’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’s
certificate of incorporation or bylaws (collectively, the “Constituent
Documents”), any change in the composition of the Company’s Board of Directors
(the “Board”) 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’s directors’ and officers’ liability
insurance policies.


     M. In light of the considerations referred to in the preceding recitals,
it is the Company’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.


AGREEMENT:




     NOW, THEREFORE, the parties hereby agree as follows:


     1. Certain Definitions. In addition to terms defined elsewhere herein,
the following terms have the following meanings when used in this Agreement
with initial capital letters:


        (a) “Change in Control” means the occurrence after the date of this
Agreement of any of the following events:


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	 	(i)	 	the acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act) (a “Person”) of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of
the combined voting power of the then-outstanding Voting
Stock of the Company; provided, however, that:



     (A) for purposes of this Section 1(a)(i), the following acquisitions shall
not constitute a Change in Control: (1) any acquisition of Voting Stock of the
Company directly from the Company that is approved by a majority of the
Incumbent Directors, (2) any acquisition of Voting Stock of the Company by the
Company or any Subsidiary, (3) any acquisition of Voting Stock of the Company
by any employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary, and (4) any acquisition of Voting Stock of the
Company by any Person pursuant to a Business Combination that complies with
clauses (1), (2) and (3) of Section 1(a)(iii) below;


     (B) if any Person acquires beneficial ownership of 20% or more of combined
voting power of the then-outstanding Voting Stock of the Company as a result of
a transaction described in clause (A)(1) of Section 1(a)(i) and such Person
thereafter becomes the beneficial owner of any additional shares of Voting
Stock of the Company representing 1% or more of the then-outstanding Voting
Stock of the Company, other than in an acquisition directly from the Company
that is approved by a majority of the Incumbent Directors or other than as a
result of a stock dividend, stock split or similar transaction effected by the
Company in which all holders of Voting Stock are treated equally, such
subsequent acquisition shall be deemed to constitute a Change in Control;


     (C) a Change in Control will not be deemed to have occurred if a Person
acquires beneficial ownership of 20% or more of the Voting Stock of the Company
as a result of a reduction in the number of shares of Voting Stock of the
Company outstanding unless and until such Person thereafter becomes the
beneficial owner of any additional shares of Voting Stock of the Company
representing 1% or more of the then-outstanding Voting Stock of the Company,
other than in an acquisition directly from the Company that is approved by a
majority of the Incumbent Directors or other than as a result of a stock
dividend, stock split or similar transaction effected by the Company in which
all holders of Voting Stock are treated equally; and


     (D) if at least a majority of the Incumbent Directors determine in good
faith that a Person has acquired beneficial ownership of 20% or more of the
Voting Stock of the Company inadvertently, and such Person divests as promptly
as practicable a sufficient number of shares so that such Person beneficially
owns less than 20% of the Voting Stock of the Company, then no Change in
Control shall have occurred as a result of such Person’s acquisition; or


	 	(ii)	 	a majority of the Directors are not
Incumbent Directors; or



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	 	(iii)	 	the consummation of a
reorganization, merger or consolidation, or sale or
other disposition of all or substantially all of the
assets of the Company or the acquisition of assets of
another corporation, or other transaction (each, a
“Business Combination”), unless, in each case,
immediately following such Business Combination (A) all
or substantially all of the individuals and entities who
were the beneficial owners of Voting Stock of the
Company immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60%
of the combined voting power of the then outstanding
shares of Voting Stock of the entity resulting from such
Business Combination (including, without limitation, an
entity which as a result of such transaction owns the
Company or all or substantially all of the Company’s
assets either directly or through one or more
subsidiaries), (B) no Person (other than the Company,
such entity resulting from such Business Combination, or
any employee benefit plan (or related trust) sponsored
or maintained by the Company, any Subsidiary or such
entity resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more
of the combined voting power of the then outstanding
shares of Voting Stock of the entity resulting from such
Business Combination, and (C) at least a majority of the
members of the Board of Directors of the entity
resulting from such Business Combination were Incumbent
Directors at the time of the execution of the initial
agreement or of the action of the Board providing for
such Business Combination; or



	 	(iv)	 	approval by the stockholders of the
Company of a complete liquidation or dissolution of the
Company, except pursuant to a Business Combination that
complies with clauses (A), (B) and (C) of Section
1(a)(iii).



	 	(v)	 	For purposes of this Section 1(a),
the following terms shall have the following meanings:



     (A) “Exchange
Act” shall mean the Securities Exchange Act of 1934, as
amended.


     (B) “Incumbent Directors” 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’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); provided,
however, that an individual shall not be an Incumbent Director if such
individual’s



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 election or appointment to the Board occurs as a result of an actual or
threatened election contest (as described in Rule 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.


     (C) “Subsidiary” means an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting Stock.


     (D) “Voting Stock” means securities entitled to vote generally in the
election of directors (or similar governing bodies).


        (b)
“Claim” means (i) 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) 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.


        (c) “Controlled Affiliate” 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, “control” 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; provided 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.


        (d)
“Disinterested Director” 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.


        (e)
“Expenses” means attorneys’ and experts’ 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.


        (f)
“Indemnifiable Claim” means any Claim based upon, arising out of or
resulting from (i) 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) any actual, alleged
or


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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) of this sentence,
or (iii) Indemnitee’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) of this sentence or any actual, alleged or
suspected act or failure to act by Indemnitee in connection with any obligation
or restriction 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) such entity or enterprise is or at the time
of such service was a Controlled Affiliate, (ii) 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) 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.


        (g) “Indemnifiable Losses” means any and all Losses relating to, arising
out of or resulting from any Indemnifiable Claim.


        (h)
“Independent Counsel” 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) 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) any other party
to the Indemnifiable Claim giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term “Independent Counsel” 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’s rights
under this Agreement.


        (i)
“Losses” means any and all Expenses, damages, losses, liabilities,
judgments, fines, penalties (whether civil, criminal or other) and amounts paid
or payable 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.


     2. Indemnification Obligation. Subject to Section 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; provided, however, that, except as provided in Sections 5
and 20, Indemnitee shall not be entitled to indemnification pursuant to this
Agreement in connection with any Claim initiated by Indemnitee against the



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 Company or any director or officer of the Company unless the Company has
joined in or consented to the initiation of such Claim.


     3. Advancement of Expenses. 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’s right to such advancement is not subject to the 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) advance to Indemnitee funds in
an amount sufficient to pay such Expenses, or (c) reimburse Indemnitee for such
Expenses; provided 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’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 7, that Indemnitee is not entitled to indemnification hereunder.


     4. Indemnification for Additional Expenses. 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) 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) recovery under any
directors’ and officers’ 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; provided, however, 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.


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     5. Partial Indemnity. 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.


     6. Procedure for Notification. 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’ and officers’ 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 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.


     7. Determination of Right to Indemnification.


        (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 2 and no Standard of Conduct Determination (as
defined in Section 7(b)) shall be required.


        (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 “Standard of
Conduct Determination”) shall be made as follows: (i) if a Change of Control
shall not have occurred, or if a Change of Control shall have occurred but
Indemnitee shall have requested that the Standard of Conduct Determination be
made pursuant to this clause (i), (A) by a majority vote of the Disinterested
Directors, even if less than a quorum of the Board, (B) 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 (C)
if there are no such Disinterested Directors, by Independent Counsel in a
written opinion addressed to the Board, a copy of which shall be delivered to
Indemnitee; and (ii) if a Change in Control shall have occurred and Indemnitee
shall not have requested


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that the Standard of Conduct Determination be made pursuant to clause (i),
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’ and experts’ fees and
expenses) incurred by Indemnitee in so cooperating with the person or persons
making such Standard of Conduct Determination.


        (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) the person or persons empowered or selected
under Section 7 to make the Standard of Conduct Determination shall not have
made a determination within 30 days after the later of (A) 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 “Notification Date”) and (B) 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 his/her obligations set forth in the second
sentence of Section 7(b), then Indemnitee shall be deemed to have satisfied the
applicable standard of conduct; provided that such 30-day period may be
extended for a reasonable time, not to exceed an additional 30 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.


        (d) If (i) Indemnitee shall be entitled to indemnification hereunder
against any Indemnifiable Losses pursuant to Section 7(a), (ii) 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) 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) 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) the earliest date on
which the applicable criterion specified in clause (i), (ii) or (iii) above
shall have been satisfied, an amount equal to the amount of such Indemnifiable
Losses.


        (e) If a Standard of Conduct Determination is to be made by Independent
Counsel pursuant to Section 7(b)(i), 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. If a Standard of Conduct Determination is to be made by Independent
Counsel pursuant to Section 7(b)(ii), the


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Independent Counsel shall be selected by Indemnitee, and Indemnitee shall
give written notice to the Company advising it of the identity of the
Independent Counsel so selected. In either case, Indemnitee or the Company, as
applicable, may, within five business days after receiving written notice of
selection from the other, deliver to the other a written objection to such
selection; provided, however, 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 “Independent Counsel” in Section 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, (i) 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 and
(ii) the non-objecting party may, at its option, select an alternative
Independent Counsel and give written notice to the other party advising such
other party of the identity of the alternative Independent Counsel so selected,
in which case the provisions of the two immediately preceding sentences and
clause (i) of this sentence shall apply to such subsequent selection and
notice. If applicable, the provisions of clause (ii) of the immediately
preceding sentence shall apply to successive alternative selections. 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 days after the Company gives its initial notice pursuant to
the first sentence of this Section 7(e) or Indemnitee gives its initial notice
pursuant to the second sentence of this Section 7(e), as the case may be,
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
the Company or Indemnitee to the other’s selection of Independent Counsel
and/or for the appointment as Independent Counsel of a person or firm 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 fees and expenses of the
Independent Counsel incurred in connection with the Independent Counsel’s
determination pursuant to Section 7(b).


     8. Presumption of Entitlement.


        (a) 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.


     9. No Other Presumption. For purposes of this Agreement, the termination
of any Claim by judgment, order, settlement (whether with or without court
approval) or



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 conviction, or upon a plea of nolo contendere 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.


     10. Non-Exclusivity. 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’s jurisdiction of
incorporation, any other contract or otherwise (collectively, “Other Indemnity
Provisions”); provided, however, that (a) 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) 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’s right to indemnification under this Agreement or any
Other Indemnity Provision.


     11. Liability Insurance and Funding. For the duration of Indemnitee’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’ and officers’ 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’s current policies of directors’ and officers’ liability insurance.
Upon request, the Company shall provide Indemnitee with a copy of all
directors’ and officers’ 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 shall not discontinue or significantly reduce the scope
or amount of coverage from one policy period to the next (i) without the prior
approval thereof by a majority vote of the Incumbent Directors, even if less
than a quorum, or (ii) 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’ and officers’ 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’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.


     12. Subrogation. 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’s successors), including



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 any entity or enterprise referred to in clause (i) of the definition of
“Indemnifiable Claim” in Section 1(f). Indemnitee shall execute all papers
reasonably required to evidence such rights (all of Indemnitee’s reasonable
Expenses, including attorneys’ fees and charges, related thereto to be
reimbursed by or, at the option of Indemnitee, advanced by the Company).


     13. No Duplication of Payments. 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) of the
definition of “Indemnifiable Claim” in Section 1(f)) in respect of such
Indemnifiable Losses otherwise indemnifiable hereunder.


     14. Defense of Claims. 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; provided that if Indemnitee
believes, after consultation with counsel selected by Indemnitee, that (a) the
use of counsel chosen by the Company to represent Indemnitee would present such
counsel with an actual or potential conflict, (b) 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) 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’s expense. The
Company shall not be liable to Indemnitee under this Agreement for any amounts
paid in settlement of any threatened or pending Indemnifiable Claim effected
without the Company’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; provided that Indemnitee may withhold
consent to any settlement that does not provide a complete and unconditional
release of Indemnitee.


     15. Successors and Binding Agreement.


        (a) 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 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


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Company whether by purchase, merger, consolidation, reorganization or
otherwise (and such successor will thereafter be deemed the “Company” for
purposes of this Agreement), but shall not otherwise be assignable or
delegatable by the Company.


        (b) This Agreement shall inure to the benefit of and be enforceable by the
Indemnitee’s personal or legal representatives, executors, administrators,
heirs, distributees, legatees and other successors.


        (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’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’s will or by the laws of descent and distribution,
and, in the event of any attempted assignment or transfer contrary to this
Section 15(c), the Company shall have no liability to pay any amount so
attempted to be assigned or transferred.


     16. Notices. 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.


     17. Governing Law. 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.


     18. Validity. 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



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 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.


     19. Miscellaneous. 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.


     20. Legal Fees and Expenses. 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’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’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 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’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’ and
related fees and expenses incurred by Indemnitee in connection with any of the
foregoing.


     21. Certain Interpretive Matters. 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.


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     22. Entire Agreement. 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.


     23. Counterparts. 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.


[Signatures Appear On Following Page]





15







 




     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.



	 	 	 	 	 
	 	 	MICHAELS STORES, INC.

8000 Bent Branch Drive

Irving, TX 75063
	 	 	 	 	 
	 	 	
By:	 	 
	 	 	 	 	

	 	 	 	 	R. Michael Rouleau
	 	 	 	 	President and Chief Executive
	 	 	 	 	   Officer






	 	 	 
	 	 	
[INDEMNITEE]

8000 Bent Branch Drive

Irving, TX 75063
	 	 	 
	 	 	


	 	 	
[Indemnitee]







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