Document:

Exhibit
10.27

Execution
Version

SEPARATION
AGREEMENT

This Agreement is made by
and between Michaels Stores, Inc. (the “Company”) and Charles J. Wyly,
Jr. (the “Executive”) on the Closing Date of the merger described in the
Recitals below (the “Effective Date”). 
Any capitalized term not defined in this Agreement shall have the
meaning ascribed to it in the Merger Agreement (defined in the Recitals).

WHEREAS, the Company has entered into an agreement
captioned “Agreement and Plan of Merger” dated as of June 30, 2006 with Bain
Paste Mergerco, Inc., Blackstone Paste Mergerco, Inc., Bain Paste Finco, LLC
and Blackstone Paste Finco, LLC, pursuant to which Bain Paste Mergerco, Inc.
and Blackstone Paste Mergerco, Inc. will merge with and into the Company with the
Company as the surviving entity (as amended, the “Merger Agreement”);

WHEREAS, immediately prior to the Closing Date of said
merger, the Executive was serving the Company as the Chairman of its Board of
Directors (the “Board”) and providing services as an independent
contractor to the Company; and

WHEREAS, the Company and
the Executive wish to confirm their agreement concerning the Executive’s
resignation as Chairman of the Board and the termination of his services to the
Company as an independent contractor, effective as of the Effective Date;

NOW, THEREFORE, in
consideration of the foregoing premises and of the mutual promises, terms,
provisions and conditions set forth in this Agreement, the sufficiency of which
is hereby acknowledged by the parties, the parties hereby agree:

1.             Agreement to Resignation and Termination of Services.  The Executive hereby resigns his position and
office as the Chairman of the Board, and the Company hereby accepts his
resignation, effective as of the Closing Date. 
Further, the Executive and the Company agree that all services of the
Executive to the Company and its Affiliates, as an independent contractor or
otherwise, shall cease on the Closing Date. 
The Company and the Executive each waives any prior notice to which it or
he may have been entitled to effect such resignation or such cessation of
services.

2.             Ancillary Covenants. 
Ancillary to the agreement of the parties set forth in Section 1 hereof
for the Executive’s resignation of his position and office and the termination
of his services to the Company, which is enforceable on its own terms, the
Executive agrees that certain restrictions on his business activities after
termination of his services with the Company and its Affiliates (as defined
below) are necessary to protect the goodwill, Confidential Information (as also
defined below) and other legitimate interests of the Company and its
Affiliates, as more fully set forth in Sections 4, 5 and 6 below.

3.             Consideration for Covenants.   In consideration of the Executive’s
agreement to the covenants of confidentiality, non-competition and
non-solicitation contained in this Agreement

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and subject to the Executive’s meeting in full all of
his obligations under those covenants, the Company will provide the Executive
with a payment of $3 million, payable in one lump sum on the Effective Date.

4.             Covenants of Non-Competition, Non-Solicitation and Confidentiality.

4.1           Agreement
Not to Compete.  The Executive
agrees that, during the period of twenty-four months immediately following the
Closing Date (the “Restricted Period”), the Executive will not, directly
or indirectly, alone or in association with others, anywhere in the Territory,
own, manage, operate, control or participate in the ownership, management,
operation or control of, or be connected as an officer, employee, investor,
principal, joint venturer, shareholder, partner, director, consultant, agent or
otherwise with, or have any financial interest (through stock or other equity
ownership, investing of capital, lending of money or otherwise) in, any
business, venture or activity that competes, directly or indirectly, with the
Business of the Company and its Affiliates as conducted or in planning as of
the Closing Date or at any time during the immediately preceding twelve months
(a “Competitor”), except that nothing contained in this Section 4.1 shall
prevent the Executive’s wholly passive ownership of one percent (1%) or less of
the equity securities of any Competitor that is a publicly-traded company.

For the purposes of this Agreement, the “Business
of the Company and its Affiliates” or “Business” is that of arts and
crafts specialty retailer providing materials, ideas and education for creative
activities and the “Territory” is those states within the United States and
those provinces of Canada in which the Company or any of its Affiliates was
doing or actively planning to do business as of the Closing Date or at any time
during the immediately preceding twelve months.

4.2           Agreement
Not to Solicit or Hire Employees.  The services of their employees being
acknowledged as valuable assets of the Company and its Affiliates, the
Executive agrees that, during the Restricted Period, the Executive will not
hire or attempt to hire without first obtaining written permission of an
authorized representative of the Company any employee of the Company or its
Affiliates; assist in such hiring or attempt by any Person; or encourage any
such employee to terminate his or her relationship with the Company or any of
its Affiliates. The foregoing shall not prevent the Executive from providing
favorable references, oral or written, for an employee of the Company or any of
its Affiliates who is known to him prior to the Closing Date; provided that
such employee terminated his or her employment with the Company or an Affiliate
without any direct or indirect solicitation or encouragement from the Executive
or Sam Wyly and such references are not for the purpose of assisting such
employee to be employed or engaged as an independent contractor by a Competitor
or by any other business, venture or activity in which the Executive or Sam
Wyly is in any way associated.

For purposes of this Agreement, an “employee”
means any individual employed by the Company or one of its Affiliates at the
level of an assistant store manager or above on the Closing Date or at any time
during the immediately preceding twelve months; a “Person” means a
natural person, a corporation, a limited liability company, an association, a
partnership, a limited partnership, a joint venture, an estate, a trust or any
other entity or organization, other than the Company or any of its Affiliates;
and an “Affiliate” means any person or entity directly or indirectly
controlling, controlled by or under common control with the Company, where
control may be by

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management authority, contract or equity interest, (i)
as to which the Executive provided services during his association with the
Company or (ii) as to which the Executive had access to Confidential
Information which would assist him in competing with the Business of such
Affiliate or in soliciting its employees, distributors or vendors.

4.3           Agreement
Not to Solicit Distributors and Vendors.  The Executive agrees that, during the
Restricted Period, he shall not directly or indirectly solicit or encourage any
distributor or vendor to the Company or any of its Affiliates to breach any
agreement with the Company or any of its Affiliates or to terminate or diminish
its relationship with the Company or any of its Affiliates; provided, however,
that these restrictions shall apply only with respect to those distributors and
vendors who are doing business with the Company or any of its Affiliates on the
Closing Date or have done business with the Company or any of its Affiliates at
any time during the twelve months immediately preceding the Closing Date.

4.4           Agreement
Not to Use or Disclose Confidential Information.  The Executive acknowledges that the Company
and its Affiliates continually develop Confidential Information; that he has
developed Confidential Information for the Company and its Affiliates; and that
he has learned of Confidential Information during the course of his service and
other associations with the Company and its Affiliates.  The Executive agrees that he shall not
disclose to any Person or use any Confidential Information obtained by the
Executive incident to his service to, or any other association with, the
Company or any of its Affiliates, other than as required by applicable law
after notice to the Company and a reasonable opportunity for the Company to
protect the Confidential Information prior to any such disclosure.

For purposes of this Agreement, “Confidential
Information” means any and all information of the Company and its
Affiliates that is not generally known by Persons with whom the Company or any
of its Affiliates competes or does business, or with whom any of them plans to
compete or do business and any and all information, publicly known in whole or
in part or not, which, if disclosed by the Company or any of its Affiliates,
would assist them in competition against them. 
Confidential Information includes without limitation such information
relating to (i) the development, research, testing, manufacturing, marketing
and financial activities of the Company and its Affiliates, (ii) the products
and services of the Company and its Affiliates, (iii) the costs, sources of
supply, financial performance and strategic plans of the Company and its
Affiliates, (iv) the identity and special needs of the customers of the Company
and its Affiliates and (v) the people and organizations with whom the Company
or any of its Affiliates has business relationships and the nature and
substance of those relationships. 
Confidential Information also includes any information that the Company
or any of its Affiliates has received belonging to a customer or any other
third parties with any understanding, express or implied, that the information
would not be disclosed.

5.             Non-Disparagement. 
The Executive agrees that he will not disparage or criticize the Company
or any of its Affiliates, their direct or indirect investors, management or
Business, to any of the employees of the Company or any of its Affiliates, or
to any Person with whom the Company or any of its Affiliates is doing, or is planning
to do, business as of the Closing Date or at any time during the immediately
preceding twelve months.

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6.             Notification Requirement. 
The Executive agrees that, throughout the Restricted Period, he will
notify the Company in writing of any change in his address and, at least
fifteen business days in advance, of each new business, venture or activity in
which he plans to engage which is, has the potential to become, or is in
planning to become, a Competitor or otherwise adversely affect the Business of the
Company and its Affiliates, within or outside the Territory.  Such notice shall state the name and address
of any such new business, venture or activity. 
The Executive agrees to provide the Company with such other pertinent
information concerning such business, venture or activity as the Company may
reasonably request in order to determine the Executive’s continued compliance
with his obligations under this Agreement. 
The Executive further agrees to notify any Person to whom he intends to
provide services, as an employee, independent contractor or otherwise, of his
obligations under this Agreement and hereby consents to notification by the
Company to any such Persons about his obligations under this Agreement.

7.             Enforcement.  The
Executive acknowledges that he has carefully read and considered all the terms
and conditions of this Agreement, including the restraints imposed upon the
Executive pursuant to Sections 4, 5 and 6 hereof.  The Executive agrees that said restraints are
necessary for the reasonable and proper protection of the Company and its
Affiliates and that each and every one of the restraints is reasonable in
respect to subject matter, length of time and geographic area.  The Executive further acknowledges that, were
he to breach any of the covenants contained in Section 4, 5 or 6 hereof, the
damage to the Company would be irreparable. 
The Executive also freely acknowledges that said restrictions will not
prevent him from earning a livelihood following the termination of the
Executive’s association with the Company. 
The Executive therefore agrees that the Company, in addition to any
other remedies available to it, shall be entitled to preliminary and permanent
injunctive relief against any breach or threatened breach by the Executive of
any of said covenants, without having to post bond.  The parties further agree that, in the event
that any provision of Section 4, 5 or 6 hereof shall be determined by any court
of competent jurisdiction to be unenforceable by reason of its being extended
over too great a time, too large a geographic area or too great a range of
activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law.  The Executive also agrees that each of the
Company’s Affiliates shall have the right to enforce all of the Executive’s
obligations to the Affiliate under this Agreement.

8.             Severability.  If any
portion or provision of this Agreement shall to any extent be declared illegal
or unenforceable by a court of competent jurisdiction, then the remainder of
this Agreement, or the application of such portion or provision in
circumstances other than those as to which it is so declared illegal or
unenforceable, shall not be affected thereby, and each portion and provision of
this Agreement shall be valid and enforceable to the fullest extent permitted
by law.

9.             Governing Law.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas, without giving any effect to any choice or conflict of law
provision or rule that would cause the application of the laws of any other
jurisdiction.

10.           Entire Agreement; Waivers. 
This Agreement constitutes the entire agreement between the parties
pertaining to the subject matter hereof and supersedes all prior and contemporaneous

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agreements, understandings, negotiations and
discussions between the parties, whether oral or written, with respect to such
subject matter hereof; provided, however, that this Agreement shall not
terminate or supersede any additional obligations the Executive may have
pursuant to any other agreement or under applicable law with respect to
confidentiality, non-competition, non-solicitation or the like; nor shall it
constitute a waiver by the Company or any of its Affiliates of any right it has
under any such agreement or under applicable law with respect to
confidentiality, non-competition, non-solicitation or the like at the time this
Agreement takes effect; nor shall it constitute a waiver by the Executive of
any rights of indemnification or contribution that he has under any agreement,
under the charter or bylaws of the Company or any of its Affiliates or under
applicable law at the time this Agreement takes effect. In the event of
conflict between this Agreement and any prior agreement between the Executive
and the Company, this Agreement shall govern. 
No waiver of any provision hereof shall be effective unless made in
writing and signed by the waiving party. 
The failure of either party to require the performance of any term or
obligation of this Agreement, or the waiver by either party of any breach of
this Agreement, shall not prevent any subsequent enforcement of such term or
obligation or be deemed a waiver of any subsequent breach.

11.           Amendment, Modification or Termination.  This Agreement may be modified or amended
only by a written instrument executed by the Executive and an expressly
authorized representative of the Board. 
This Agreement may be terminated only by express written agreement
signed by the Executive and an expressly authorized representative of the
Board.

12.           Headings, Construction and Counterparts.  Section and subsection headings are not to be
considered part of this Agreement; are included solely for convenience; are not
intended to be full or accurate descriptions of the content thereof; and shall
not affect the construction hereof.  This
Agreement shall be deemed to express the mutual intent of the parties, and no
rule of strict construction shall be applied against any party.  This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.

13.           Successors and Assigns. 
Neither the Company nor the Executive may make any assignment of this
Agreement or any interest in it, by operation of law or otherwise, without the
prior written consent of the other; provided, however, that the
Company may assign its rights and obligations under this Agreement without the
consent of the Executive in the event that the Company shall hereafter affect a
reorganization, consolidate with, or merge into any Person or transfer to any
Person all or substantially all of the Business, properties or assets of the
Company.  This Agreement shall inure to
the benefit of and be binding upon the Company and the Executive and each of
their respective successors, executors, administrators, heirs, representatives
and permitted assigns.  The Executive
expressly consents to be bound by the provisions of this Agreement for the
benefit of the Company and its Affiliates, their successors and permitted
assigns, without the necessity that this Agreement be re-signed at the time of
any such transfer.

14.           Notices.  Any and all
notices, requests, demands or other communications provided for by this Agreement
shall be in writing and shall be effective when delivered in person, consigned
to a reputable national courier service or deposited in the United States mail,
postage prepaid,

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and addressed to the Executive at his last known
address on the books of the Company or, in the case of the Company, at its
principal place of business, attention of its Chief Executive Officer, or to
such other address as either party may specify by notice to the other actually
received.

15.           Certain Definitions.

“Affiliate” is defined in Section 4.2.

“Board” is defined in the second Recital.

“Business of the Company and its Affiliates” is
defined in Section 4.1.

“Company” is defined in the Preamble.

“Confidential Information” is defined in Section 4.4.

“distributor” is defined in Section 4.3.

“employee” is defined in Section 4.2.

“Effective Date” is defined in the Preamble.

“Merger Agreement” is defined in the first Recital.

“Person” is defined in Section 4.2.

“Restricted Period” is defined in Section 4.1.

“Territory” is defined in Section 4.1.

“vendor” is defined in Section 4.3.

[Remainder of page
intentionally left blank]

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INTENDING TO BE LEGALLY
BOUND, the Executive and the Company, by its duly authorized representative,
have executed this Agreement as a sealed instrument as of the date first above
written.

	
  THE EXECUTIVE:

  	
   

  	
  THE COMPANY

  
	
   

  	
   

  	
  MICHAELS STORES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Charles J. Wyly, Jr.

  	
   

  	
  By:

  	
  /s/ Jeffrey N. Boyer

  	
   

  
	
  Charles J. Wyly, Jr.

  	
   

  	
   

  	
  Jeffrey N. Boyer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  President & Chief Financial Officer

  	
   

  

 

 7Exhibit
10.28

Execution
Version

SEPARATION
AGREEMENT

This Agreement is made by
and between Michaels Stores, Inc. (the “Company”) and Sam Wyly (the “Executive”)
on the Closing Date of the merger described in the Recitals below (the “Effective
Date”).  Any capitalized term not
defined in this Agreement shall have the meaning ascribed to it in the Merger
Agreement (defined in the Recitals).

WHEREAS, the Company has entered into an agreement
captioned “Agreement and Plan of Merger” dated as of June 30, 2006 with Bain
Paste Mergerco, Inc., Blackstone Paste Mergerco, Inc., Bain Paste Finco, LLC
and Blackstone Paste Finco, LLC, pursuant to which Bain Paste Mergerco, Inc.
and Blackstone Paste Mergerco, Inc. will merge with and into the Company with
the Company as the surviving entity (as amended, the “Merger Agreement”);

WHEREAS, immediately prior to the Closing Date of said
merger, the Executive was serving the Company as the Vice Chairman of its Board
of Directors (the “Board”) and providing services as an independent
contractor to the Company; and

WHEREAS, the Company and
the Executive wish to confirm their agreement concerning the Executive’s
resignation as Vice Chairman of the Board and the termination of his services
to the Company as an independent contractor, effective as of the Effective
Date;

NOW, THEREFORE, in
consideration of the foregoing premises and of the mutual promises, terms,
provisions and conditions set forth in this Agreement, the sufficiency of which
is hereby acknowledged by the parties, the parties hereby agree:

1.             Agreement to Resignation and Termination of Services.  The Executive hereby resigns his position and
office as the Vice Chairman of the Board, and the Company hereby accepts his
resignation, effective as of the Closing Date. 
Further, the Executive and the Company agree that all services of the
Executive to the Company and its Affiliates, as an independent contractor or
otherwise, shall cease on the Closing Date. 
The Company and the Executive each waives any prior notice to which it
or he may have been entitled to effect such resignation or such cessation of
services.

2.             Ancillary Covenants. 
Ancillary to the agreement of the parties set forth in Section 1 hereof
for the Executive’s resignation of his position and office and the termination
of his services to the Company, which is enforceable on its own terms, the
Executive agrees that certain restrictions on his business activities after
termination of his services with the Company and its Affiliates (as defined
below) are necessary to protect the goodwill, Confidential Information (as also
defined below) and other legitimate interests of the Company and its
Affiliates, as more fully set forth in Sections 4, 5 and 6 below.

3.             Consideration for Covenants.   In consideration of the Executive’s
agreement to the covenants of confidentiality, non-competition and
non-solicitation contained in this Agreement

 1
 

and subject to the Executive’s meeting in full all of
his obligations under those covenants, the Company will provide the Executive with
a payment of $3 million, payable in one lump sum on the Effective Date.

4.             Covenants of Non-Competition, Non-Solicitation and Confidentiality.

4.1           Agreement
Not to Compete.  The Executive
agrees that, during the period of twenty-four months immediately following the
Closing Date (the “Restricted Period”), the Executive will not, directly
or indirectly, alone or in association with others, anywhere in the Territory,
own, manage, operate, control or participate in the ownership, management,
operation or control of, or be connected as an officer, employee, investor,
principal, joint venturer, shareholder, partner, director, consultant, agent or
otherwise with, or have any financial interest (through stock or other equity
ownership, investing of capital, lending of money or otherwise) in, any
business, venture or activity that competes, directly or indirectly, with the
Business of the Company and its Affiliates as conducted or in planning as of
the Closing Date or at any time during the immediately preceding twelve months
(a “Competitor”), except that nothing contained in this Section 4.1 shall
prevent the Executive’s wholly passive ownership of one percent (1%) or less of
the equity securities of any Competitor that is a publicly-traded company.

For the purposes of this Agreement, the “Business
of the Company and its Affiliates” or “Business” is that of arts and
crafts specialty retailer providing materials, ideas and education for creative
activities and the “Territory” is those states within the United States
and those provinces of Canada in which the Company or any of its Affiliates was
doing or actively planning to do business as of the Closing Date or at any time
during the immediately preceding twelve months.

4.2           Agreement
Not to Solicit or Hire Employees. 
The services of their employees being acknowledged as valuable assets of
the Company and its Affiliates, the Executive agrees that, during the
Restricted Period, the Executive will not hire or attempt to hire without first
obtaining written permission of an authorized representative of the Company any
employee of the Company or its Affiliates; assist in such hiring or attempt by
any Person; or encourage any such employee to terminate his or her relationship
with the Company or any of its Affiliates. The foregoing shall not prevent the
Executive from providing favorable references, oral or written, for an employee
of the Company or any of its Affiliates who is known to him prior to the
Closing Date; provided that such employee terminated his or her employment with
the Company or an Affiliate without any direct or indirect solicitation or
encouragement from the Executive or Charles J. Wyly, Jr. and such references
are not for the purpose of assisting such employee to be employed or engaged as
an independent contractor by a Competitor or by any other business, venture or
activity in which the Executive or Charles J. Wyly, Jr. is in any way
associated.

For purposes of this Agreement, an “employee”
means any individual employed by the Company or one of its Affiliates at the
level of an assistant store manager or above on the Closing Date or at any time
during the immediately preceding twelve months; a “Person” means a
natural person, a corporation, a limited liability company, an association, a
partnership, a limited partnership, a joint venture, an estate, a trust or any
other entity or organization, other than the Company or any of its Affiliates;
and an “Affiliate” means any person or entity directly or indirectly
controlling, controlled by or under common control with the Company, where
control may be by

 2
 

management authority, contract or equity interest, (i)
as to which the Executive provided services during his association with the
Company or (ii) as to which the Executive had access to Confidential Information
which would assist him in competing with the Business of such Affiliate or in
soliciting its employees, distributors or vendors.

4.3           Agreement
Not to Solicit Distributors and Vendors.  The Executive agrees that, during the
Restricted Period, he shall not directly or indirectly solicit or encourage any
distributor or vendor to the Company or any of its Affiliates to breach any
agreement with the Company or any of its Affiliates or to terminate or diminish
its relationship with the Company or any of its Affiliates; provided, however,
that these restrictions shall apply only with respect to those distributors and
vendors who are doing business with the Company or any of its Affiliates on the
Closing Date or have done business with the Company or any of its Affiliates at
any time during the twelve months immediately preceding the Closing Date.

4.4           Agreement
Not to Use or Disclose Confidential Information.  The Executive acknowledges that the Company
and its Affiliates continually develop Confidential Information; that he has
developed Confidential Information for the Company and its Affiliates; and that
he has learned of Confidential Information during the course of his service and
other associations with the Company and its Affiliates.  The Executive agrees that he shall not
disclose to any Person or use any Confidential Information obtained by the
Executive incident to his service to, or any other association with, the
Company or any of its Affiliates, other than as required by applicable law
after notice to the Company and a reasonable opportunity for the Company to
protect the Confidential Information prior to any such disclosure.

For purposes of this Agreement, “Confidential
Information” means any and all information of the Company and its
Affiliates that is not generally known by Persons with whom the Company or any
of its Affiliates competes or does business, or with whom any of them plans to
compete or do business and any and all information, publicly known in whole or
in part or not, which, if disclosed by the Company or any of its Affiliates,
would assist them in competition against them. 
Confidential Information includes without limitation such information
relating to (i) the development, research, testing, manufacturing, marketing
and financial activities of the Company and its Affiliates, (ii) the products
and services of the Company and its Affiliates, (iii) the costs, sources of
supply, financial performance and strategic plans of the Company and its
Affiliates, (iv) the identity and special needs of the customers of the Company
and its Affiliates and (v) the people and organizations with whom the Company
or any of its Affiliates has business relationships and the nature and
substance of those relationships.  Confidential
Information also includes any information that the Company or any of its
Affiliates has received belonging to a customer or any other third parties with
any understanding, express or implied, that the information would not be
disclosed.

5.             Non-Disparagement. 
The Executive agrees that he will not disparage or criticize the Company
or any of its Affiliates, their direct or indirect investors, management or
Business, to any of the employees of the Company or any of its Affiliates, or
to any Person with whom the Company or any of its Affiliates is doing, or is
planning to do, business as of the Closing Date or at any time during the
immediately preceding twelve months.

 3
 

6.             Notification Requirement. 
The Executive agrees that, throughout the Restricted Period, he will
notify the Company in writing of any change in his address and, at least
fifteen business days in advance, of each new business, venture or activity in
which he plans to engage which is, has the potential to become, or is in
planning to become, a Competitor or otherwise adversely affect the Business of
the Company and its Affiliates, within or outside the Territory.  Such notice shall state the name and address
of any such new business, venture or activity. 
The Executive agrees to provide the Company with such other pertinent information
concerning such business, venture or activity as the Company may reasonably
request in order to determine the Executive’s continued compliance with his
obligations under this Agreement.  The
Executive further agrees to notify any Person to whom he intends to provide
services, as an employee, independent contractor or otherwise, of his
obligations under this Agreement and hereby consents to notification by the
Company to any such Persons about his obligations under this Agreement.

7.             Enforcement.  The
Executive acknowledges that he has carefully read and considered all the terms
and conditions of this Agreement, including the restraints imposed upon the
Executive pursuant to Sections 4, 5 and 6 hereof.  The Executive agrees that said restraints are
necessary for the reasonable and proper protection of the Company and its
Affiliates and that each and every one of the restraints is reasonable in
respect to subject matter, length of time and geographic area.  The Executive further acknowledges that, were
he to breach any of the covenants contained in Section 4, 5 or 6 hereof, the
damage to the Company would be irreparable. 
The Executive also freely acknowledges that said restrictions will not
prevent him from earning a livelihood following the termination of the
Executive’s association with the Company. 
The Executive therefore agrees that the Company, in addition to any
other remedies available to it, shall be entitled to preliminary and permanent
injunctive relief against any breach or threatened breach by the Executive of
any of said covenants, without having to post bond.  The parties further agree that, in the event
that any provision of Section 4, 5 or 6 hereof shall be determined by any court
of competent jurisdiction to be unenforceable by reason of its being extended
over too great a time, too large a geographic area or too great a range of
activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law.  The Executive also agrees that each of the
Company’s Affiliates shall have the right to enforce all of the Executive’s
obligations to the Affiliate under this Agreement.

8.             Severability.  If any
portion or provision of this Agreement shall to any extent be declared illegal
or unenforceable by a court of competent jurisdiction, then the remainder of
this Agreement, or the application of such portion or provision in
circumstances other than those as to which it is so declared illegal or
unenforceable, shall not be affected thereby, and each portion and provision of
this Agreement shall be valid and enforceable to the fullest extent permitted
by law.

9.             Governing Law.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas, without giving any effect to any choice or conflict of law
provision or rule that would cause the application of the laws of any other
jurisdiction.

10.           Entire Agreement; Waivers. 
This Agreement constitutes the entire agreement between the parties
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous

 4
 

agreements, understandings, negotiations and
discussions between the parties, whether oral or written, with respect to such
subject matter hereof; provided, however, that this Agreement shall not terminate
or supersede any additional obligations the Executive may have pursuant to any
other agreement or under applicable law with respect to confidentiality,
non-competition, non-solicitation or the like; nor shall it constitute a waiver
by the Company or any of its Affiliates of any right it has under any such
agreement or under applicable law with respect to confidentiality,
non-competition, non-solicitation or the like at the time this Agreement takes
effect; nor shall it constitute a waiver by the Executive of any rights of
indemnification or contribution that he has under any agreement, under the
charter or bylaws of the Company or any of its Affiliates or under applicable
law at the time this Agreement takes effect. In the event of conflict between this
Agreement and any prior agreement between the Executive and the Company, this
Agreement shall govern.  No waiver of any
provision hereof shall be effective unless made in writing and signed by the
waiving party.  The failure of either
party to require the performance of any term or obligation of this Agreement,
or the waiver by either party of any breach of this Agreement, shall not
prevent any subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach.

11.           Amendment, Modification or Termination.  This Agreement may be modified or amended
only by a written instrument executed by the Executive and an expressly
authorized representative of the Board. 
This Agreement may be terminated only by express written agreement signed
by the Executive and an expressly authorized representative of the Board.

12.           Headings, Construction and Counterparts.  Section and subsection headings are not to be
considered part of this Agreement; are included solely for convenience; are not
intended to be full or accurate descriptions of the content thereof; and shall
not affect the construction hereof.  This
Agreement shall be deemed to express the mutual intent of the parties, and no
rule of strict construction shall be applied against any party.  This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.

13.           Successors and Assigns. 
Neither the Company nor the Executive may make any assignment of this
Agreement or any interest in it, by operation of law or otherwise, without the
prior written consent of the other; provided, however, that the
Company may assign its rights and obligations under this Agreement without the
consent of the Executive in the event that the Company shall hereafter affect a
reorganization, consolidate with, or merge into any Person or transfer to any
Person all or substantially all of the Business, properties or assets of the
Company.  This Agreement shall inure to
the benefit of and be binding upon the Company and the Executive and each of
their respective successors, executors, administrators, heirs, representatives
and permitted assigns.  The Executive
expressly consents to be bound by the provisions of this Agreement for the
benefit of the Company and its Affiliates, their successors and permitted
assigns, without the necessity that this Agreement be re-signed at the time of
any such transfer.

14.           Notices.  Any and all
notices, requests, demands or other communications provided for by this
Agreement shall be in writing and shall be effective when delivered in person,
consigned to a reputable national courier service or deposited in the United
States mail, postage prepaid,

 5
 

and addressed to the Executive at his last known
address on the books of the Company or, in the case of the Company, at its
principal place of business, attention of its Chief Executive Officer, or to
such other address as either party may specify by notice to the other actually
received.

15.           Certain Definitions.

“Affiliate” is defined in Section 4.2.

“Board” is defined in the second Recital.

“Business of the Company and its Affiliates” is
defined in Section 4.1.

“Company” is defined in the Preamble.

“Confidential Information” is defined in Section 4.4.

“distributor” is defined in Section 4.3.

“employee” is defined in Section 4.2.

“Effective Date” is defined in the Preamble.

“Merger Agreement” is defined in the first Recital.

“Person” is defined in Section 4.2.

“Restricted Period” is defined in Section 4.1.

“Territory” is defined in Section 4.1.

“vendor” is defined in Section 4.3.

[Remainder of page
intentionally left blank]

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INTENDING TO BE LEGALLY
BOUND, the Executive and the Company, by its duly authorized representative,
have executed this Agreement as a sealed instrument as of the date first above
written.

	
  THE EXECUTIVE:

  	
   

  	
  THE COMPANY

  
	
   

  	
   

  	
  MICHAELS STORES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Sam Wyly

  	
   

  	
  By:

  	
  /s/ Jeffrey N. Boyer

  	
   

  
	
  Sam Wyly

  	
   

  	
   

  	
  Jeffrey N. Boyer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  President & Chief Financial Officer

  	
   

  

 

 7

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