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Exhibit 10.22  

 
 

MICHAELS STORES, INC.
  
    DEFERRED COMPENSATION PLAN
  
    (Amended and Restated as of January 1, 2002)    
  

 

 
 

TABLE OF CONTENTS    
  

	ARTICLE 1	 	    TITLE AND DEFINITIONS	 	2
	1.1  	 	Title	 	2
	1.2  	 	Definitions	 	2
	ARTICLE 2	 	    ELIGIBILITY AND PARTICIPATION	 	4
	2.1  	 	Eligibility	 	4
	2.2  	 	Participation	 	4
	ARTICLE 3	 	    DEFERRED COMPENSATION	 	5
	3.1  	 	Elections to Defer Compensation	 	5
	3.2  	 	Matching Amounts	 	6
	3.3  	 	Discretionary Amounts	 	7
	3.4  	 	Investment Elections	 	7
	ARTICLE 4	 	    ACCOUNTS	 	8
	4.1  	 	Participant Accounts	 	8
	4.2  	 	Quarterly Statements	 	8
	ARTICLE 5	 	    VESTING	 	9
	5.1  	 	Account	 	9
	ARTICLE 6	 	    DISTRIBUTIONS	 	9
	6.1  	 	Form and Time of Payment	 	9
	6.2  	 	Scheduled Early Distributions	 	10
	6.3  	 	Unscheduled Early Distributions	 	11
	6.4  	 	Financial Hardship Withdrawals	 	12
	6.5  	 	Death Benefits	 	12
	6.6  	 	Inability To Locate Participant	 	12
	6.7  	 	Directors and Consultants	 	13
	6.8  	 	Claims Procedure	 	13
	ARTICLE 7	 	    ADMINISTRATION	 	14
	7.1  	 	Administrative Committee	 	14
	7.2  	 	Committee Action	 	15
	7.3  	 	Powers and Duties of the Administrative Committee	 	15
	7.4  	 	Construction and Interpretation	 	16
	7.5  	 	Information	 	16

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	7.6  	 	Expenses and Indemnity	 	16
	ARTICLE 8	 	    MISCELLANEOUS	 	17
	8.1  	 	Unsecured General Creditor	 	17
	8.2  	 	Restriction Against Assignment	 	17
	8.3  	 	Withholding	 	17
	8.4  	 	Amendment, Modification, Suspension or Termination	 	17
	8.5  	 	Governing Law	 	18
	8.6  	 	Receipt or Release	 	18
	8.7  	 	Payments on Behalf of Persons Under Incapacity	 	18
	8.8  	 	Successors and Assigns	 	18
	8.9  	 	No Employment Rights	 	18
	8.10	 	Headings, etc. Not Part of Agreement	 	18

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MICHAELS STORES, INC.
  
    DEFERRED COMPENSATION PLAN    
  

        Michaels Stores, Inc., a Delaware corporation (the "Company"), acting on behalf of itself and its designated subsidiaries, hereby amends and completely
restates the Michaels Stores, Inc. Deferred Compensation Plan (the "Plan"), effective as of January 1, 2002. 

 
 

RECITALS    
  

        1.    The
Plan was established effective as of August 1, 1999, as an unfunded supplemental retirement plan for the benefit of selected highly compensated employees,
directors and consultants and their respective beneficiaries. Benefits under the Plan are to be paid by the Company from its general assets or from the assets of the trust hereinafter described. 

        2.    The
Company has entered into a trust agreement with Wachovia Bank, N.A., as trustee, and has established a trust (the "Trust") to hold and manage assets contributed by
the Company in connection with the Plan. It is intended that the Trust will qualify as a "grantor trust" under the Internal Revenue Code of 1986, as amended, with the principal and income of the Trust
to be treated as assets and income of the Company for federal and state income tax purposes. 

        3.    The
assets of the Plan held in the Trust will at all times be subject to the claims of the general creditors of the Company. 

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ARTICLE 1
  
    TITLE AND DEFINITIONS    
  

        1.1    Title.    This Plan will be known as the Michaels Stores, Inc. Deferred Compensation Plan. 

        1.2    Definitions.    Whenever the following words and phrases are used in this Plan, with the first letter
capitalized, they will have the meanings specified below. 

                (a)    "Account" means for each Participant the bookkeeping account maintained by the Administrative Committee on
the books of the Company that is credited with amounts equal to (i) the portion of the Participant's Salary and Incentive Bonus that he or she elects to defer, (ii) the matching amounts
determined pursuant to Section 3.2, (iii) discretionary amounts determined pursuant to Section 3.3, and (iv) the deemed earnings on such amounts that are determined
pursuant to Section 4.1(iii). 

                (b)    "Administrative Committee" or "Committee" means the person
or persons appointed to administer the plan in accordance with Article 7. 

                (c)    "Beneficiary" or "Beneficiaries" means the beneficiary or
beneficiaries last designated in writing by a Participant, in accordance with procedures established by the Administrative Committee, to receive benefits under the Plan in the event of the
Participant's death. No beneficiary designation will become effective unless and until it is filed with the Administrative Committee during the Participant's lifetime. 

                (d)    "Board of Directors" or "Board" means the Board of
Directors of Michaels Stores, Inc. Any determination or other action specified in this Plan to be made, taken or effectuated by the Board may be made, taken or effectuated by the Executive
Committee of the Board. 

                (e)    "Code" means the Internal Revenue Code of 1986, as amended. 

                (f)    "Company" means Michaels Stores, Inc., a Delaware corporation, any successor corporation to Michaels
Stores, Inc. satisfying the requirements of Section 8.8; Aaron Brothers, Inc., a wholly-owned subsidiary of Michaels Stores, Inc.; and any other entity that is directly or
indirectly controlled by
Michaels Stores, Inc. or in which Michaels Stores, Inc. has a significant equity or investment interest, as determined by the Administrative Committee. 

                (g)    "Disability" means, with respect to a Participant, a disability as defined in the Company's
then-existing long-term disability plan in which the Participant is eligible to participate. 

                (h)    "Distributable Amount" means the balance of a Participant's Account at any given time. 

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                (i)    "Eligible Individual" for a Plan Year means (i) a common law employee of the Company who satisfies
the eligibility criteria set forth in Article 2; (ii) a member of the Board of Directors who is not a common law employee of the Company; or (iii) a consultant who is not a common
law employee of the Company and who is designated by the Administrative Committee as eligible to participate in the Plan. An individual other than a member of the Board who is classified by the
Company as an independent contractor whose compensation for services is reported by the Company on a form other than Form W-2 or any successor form for reporting wages paid to
employees will not be an Eligible Individual, unless the Administrative Committee specifically designates such individual by name as an Eligible Individual pursuant to clause (iii) above. 

                (j)    "Fund" or "Funds" means one or more of the investment funds or contracts selected by the Administrative
Committee pursuant to Section 7.3(i). 

                (k)    "Incentive Bonus" means any cash incentive compensation payable to an employee of the Company in addition
to the employee's Salary, other than any bonus or other compensation paid to an individual as an inducement to the individual to accept employment with the Company. The amount of an employee's
Incentive Bonus will be computed before giving effect to the Participant's salary reduction elections under Code Sections 125 or 401(k). 

                (l)    "Investment Fund Subaccount" has the meaning set forth in Section 4.1. 

                (m)    "Michaels 401(k) Plan" means the Michaels Stores, Inc. Employees 401(k) Plan. 

                (n)    "Net Earnings" means, for any Fund and for any month, an amount expressed as a percentage equal to the net
rate of gain or loss on the assets of such Fund during such month. 

                (o)    "Participant" means any Eligible Individual who elects to defer Salary or Incentive Bonus in accordance
with Section 3.1. 

                (p)    "Plan" means the Michaels Stores, Inc. Deferred Compensation Plan set forth herein, as amended from
time to time in accordance with Section 8.4. 

                (q)    "Plan Year" means the 12-consecutive month period beginning January 1 and ending
December 31 of each year. 

                (r)    "Salary" means, for any calendar year, the annual base salary payable to an Eligible Individual who is an
employee, the annual retainer and meeting fees payable to members of the Board and the fees payable to consultants during the calendar year, computed before giving effect to the Eligible Individual's
salary reduction elections under Code Sections 125 or 401(k). Salary excludes any other form of compensation such as bonuses, restricted stock, income from stock options or stock appreciation rights,
severance payments, moving expenses, car or other special allowances, reimbursements for taxes or any other remuneration for personal services. 

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                (s)    "Threshold Amount" means, for the Plan Year beginning January 1, 2002,
$85,000 and, for any
subsequent Plan Year, such other amount as may be determined by the Administrative Committee pursuant to Section 7.3(iv). 

                (t)    "Trust" means the trust established by the Trust Agreement. 

                (u)    "Trust Agreement" means the agreement between the Company and the Trustee that establishes a trust to hold
and manage the assets contributed by the Company in connection with the Plan. 

                (v)    "Trustee" means the one or more individuals or organizations that have entered into the Trust Agreement as
trustee(s), and any duly appointed successors. 

 
 

ARTICLE 2
  
    ELIGIBILITY AND PARTICIPATION    
  

        2.1    Eligibility.    

                (a)    Employees.    Except as provided in the next sentence of this Section 2.1(a), an employee
of the Company will be eligible to participate in the Plan during a Plan Year if (i) the employee is a United States citizen whose Salary is paid in United States dollars on a United States
payroll and (ii) the employee's aggregate Salary and Incentive Bonus for the immediately preceding Plan Year are equal to or in excess of the Threshold Amount for the current Plan Year.
Notwithstanding the foregoing, an individual who is hired or rehired as an employee during a Plan Year will be eligible to participate in the Plan during such Plan Year only if (A) the amount
of his or her annual Salary for the Plan Year is equal to or exceeds the Threshold Amount for the Plan Year or (B) if the individual is a rehired employee who was an employee of the Company
during the immediately preceding Plan Year, the
aggregate amount of his or her Salary and Incentive Bonus for such preceding Plan Year are equal to or in excess of the Threshold Amount for the current Plan Year. 

                (b)    Directors and Consultants.    Directors and consultants who are Eligible Individuals will be
eligible to participate in the Plan during any Plan Year without regard to the amount of their Salary for the current or preceding Plan Year. 

                (c)    Exceptions.    Notwithstanding the provisions of Sections 2.1(a) and 2.1(b), the Administrative
Committee in its discretion may determine in writing that an otherwise Eligible Individual may not participate in the Plan for one or more Plan Years. 

        2.2    Participation.    An Eligible Individual will become a Participant in the Plan for a Plan Year by electing to
defer all or a portion of his or her Salary or Incentive Bonus for such Plan Year in accordance with Section 3.1, by completing all required applications for life insurance (as determined by
the Administrative Committee in its discretion), and by complying with any applicable medical underwriting requirements of the issuer of any policy of insurance on the life of the Eligible Individual. 

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ARTICLE 3
  
    DEFERRED COMPENSATION    
  

        3.1    Elections to Defer Compensation.    

                (a)    Elections.    For each Plan Year, an Eligible Individual may make the following deferral
elections: 

                (i)    An
Eligible Individual may elect to defer Salary by filing with the Administrative Committee an election that conforms to the requirements of this
Section 3.1, on a form provided by the Administrative Committee (an "Election Form"), no later than the last day of December of the immediately preceding Plan Year. 

                (ii)    Notwithstanding
the provisions of Section 3.1(a)(i), an Eligible Individual who becomes eligible to participate in the Plan on a date other than
the first day of a Plan Year may elect to defer Salary for such Plan Year and/or any bonus or other compensation payable as an inducement to accept employment with the Company by filing an Election
Form with the Administrative Committee no later than 60 days after the date such individual is notified that he or she satisfies the eligibility criteria set forth in Section 2.1, and
such election will be effective to defer Salary earned and any such bonus or other compensation payable after the Election Form is filed with the Administrative Committee, as provided in subsection
(d) below. 

                (iii)    An
Eligible Individual may also make a separate election to defer the Incentive Bonus to be paid in a Plan Year by filing an Election Form with the
Administrative Committee on or before the last day of October of the immediately preceding Plan Year. 

                (iv)    An
Eligible Individual who does not elect to defer Salary or Incentive Bonus for a Plan Year may become a Participant with respect to a subsequent Plan
Year by filing an Election Form with the Administrative Committee on or before the last day of December (with respect to elections to defer Salary) or the last day of October (with respect to
elections to defer Incentive Bonus) preceding the Plan Year for which the election is to be effective, provided he or she is still an Eligible Individual with respect to such Plan Year. 

                (b)    401(k)
Plan Distributions.    In addition to the elections described above, for each Plan Year an Eligible Individual may also elect to defer an
amount of Salary and/or Incentive Bonus that is equal to the amount distributed to the Eligible Individual in such Plan Year from the Michaels 401(k) Plan because of (i) the annual limitation
on plan compensation described in Code Section 401(a)(17), (ii) the annual dollar limit on elective deferrals described in Code Section 402(g), (iii) the annual dollar
limit on annual additions to an individual's account described in Code Section 415(c), or (iv) the limits on deferrals imposed by the plan administrator of the Michaels 401(k)Plan or
resulting from the application of the nondiscrimination tests described in Code Sections 401(k) and 401(m). Such an election for a Plan Year must be filed with the Administrative Committee on an
Election Form (i) with respect to Salary on or before the last day of December of the immediately preceding Plan Year, and (ii) with respect to Incentive Bonus on or before the last day
of October of the immediately preceding Plan Year. An Eligible Individual may make an election to defer Salary or Incentive 

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Bonus
under this subsection (b) without making an election to defer Salary or Incentive Bonus under subsection (a) above. 

                (c)    Amount of Deferrals.    An Eligible Individual may elect to defer any whole percentage or whole
dollar amount of his or her Salary up to 100% of his or her Salary, any whole percentage or whole dollar
amount of any bonus or other compensation described in Section 3.1(a)(ii) up to 100% of such bonus or other compensation and any whole percentage or whole dollar amount of his or her
Incentive Bonus up to 100% of his or her Incentive Bonus; provided, however, that if an Eligible Individual's deferral elections would reduce the cash compensation paid to the Eligible Individual to
an amount that is less than (i) the amount necessary to satisfy the Eligible Individual's portion of applicable employment taxes for the Plan Year, (ii) amounts necessary to satisfy any
other benefit plan elections or loan repayments for the Plan Year under any other plan sponsored by the Company and (iii) any income taxes payable with respect to taxable compensation that is
not eligible for deferral, then the Eligible Individual's deferral elections will be limited to the extent necessary to permit the Company to satisfy its obligation to withhold such taxes, implement
such benefit plan elections or deduct such loan repayments. In addition, a deferral election made by an Eligible Individual will not be effective unless and until the Eligible Individual completes all
required applications for life insurance (as determined by the Administrative Committee in its discretion). 

                (d)    Effect of Deferral Elections.    An election to defer Salary or Incentive Bonus will be first
effective with respect to Salary earned during the first pay period beginning on or after the first day of the Plan Year (or in the case of a newly eligible individual, the first pay period beginning
after the date on which the completed Election Form is filed with the Administrative Committee) or as soon as administratively practicable thereafter; with respect to any bonus or other compensation
described in Section 3.1(a)(ii) that becomes payable after the date on which the completed Election Form is filed with the Administrative Committee; and with respect to the Incentive
Bonus payable in the Plan Year subsequent to the Plan Year in which the election is made. Deferrals of Salary made in accordance with subsection (a) above will be deducted during each pay
period throughout the year. Deferrals of any portion of Incentive Bonus made in accordance with subsection (a) above will be deducted in the pay period(s) when the Incentive Bonus would have
otherwise been paid. Deferrals related to distributions from the Michaels 401(k) Plan made in accordance with subsection (b) above will be deducted in one or more pay period(s) after the
Michaels 401(k) Plan distribution is made. 

                (e)    Duration of Deferral Elections.    Any deferral elections made under this Section 3.1 will
be irrevocable and, with respect to the deferral of Salary and Incentive Bonus, will apply only to the Salary payable with respect to services performed during the Plan Year for which the election is
made and to the Incentive Bonus payable in the Plan Year subsequent to the Plan Year in which the elections are made. 

        3.2    Matching Amounts.    The Account of each Participant will be credited each pay period with a matching amount
equal to 50% of the Participant's deferrals under this Plan during such pay period but only to the extent the Participant's deferrals elected under this Plan do not exceed 6% of the Participant's
Salary and Incentive Bonus for the pay period, such matching amount to be reduced by the matching contributions credited to the Participant's account, if any, under the Michaels 401(k) Plan for the
same pay period. Notwithstanding the foregoing 

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provisions
of this Section 3.2, the portion of any bonus or other compensation described in Section 3.1(a)(ii) deferred by the Participant will be excluded in determining the
matching amount credited to the Participant's Account. 

        3.3    Discretionary Amounts.    At any time and from time to time, the Company may elect to credit the Account of one
or more Participants with an additional discretionary amount. The timing and amount of any additional amount credited under this Section 3.3 will be determined in the sole discretion of the
Administrative Committee and may vary among Participants. The crediting of the Account of a Participant under this Section 3.3 will neither create nor imply any obligation on the part of the
Company to credit the Accounts of other Participants. Only a Participant who is deferring compensation under Section 3.1 during a Plan Year and whose deferrals have not been suspended under
Section 6.3 for such Plan Year will be eligible for such discretionary amounts credited during the Plan Year. 

        3.4    Investment Elections.    

                (a)    Investment Funds.    The Administrative Committee will provide each Participant with a list of
Funds available for hypothetical investment and each Participant may designate, on a form provided by the Administrative Committee, one or more of such Funds in which the portion of his or her Account
attributable to deferrals, matching amounts or discretionary amounts credited to his or her Account for such Plan Year will be deemed to be invested for purposes of determining the amount of earnings
or loss to be credited to such Account. The Administrative Committee may in its discretion change from time to time the Funds available for hypothetical investment, provided Participants are given at
least 30 days' prior written notice of the effective date of the deletion of any Fund (including, without limitation, the deletion of a Fund in connection with the substitution of a new Fund in
its place); it being understood, however, that where the deletion of a Fund is beyond the control of the Administrative Committee, the Administrative Committee's obligation will be to give
Participants written notice of the effective date of such deletion as promptly as practicable after the Administrative Committee obtains knowledge thereof. The Administrative Committee may in its
discretion add new Funds at any time and Participants will be given written notice of such additions as promptly as practicable after the Administrative Committee decides to add a new Fund. 

                (b)    Investment Designations.    In making an investment designation pursuant to this
Section 3.4, the Participant may specify that all, or any whole percentage, of the portion of his or her Account attributable to a Plan Year will be deemed to be invested in one or more of the
Funds designated by the Administrative Committee (with all such designations in the aggregate not to exceed 100% of the Participant's Account balance) and may make a separate investment designation in
whole percentages (not to exceed 100%) for future deferrals. Pursuant to procedures adopted by the Administrative Committee from time to time, a Participant may change the Fund designations made under
this Section 3.4 with respect to any portion of his or her Account Balance or his or her future deferrals on any business day. 

                (c)    Failure to Elect.    If a Participant fails to elect a Fund under this Section 3.4, or if
the Participant's investment designation is less than 100% of his or her Account balance or future deferrals, as applicable, the for any portion of the Account balance or future 

7

 

        deferrals
for which no investment designation has been made he or she will be deemed to have designated the Fund that the Administrative Committee determines in its sole judgment to have
the least risk of loss of principal or conservative money market funds. 

                (d)    Temporary Investment.    Pending any change in the Funds available pursuant to
Section 3.4(a), the Committee may credit one or more Participant's Accounts with a money market rate of return notwithstanding any Participant's investment election. 

 
 

ARTICLE 4
  
    ACCOUNTS    
  

        4.1    Participant Accounts.    The Administrative Committee will establish and maintain an Account for each
Participant under the Plan. Each Participant's Account will be further divided into separate subaccounts ("Investment Fund Subaccounts"), each of which corresponds to a Fund elected by the Participant
pursuant to Section 3.4. Under procedures established by the Administrative Committee, a Participant's Account will be debited and credited as follows: 

        (i)    The
Administrative Committee will credit the Investment Fund Subaccounts of the Participant's Account with an amount equal to the compensation deferred by the
Participant in accordance with the Participant's elections; that is, the portion of the Participant's deferred compensation that the Participant has elected to defer under this Plan and to be invested
in a certain Fund will be credited to the Investment Fund Subaccount corresponding to that Fund. 

        (ii)    The
Administrative Committee will also credit the Investment Fund Subaccounts of the Participant's Account with an amount equal to the matching amounts determined under
Section 3.2 and the discretionary amounts under Section 3.3. 

        (iii)    As
of the last day of each month, each Investment Fund Subaccount of a Participant's Account will be credited with earnings or loss in an amount determined by
multiplying the balance credited to such Investment Fund Subaccount as of the last day of the preceding month (adjusted to reflect distributions from or additional credits to a Participant's Account
during such month) by the Net Earnings for the corresponding Fund for the then current month. To the extent any such Net Earnings is negative in any month (due to a net loss in the applicable Fund),
the applicable Investment Fund Subaccount will be debited in the same manner. 

        (iv)    Each
Investment Fund Subaccount will be debited or credited on a daily basis to appropriately reflect any change in Fund designations made by Participants pursuant to
Section 3.4. 

        4.2    Quarterly Statements.    Under procedures established by the Administrative Committee, a Participant will
receive a statement with respect to such Participant's Account on a quarterly basis. 

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ARTICLE 5
  
    VESTING    
  

        5.1    Account.    A Participant's interest in the portion of his or her Account attributable to deferrals under
Section 3.1 and matching amounts under Section 3.2, and earnings and losses credited thereon, will be 100% vested at all times. A Participant's vested interest in the portion of his or
her Account attributable to discretionary amounts under Section 3.3 and earnings and losses credited thereon will be determined in accordance with the vesting schedule(s) established by the
Administrative Committee in connection with the Administrative Committee's determination of any such discretionary amounts. Notwithstanding the foregoing, a Participant's interest in his or her entire
Account will become 100% vested upon the Participant's death while employed by the Company. 

 
 

ARTICLE 6
  
    DISTRIBUTIONS    
  

        6.1    Form and Time of Payment.    

                (a)    Payment Form Elections.    Each Participant will elect, at the time of his or her first election
to defer compensation under the Plan for a Plan Year, to have that portion of his or her Distributable Amount attributable to his or her deferral elections for such Plan Year paid either in annual
installments or in a lump sum payment, subject to the following provisions: 

                (i)    If
a Participant terminates employment with the Company before the Participant has attained age 55 and for reasons other than death or Disability, the
Participant's Distributable Amount will be paid (A) in a single lump sum, if the Distributable Amount is $25,000 or less, and (B) in a single lump sum
or in annual installments over a period of 2, 3 4 or 5 years, as the Participant elects, if the Distributable Amount is more than $25,000. If a Participant described in this
Section 6.1(a)(i) fails to make a payment election with respect to a deferral of compensation for a Plan Year, the Participant's Distributable Amount attributable to such deferral
election will be paid to the Participant in a single lump sum. 

                (ii)    If
a Participant terminates employment with the Company after the Participant has attained age 55 or as a result of the Participant's death or Disability,
the Participant's Distributable Amount will be paid in a single lump sum or in annual installments over a period of 5, 10, 15 or 20 years, as the Participant elects. If a Participant described
in this Section 6.1(a)(ii) fails to make a payment election with respect to a deferral of compensation for a Plan Year, the Participant's Distributable Amount attributable to such
deferral election will be paid to the Participant (or the Participant's Beneficiary, if the Participant terminates employment by reason of death) in annual installments over a period of
10 years. 

                (iii)    Any
distribution elections that were in effect on October 1, 2001, that complied with the provisions of the Plan as in effect on that date and
that have not been modified after October 1, 2001, will be honored in accordance with their terms, notwithstanding the provisions of Section 6.1(a)(i) or
Section 6.1(a)(ii). 

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                (iv)    All
amounts deferred for a Plan Year will be subject to the same payment election. 

                (v)    For
purposes of this Plan, any portion of a Participant's Incentive Bonus that the Participant elects to defer will be attributable to the Plan Year in
which the Incentive Bonus would otherwise have been paid to the Participant. 

                (b)    Payment Commencement Date.    Unless a Participant receives an early distribution with respect to
the Distributable Amount for a Plan Year pursuant to Section 6.2, Section 6.3 or Section 6.4, such Distributable Amount (or any remaining portion thereof) will be paid after the
Participant terminates employment with the Company. Lump sum payments will be paid as soon as practicable following the Participant's termination of employment. Annual installment payments will begin
as soon as practicable following the Participant's termination of employment and will continue to be made during the month of February of each year thereafter until the applicable portion of the
Distributable Amount has been fully distributed. Each installment payment will be made pro rata from the Participant's Investment Fund Subaccounts according to the portion of the balances in such
Subaccounts which are attributable to the deferrals for the Plan Year which are subject to the installment payment election. During the period in which installment payments are being made, the
Participant's Account will continue to be credited monthly with earnings pursuant to Section 4.1(iii), the Participant (or his or her Beneficiary) may continue to change Fund designations
pursuant to Section 3.4, and installment payments will be
adjusted annually to reflect earnings, gains and losses until all amounts credited to his or her Account under the Plan have been distributed. 

                (c)    Change in Payment Election.    A Participant who has not terminated employment with the Company
may change his or her form of payment with respect to the portion of the Distributable Amount attributable to one or more Plan Years to one of the payment forms permitted by the Plan, provided the
Participant files a written election with the Administrative Committee to change such payment form at least one year prior to the date that payment of such portion of his or her Distributable Amount
would otherwise be made. In addition, a Participant who has elected scheduled early distributions pursuant to Section 6.2 may defer the scheduled distribution dates in accordance with
Section 6.2. A Participant's payment election with respect to a given Plan Year may not be changed after payment of that portion of the Distributable Amount attributable to such Plan Year has
been made or has begun. 

        6.2    Scheduled Early Distributions.    Participants may elect to have the Distributable Amount attributable to
compensation deferred for a given Plan Year be paid in a future calendar year while still employed in a lump sum payment, subject to the following provisions: 

        (i)    The
Participant's election is made at the time of the Participant's first election to defer compensation for such Plan Year, and the payment year is at least two years
after the last day of such Plan Year. 

        (ii)    Payments
under this Section 6.2 will be made in February of the elected payment year. 

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        (iii)    A
Participant may elect a different payment date for the portion of his Distributable Amount attributable to deferrals for each Plan Year. 

        (iv)    Payment
dates elected pursuant to this Section 6.2 may be deferred by at least one year, by filing with the Administrative Committee written notice at least
12 months prior to the payment date to be deferred, but in no event may a Participant make more than three such deferral elections with respect to deferrals for any Plan Year without the
written approval of the Administrative Committee. 

        (v)    A
distribution pursuant to this Section 6.2 of less than the Participant's entire interest in the Plan will be made pro rata from his or her Investment Fund
Subaccounts according to the portion of the balances in such Subaccounts which are attributable to the deferrals for the Plan Year which are subject to the early distribution election. 

        (vi)    Notwithstanding
the foregoing provisions of this Section 6.2, if a Participant terminates employment with the Company prior to the date on which a lump sum
payment is scheduled to be made pursuant to this Section 6.2, the Participant's Distributable Amount that would have been paid pursuant to this Section 6.2 will be paid following the
Participant's termination of employment based on the Participant's election pursuant to Section 6.1. 

        6.3    Unscheduled Early Distributions.    Subject to paragraph (vi) below, Participants will be permitted to
request to withdraw amounts from their Accounts at any time ("Early Distributions"). Upon receiving a withdrawal request, the Administrative Committee will determine, in its sole discretion, whether
to permit any such withdrawal and the amount, if any, to be withdrawn, subject to the following restrictions: 

        (i)    The
election to take an Early Distribution will be made by filing a form provided by and filed with the Administrative Committee. 

        (ii)    The
maximum amount payable to a Participant in connection with an Early Distribution will in all cases equal 90% of the amount requested by the Participant (which
requested amount must be not less than $10,000 or the Participant's entire Distributable Amount if less than $10,000) or approved by the Administrative Committee; provided, however, that the maximum
amount payable to a Participant in connection with an Early Distribution will be 90% of the Distributable Amount as of the end of the calendar month in which the Early Distribution request is received
by the Administrative Committee. 

        (iii)    The
amount described in paragraph (ii) above will be paid in a single lump sum by the end of the calendar month next following the calendar month in which the
Early Distribution request is received by the Administrative Committee. A distribution pursuant to this Section 6.3 of less than the Participant's entire interest in the Plan will be made pro
rata from his or her Investment Fund Subaccounts according to the balances in such Subaccounts. 

        (iv)    If
a Participant receives an Early Distribution, the remaining portion of the requested or approved amount, as applicable, in excess of the amount payable under
paragraph (ii) above (i.e., 10% of such amount), will be permanently forfeited and the 

11

 

Company
will have no obligation to the Participant or his or her Beneficiary with respect to such forfeited amount. Forfeiture of such amount will be made pro rata from the Participant's Investment
Fund Subaccounts according to the balances in such Subaccounts. 

        (v)    If
a Participant receives an Early Distribution, the Participant will be ineligible to participate in the Plan for the balance of the Plan Year in which the Early
Distribution occurs and for the immediately following Plan Year. 

        (vi)    A
Participant will be limited to a maximum of two Early Distributions during all of his or her periods of Plan participation. 

        6.4    Financial Hardship Withdrawals.    The Administrative Committee may, pursuant to rules or policies from time to
time adopted and applied in a consistent manner, accelerate the date of distribution of all or any portion of a Participant's Account balance because of a financial hardship. A financial hardship
means an unforeseeable, severe financial emergency resulting from (a) a sudden and unexpected illness or accident of the Participant or his or her dependents (as defined in
Section 152(a) of the Code); (b) loss of the Participant's property due to casualty; or (c) other similar extraordinary and unforeseeable circumstances arising out of events
beyond the control of the Participant, which may not be relieved through other available resources of the Participant, as determined by the Administrative Committee in accordance with such rules and
policies. A distribution pursuant to this Section 6.4 of less than the Participant's entire interest in the Plan will be made pro rata from his or her Investment Fund Subaccounts according to
the balances in such Subaccounts. Subject to the foregoing, payment of any amount with respect to which a Participant has filed a request under this Section 6.4 will be made as soon as
practicable after approval of such request by the Administrative Committee. Distributions made pursuant to this Section 6.4 will be without penalty. 

        6.5    Death Benefits.    If a Participant dies while employed by the Company or after termination of employment, the
Participant's Distributable Amount will be paid to the Participant's Beneficiary in the same form and in accordance with the same payment schedule under which the Distributable Amount was being or
would have been paid to the Participant under the provisions of Section 6.1. In addition to the foregoing, if a Participant with an undistributed Account balance dies while employed by the
Company, the Participant's Beneficiary will be paid a single sum benefit of $100,000, provided that coverage under any policy of insurance on the life of the Participant which is required by the
Administrative Committee is in effect at the Participant's death. 

        6.6    Inability To Locate Participant.    

        (a)    Forfeiture of Account.    In the event that the Administrative Committee is unable to locate a Participant or,
with respect to a Participant who has died, any Beneficiary within two years following the date on which any payment of the Participant's Distributable Amount is scheduled to be made or begin, the
amount allocated to the Participant's Account will be forfeited. Following the date of forfeiture, the Participant's Account which is forfeited will be invested in the Fund offering the least risk of
loss of principal or conservative money market funds. If, after such forfeiture and prior to the escheat of the Participant's Account as provided in Section 6.6(b), the Participant or
Beneficiary later claims such benefit and establishes to the 

12

 

reasonable
satisfaction of the Administrative Committee such Participant's or Beneficiary's right to receive same, such Account will be reinstated at its balance at the date of forfeiture without
additional interest, earnings, gains or losses from the date of forfeiture through the date of reinstatement. The Participant's restored Account balance will be invested in the manner that the
Participant or Beneficiary elects pursuant to Section 3.4 and will be distributed to the Participant or Beneficiary in accordance with the Participant's payment elections made pursuant to this
Article 6. In addition, any installment payments that were scheduled to have been made during the period in which the Participant or Beneficiary could not be located will be made to the
Participant or Beneficiary in a lump sum catch-up payment as soon as administratively practicable. 

        (b)    Escheat of Account.    The Administrative Committee, in its discretion, may escheat, or may cause the Trustee
to escheat, to the state of Texas (or such other state as the Administrative Committee, in its discretion, determines is appropriate) any Participant's Account which was forfeited if either
(i) the Administrative Committee has been unable to locate the Participant or Beneficiary for a period of five years (or such other period as may be specified by applicable law) following the
date on which any payment of the Participant's Distributable Amount is scheduled to be made or begin or (ii) the Plan is terminated and the Administrative Committee has been unable to locate
the Participant or Beneficiary for a period of two years (or such other period as may be specified by applicable law) following the date on which any payment of the Participant's Distributable Amount
is scheduled to be made or begin. Upon the escheat of the Participant's Account, the Participant or Beneficiary will have no further right to any benefits or payments under the Plan, and neither the
Company, the Administrative Committee nor the Trustee will have any liability to such Participant or Beneficiary for the amount of the Participant's Account. 

        6.7    Directors and Consultants.    For purposes of the preceding sections of this Article 6, a Participant
who is a member of the Board or a consultant, but who is not an employee of the Company, will be deemed to be employed by the Company as long as he or she is a director or is engaged as a consultant
and will be deemed to have terminated employment when he or she is no longer a director or is no longer engaged as a consultant or an employee of the Company. 

        6.8    Claims Procedure.    

                (a)    Claim for Benefits.    If a Participant or Beneficiary does not receive the benefits which the
Participant or Beneficiary believes he or she is entitled to receive under the Plan, the Participant or Beneficiary may file a claim for benefits with the Administrative Committee. All claims
will be made in writing and will be signed by the claimant. If the claimant does not furnish sufficient information to enable the Administrative Committee to process the claim, the Administrative
Committee will indicate to the claimant any additional information which is required. 

                (b)    Notification by the Administrative Committee.    Each claim will be approved or disapproved by
the Administrative Committee within 90 days following the receipt of the information necessary to process the claim. In the event the Administrative Committee denies a claim for benefits in
whole or in part, the Administrative Committee will notify the 

13

 

claimant
in writing of the denial of the claim. Such notice by the Administrative Committee will also set forth, in a manner calculated to be understood by the claimant, the specific reason for such
denial, the specific Plan provisions on which the denial is based, a description of any additional material or information necessary for the claim to be approved, if possible, with an explanation of
why such material or information is necessary, and an explanation of the Plan's claim review procedure as set forth in subsection (c). If no action is taken by the Administrative Committee on a claim
within such 90 day period, the claim will be deemed to be denied for purposes of the review procedure. 

                (c)    Review Procedure.    A claimant may appeal a denial of his or her claim by requesting a review of
the decision by the Administrative Committee or a person designated by the Administrative Committee. An appeal must be submitted in writing within 60 days after receipt by the claimant of
written notification of the denial and must (i) request a review of the claim for benefits under the Plan, (ii) set forth all of the grounds upon which the claimant's request for review
is based and any facts in support thereof, and (iii) set forth any issues or comments which the claimant deems pertinent to the appeal. The Administrative Committee or the person designated by
the Administrative Committee will make a full and fair review of each appeal and any written materials submitted in connection with the appeal. The Administrative Committee or the person designated by
the Administrative Committee will act upon each appeal within 60 days after receipt thereof unless special circumstances require an extension of the time for processing, in which case a
decision will be rendered as soon as possible but not later than 120 days after the appeal is received. The claimant will be given the opportunity to review documents or materials directly
pertinent to the appeal upon submission of a reasonable written request to the Administrative Committee or person designated by the Administrative Committee, provided the Administrative Committee or
person designated by the Administrative Committee in its reasonable judgment finds the requested documents or materials are directly pertinent to the appeal. On the basis of its review, the
Administrative Committee or person designated by the Administrative Committee will make an independent determination of the claimant's eligibility for benefits under the Plan. The decision of the
Administrative Committee or person designated by the Administrative Committee on any claim for benefits will be final and conclusive upon all parties thereto. In the event the Administrative Committee
or person designated by the Administrative Committee denies an appeal in whole or in part, it will give written notice of the decision to the claimant, which notice will set forth in a manner
calculated to be understood by the claimant the specific reasons for such denial and which will make specific reference to the pertinent Plan provisions on which the decision was based. 

 
 

ARTICLE 7
  
    ADMINISTRATION    
  

        7.1    Administrative Committee.    The Administrative Committee for the Plan will be appointed by, and serve at the
pleasure of, the Board. The number of members comprising the Committee will be determined by the Board, which may from time to time vary the number of members, and may determine that the Committee
will consist of a single individual. A member of the Committee may resign by delivering a written notice of resignation to the Board. The 

14

 

Board
may remove any member of the Committee with or without cause. Vacancies in the membership of the Committee will be filled as soon as practicable by the Board. 

        7.2    Committee Action.    The Administrative Committee will act at meetings by affirmative vote of a majority of the
members of the Committee. Any action permitted to be taken at a meeting may be taken without a meeting if, a written consent to the action is signed by all members of the Committee. A member of the
Committee will not vote or act upon any matter which relates solely to himself or herself as a Participant. Any members of the Committee may execute any certificate or other written direction on
behalf of the Committee. 

        7.3    Powers and Duties of the Administrative Committee.    The Administrative Committee will administer the Plan in
accordance with its terms and will have all powers, authority and discretion necessary to accomplish its purposes, including, but not by way of limitation, the authority and discretion to: 

        (i)    select
the Funds and change the Funds from time to time pursuant to Section 3.4; 

        (ii)    appoint
a representative, delegate or any other agent, and delegate to them such powers and duties in connection with the administration of the Plan as the
Administrative Committee may from time to time prescribe; 

        (iii)    resolve
all questions relating to the eligibility of employees, directors and consultants to be or become Eligible Individuals or Participants; 

        (iv)    determine
the Threshold Amount applicable to any Plan Year after the first Plan Year and establish alternative criteria, consistent with the purpose of the Plan to
provide benefits to a select group of management or highly compensated employees, for what will constitute an employee of the Company or an Eligible Individual with respect to any given Plan Year, in
addition to or in lieu of the eligibility criteria set forth in Section 1.2(i) or Section 2.1; 

        (v)    determine
the amount of benefits payable to Participants or their Beneficiaries under this Plan, and determine the time and manner in which such benefits are to be paid; 

        (vi)    authorize
and direct all disbursements by the Trustee from the Trust; 

        (vii)    engage
any administrative, legal, accounting, clerical, or other services it deems appropriate in administering the Plan or the Trust Agreement; 

        (viii)    construe
and interpret this Plan and the Trust Agreement, supply omissions from, correct deficiencies in, and resolve ambiguities in the language of this Plan and the
Trust Agreement, and adopt rules for the administration of this Plan and the Trust Agreement that are not inconsistent with the terms of such documents; 

15

  

        (ix)    compile
and maintain all records it determines to be necessary, appropriate or convenient in connection with the administration of this Plan and of benefit payments
hereunder; 

        (x)    determine
the disposition of assets in the Trust in the event this Plan is terminated; 

        (xi)    review
the performance of the Trustee with respect to the Trustee's administrative duties, responsibilities and obligations under this Plan and the Trust Agreement,
report to the Board regarding such administrative performance of the Trustee, and recommend to the Board, if necessary, the removal of the Trustee and the appointment of a successor Trustee; and 

        (xii)    resolve
all questions and make all factual determinations relating to any matter for which it has administrative responsibility. 

        7.4    Construction and Interpretation.    The Administrative Committee will have full authority and discretion to
construe and interpret the terms and provisions of this Plan, which interpretation or construction will be final and binding on all parties, including but not limited to the Company and any Eligible
Individual, Participant or Beneficiary. The Administrative Committee will administer the Plan in a consistent and nondiscriminatory manner and in full accordance with any and all laws applicable to
the Plan. 

        7.5    Information.    To enable the Administrative Committee to perform its functions, the Company will supply full
and timely information to the Administrative Committee on all matters relating to the Salary and Incentive Bonus of all Participants, their death or other cause of termination, and such other
pertinent facts as the Administrative Committee may reasonably require. 

        7.6    Expenses and Indemnity.    

        (a)    Expenses. All expenses and fees incurred in connection with the administration of the Plan and the Trust will be paid by
the Company. 

        (b)    Indemnification. To the fullest extent permitted by applicable law, the Company will indemnify and save harmless the
Administrative Committee, the Board and any delegate of the Administrative Committee who is an employee of the Company and any officers and employees of the Company against any and all expenses,
liabilities and claims, including legal fees to defend against such liabilities and claims, arising out of their discharge in good faith of responsibilities under or incident to the Plan, other than
expenses and liabilities arising out of willful misconduct. Without limiting the generality of the foregoing, the Company will, promptly upon request, advance funds to persons entitled to
indemnification hereunder to the extent necessary to defray legal and other expenses incurred in the defense of such liabilities and claims, as and when incurred. This indemnity will not preclude such
further indemnities as may be available under insurance purchased by the Company or provided by the Company under any bylaw, agreement or otherwise. 

16

 
 
 

ARTICLE 8
  
    MISCELLANEOUS    
  

        8.1    Unsecured General Creditor.    Participants and their Beneficiaries, heirs, successors, and assigns will have
no legal or equitable rights, claims, or interests in any property or assets of the Company or the Trust. No assets of the Company will be held as collateral security for the obligations of the
Company under this Plan. Any and all assets of the Trust will be and will remain unpledged and unencumbered. The Company's obligation under the Plan will be merely that of an unfunded and unsecured
promise of the Company to pay money in the future, and the rights of the Participants and Beneficiaries will be no greater than those of unsecured general creditors. The Company will maintain the
Trust at all times during the term of the Plan. All assets of the Company and the Trust will be subject to the claims of the Company's creditors. 

        8.2    Restriction Against Assignment.    The Company or the Trustee will pay all amounts payable hereunder only to
the person or persons designated pursuant to the Plan and not to any other person or entity. No part of a Participant's Account will be liable for the debts, contracts, or engagements of any
Participant, his or her Beneficiary, or successors in interest, nor will a Participant's Account be subject to execution by levy, attachment, or garnishment or by any other legal or equitable
proceeding, nor will any such person have any right to alienate, anticipate, commute, pledge, encumber, or assign any benefits or payments hereunder in any manner whatsoever, without the prior written
consent of the Administrative Committee, which may be withheld in its sole discretion. If any Participant, Beneficiary or successor in interest is adjudicated bankrupt or purports to anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge any distribution or payment from the Plan, voluntarily or involuntarily, the Administrative Committee, in its discretion, may cancel such
distribution or payment (or any part
thereof) to or for the benefit of such Participant, Beneficiary or successor in interest in such manner as the Administrative Committee will direct. 

        8.3    Withholding.    There will be deducted from each payment made under the Plan all taxes which are required to be
withheld by the Company in respect to such payment. 

        8.4    Amendment, Modification, Suspension or Termination.    

        (a)    The
Administrative Committee or the Board may amend, modify, suspend or terminate the Plan for any reason, in whole or in part, provided that (i) no amendment,
modification, suspension or termination will have any retroactive effect that would directly or indirectly reduce any amounts allocated to a Participant's Account or otherwise deprive any Participant
of any benefits already vested under the Plan; and (ii) any amendment, modification, suspension or termination of the Plan that will significantly increase costs to the Company will be approved
by the Board. 

        (b)    In
the event that this Plan is terminated in accordance with this Section 8.4, the balance of each Participant's Account will be distributed to the Participant
(or, in the event of the death of the Participant, to the Participant's Beneficiary) in a lump sum payment as soon as administratively feasible and in any event within 90 days of such
termination. 

17

 

        8.5    Governing Law.    The Plan will be construed and governed in all respects in accordance with applicable federal
law and, to the extent not preempted by such federal law, in accordance with the laws of the State of Texas, including without limitation, the Texas statute of limitations, but without giving effect
to the principles of conflicts of laws of such State. 

        8.6    Receipt or Release.    Any payment to a Participant or the Participant's Beneficiary in accordance with the
provisions of the Plan will, to the extent thereof, be in full satisfaction of all claims against the Administrative Committee and the Company with respect to the amount paid. The Administrative
Committee may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect. 

        8.7    Payments on Behalf of Persons Under Incapacity.    In the event that any amount becomes payable under the Plan
to a person who, in the sole judgment of the Administrative Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefor, the Administrative
Committee may direct that such payment be made to any person found by the
Administrative Committee, in its sole judgment, to have assumed the care of such person. Any payment made pursuant to such determination will, to the extent thereof, constitute a full release and
discharge of the Administrative Committee and the Company with respect to the amount paid. 

        8.8    Successors and Assigns.    The Company may not assign its obligations under this Plan, whether by contract,
merger, operation of law or otherwise, unless the assignment is to an assignee or successor entity (in either case, hereafter called a "Successor") that has stockholders' equity or the closest
equivalent thereto (as measured by the most recent audited financial statements of such Successor) equal to or greater than the stockholders' equity of the Company (as measured immediately prior to
the event that causes such entity to become a Successor to the Company). The provisions of this Section 8.8 will be binding upon each and every Successor to the Company. 

        8.9    No Employment Rights.    Participation in this Plan will not confer upon any person any right to be employed by
the Company nor any other right not expressly provided hereunder. 

        8.10    Headings, etc. Not Part of Agreement.    Headings and subheadings in this Plan are inserted for convenience of
reference only and are not to be considered in the construction of the provisions hereof. 

18

 

        IN
WITNESS WHEREOF, the Company has caused this document to be executed by its duly authorized officer as of the 15th day of September, 2001. 

	 	 	MICHAELS STORES, INC.
	

 	
 	

By:	
 	

MICHAELS STORES, INC.

DEFERRED COMPENSATION PLAN

ADMINISTRATIVE COMMITTEE

	

 	
 	

 	
 	

By:	
 	

/s/  SUE ELLIOTT      
 Sue Elliott
	

 	
 	

 	
 	

By:	
 	

/s/  DAVID KEEPES      
 David Keepes

19

QuickLinks

MICHAELS STORES, INC. DEFERRED COMPENSATION PLAN (Amended and Restated as of January 1, 2002)

TABLE OF CONTENTS

MICHAELS STORES, INC. DEFERRED COMPENSATION PLAN

RECITALS

ARTICLE 1 TITLE AND DEFINITIONS

ARTICLE 2 ELIGIBILITY AND PARTICIPATION

ARTICLE 3 DEFERRED COMPENSATION

ARTICLE 4 ACCOUNTS

ARTICLE 5 VESTING

ARTICLE 6 DISTRIBUTIONS

ARTICLE 7 ADMINISTRATION

ARTICLE 8 MISCELLANEOUSEXHIBIT 4.33

                                 PROMISSORY NOTE

$6,600,000.00                                                MONTGOMERY, ALABAMA
DECEMBER 31, 2001

            FOR VALUE RECEIVED FIBERCORE USA, INC., a Delaware corporation, as
maker, having its principal place of business at _____________________________
("Borrower"), hereby unconditionally promises to pay to the order of EMPLOYEES'
RETIREMENT SYSTEM OF ALABAMA, having an address at 135 South Union Street,
Montgomery, Alabama, 36130 ("Lender"), or at such other place as the holder
hereof may from time to time designate in writing, the principal sum of SIX
MILLION SIX HUNDRED THOUSAND AND NO/100 DOLLARS ($6,600,000.00), or so much
thereof as may be advanced pursuant to that certain Loan Agreement of even date
herewith between Borrower and the Lender (the "Loan Agreement") in lawful money
of the United States of America with interest thereon to be computed at the
simple interest rate of eight (8%) percent per annum, and to be paid in
accordance with the terms of this Note and the Loan Agreement. All capitalized
terms not defined herein shall have the respective meanings set forth in the
Loan Agreement.

                            ARTICLE 1 - PAYMENT TERMS

            Borrower agrees to pay the principal sum of this Note and interest
on the principal sum of this Note from time to time outstanding at the rates and
at the times specified in Article 5 of the Loan Agreement.

                      ARTICLE 2 - DEFAULT AND ACCELERATION

            The Loan shall without notice become immediately due and payable at
the option of Lender if any payment required in this Note is not paid on or
prior to the date when due or if not paid on the Maturity Date or upon the
Change in Control of Borrower, or upon sale of the Project or, on the happening
of any other Event of Default. In the event the Loan becomes immediately due and
payable, Lender shall be entitled to receive interest on the entire unpaid
principal sum at the Default Rate pursuant to the terms of the Loan Agreement.
This Article 2, however, shall not be construed as an agreement or privilege to
extend the date of the payment of the Loan, nor as a waiver of any other right
or remedy accruing to Lender by reason of the occurrence of any Event of
Default.

                           ARTICLE 3 - LOAN DOCUMENTS

            This Note is secured by the Security Documents. All of the terms,
covenants and conditions contained in the Loan Agreement, each Security Document
and the other Loan Documents are hereby made part of this Note to the same
extent and with the same force as if they were fully set forth herein. In the
event of a conflict or inconsistency between the terms of this Note and the Loan
Agreement, the terms and provisions of the Loan Agreement shall govern.

                                  Page 1 of 4
<PAGE>

                           ARTICLE 4 - SAVINGS CLAUSE

            This Note and the Loan Agreement are subject to the express
condition that at no time shall Borrower be obligated or required to pay
interest on the principal balance of the Loan at a rate which could subject
Lender to either civil or criminal liability as a result of being in excess of
the Maximum Legal Rate. If, by the terms of this Note, the Loan Agreement or the
other Loan Documents, Borrower is at any time required or obligated to pay
interest on the principal balance due hereunder at a rate in excess of the
Maximum Legal Rate, the Simple Interest rate or the Default Rate, as the case
may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and
all previous payments in excess of the Maximum Legal Rate shall be deemed to
have been payments in reduction of principal and not on account of the interest
due hereunder. All sums paid or agreed to be paid to Lender for the use,
forbearance, or detention of the sums due under the Loan, shall, to the extent
permitted by applicable law, be amortized, prorated, allocated, and spread
throughout the full stated term of the Loan until payment in full so that the
rate or amount of interest on account of the Loan does not exceed the Maximum
Legal Rate of interest from time to time in effect and applicable to the Loan
for so long as the Loan is outstanding.

                           ARTICLE 5 - NO ORAL CHANGE

            This Note may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Borrower or Lender, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.

                               ARTICLE 6 - WAIVERS

            Borrower and all others who may become liable for the payment of all
or any part of the Loan do hereby severally waive presentment and demand for
payment, notice of dishonor, notice of intention to accelerate, notice of
acceleration, protest and notice of protest and nonpayment and all other notices
of any kind. No release of any security for the Loan or extension of time for
payment of this Note or any installment hereof, and no alteration, amendment or
waiver of any provision of this Note, the Loan Agreement or the other Loan
Documents made by agreement between Lender or any other Person not in writing
signed on behalf of Lender and Borrower shall release, modify, amend, waive,
extend, change, discharge, terminate or affect the liability of Borrower, and
any other Person who may become liable for the payment of all or any part of the
Loan, under this Note, the Loan Agreement or the other Loan Documents. No notice
to or demand on Borrower shall be deemed to be a waiver of the obligation of
Borrower or of the right of Lender to take further action without further notice
or demand as provided for in this Note, the Loan Agreement or the other Loan
Documents. If Borrower is a partnership, the agreements herein contained shall
remain in force and be applicable, notwithstanding any changes in the
individuals or entities comprising the partnership, and the term "Borrower," as
used herein, shall include any alternate or successor partnership, but any
predecessor partnership and their partners shall not thereby be released from
any liability. If Borrower is a corporation, the agreements contained herein
shall remain in full force and be applicable notwithstanding any changes in the
shareholders comprising, or the officers and directors relating to, the
corporation,

                                  Page 2 of 4
<PAGE>

and the term "Borrower," as used herein, shall include any alternative or
successor corporation, but any predecessor corporation shall not be relieved of
liability hereunder. If any Borrower is a limited liability company, the
agreements herein contained shall remain in force and be applicable,
notwithstanding any changes in the members comprising the limited liability
company, and the term "Borrower" as used herein, shall include any alternate or
successor limited liability company, but any predecessor limited liability
company and their members shall not thereby be released from any liability.
(Nothing in the foregoing sentence shall be construed as a consent to, or a
waiver of, any prohibition or restriction on transfers of interests in such
partnership, corporation or limited liability company which may be set forth in
the Loan Agreement, each Security Instrument or any other Loan Document.) If
Borrower consists of more than one person or party, the obligations and
liabilities of each such person or party shall be joint and several.

                              ARTICLE 7 - TRANSFER

            Upon the transfer of this Note in accordance with Section 5.5(b) of
the Loan Agreement, Borrower hereby waiving notice of any such transfer, Lender
may deliver all the collateral mortgaged, granted, pledged or assigned pursuant
to the Loan Documents, or any part thereof, to the transferee who shall
thereupon become vested with all the rights herein or under applicable law given
to Lender with respect thereto, and Lender shall thereafter forever be relieved
and fully discharged from any liability or responsibility in the matter; but
Lender shall retain all rights hereby given to it with respect to any
liabilities and the collateral not so transferred. Notwithstanding the
foregoing, a Change in Control of Borrower or a sale of the Project shall cause
the Loan to become immediately due and payable at the election of Lender, under
Article 2 hereof.

                            ARTICLE 8 - GOVERNING LAW

            This Note shall be governed in accordance with the choice of law
provisions of Section 1.4 of the Loan Agreement.

                               ARTICLE 9 - NOTICES

            All notices or other written communications hereunder shall be
delivered in accordance with Section 9.6 of the Loan Agreement.

                        [NO FURTHER TEXT ON THIS PAGE]

                                  Page 3 of 4
<PAGE>

            IN WITNESS WHEREOF, Borrower has duly executed this Note as of the
day and year first above written.

                                       [BORROWER]

                                       FIBERCORE USA, INC.
                                          A DELAWARE CORPORATION

                                       By: /s/ Robert Lobban
                                           ------------------------------------
                                           Name:  Robert Lobban
                                           Title: Chief Financial Officer

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