OFFICER INDEMNIFICATION AGREEMENT
Exhibit 10.37
This Officer Indemnification Agreement, dated as of , 2005 (this “Agreement”),
is made by and between Michaels Stores, Inc., a Delaware corporation (the “Company”), and
(“Indemnitee”).
RECITALS:
A. Section 141 of the Delaware General Corporation Law provides that the business and affairs
of a corporation shall be managed under the direction of its board of directors.
B. Pursuant to Sections 141 and 142 of the Delaware General Corporation Law, significant
authority with respect to the management of the Company has been delegated to the officers of the
Company.
C. By virtue of the managerial prerogatives vested in the officers of a Delaware corporation,
officers act as fiduciaries of the corporation and its stockholders.
D. Thus, it is critically important to the Company and its stockholders that the Company be
able to attract and retain the most capable persons reasonably available to serve as officers of
the Company.
E. In recognition of the need for corporations to be able to induce capable and responsible
persons to accept positions in corporate management, Delaware law authorizes (and in some instances
requires) corporations to indemnify their directors and officers, and further authorizes
corporations to purchase and maintain insurance for the benefit of their directors and officers.
F. The Delaware courts have recognized that indemnification by a corporation serves the dual
policies of (1) allowing corporate officials to resist unjustified lawsuits, secure in the
knowledge that, if vindicated, the corporation will bear the expense of litigation and (2)
encouraging capable women and men to serve as corporate directors and officers, secure in the
knowledge that the corporation will absorb the costs of defending their honesty and integrity.
G. The number of lawsuits challenging the judgment and actions of officers of Delaware
corporations, the costs of defending those lawsuits, and the threat to officers’ personal assets
have all materially increased over the past several years, chilling the willingness of capable
women and men to undertake the responsibilities imposed on corporate officers.
H. Recent federal legislation and rules adopted by the Securities and Exchange Commission and
the national securities exchanges have imposed additional disclosure and corporate governance
obligations on officers of public companies and have exposed such officers to new and substantially
broadened civil liabilities.
I. These legislative and regulatory initiatives have also exposed officers of public companies
to a significantly greater risk of criminal proceedings, with attendant defense costs and potential
criminal fines and penalties.
J. Under Delaware law, an officer’s right to be reimbursed for the costs of defense of
criminal actions, whether such claims are asserted under state or federal law, does not depend upon
the merits of the claims asserted against the officer and is separate and distinct from any right
to indemnification the officer may be able to establish, and indemnification of the officer against
criminal fines and penalties is permitted if the officer satisfies the applicable standard of
conduct.
K. Indemnitee is an officer of the Company or a Controlled Affiliate (as defined below) and
his/her willingness to serve in such capacity is predicated, in substantial part, upon the
Company’s willingness to indemnify him/her in accordance with the principles reflected above, to
the fullest extent permitted by the laws of the state of Delaware, and upon the other undertakings
set forth in this Agreement.
L. Therefore, in recognition of the need to provide Indemnitee with substantial protection
against personal liability, in order to procure Indemnitee’s continued service as an officer of the
Company or a Controlled Affiliate and to enhance Indemnitee’s ability to serve the Company or a
Controlled Affiliate in an effective manner, and in order to provide such protection pursuant to
express contract rights (intended to be enforceable irrespective of, among other things, any
amendment to the Company’s certificate of incorporation or bylaws (collectively, the “Constituent
Documents”), any change in the composition of the Company’s Board of Directors (the “Board”) or any
change-in-control or business combination transaction relating to the Company), the Company wishes
to provide in this Agreement for the indemnification of and the advancement of Expenses (as defined
in Section 1(c)) to Indemnitee as set forth in this Agreement and for the continued coverage of
Indemnitee under the Company’s directors’ and officers’ liability insurance policies.
M. In light of the considerations referred to in the preceding recitals, it is the Company’s
intention and desire that the provisions of this Agreement be construed liberally, subject to their
express terms, to maximize the protections to be provided to Indemnitee hereunder.
AGREEMENT:
NOW, THEREFORE, the parties hereby agree as follows:
1. Certain Definitions. In addition to terms defined elsewhere herein, the
following terms have the following meanings when used in this Agreement with initial capital
letters:
(a) “Change in Control” means the occurrence after the date of this Agreement of any
of the following events:
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| (i) | the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the combined voting power of the then-outstanding Voting Stock of the Company; provided, however, that: |
(A) for purposes of this Section 1(a)(i), the following acquisitions shall not
constitute a Change in Control: (1) any acquisition of Voting Stock of the Company directly from
the Company that is approved by a majority of the Incumbent Directors, (2) any acquisition of
Voting Stock of the Company by the Company or any Subsidiary, (3) any acquisition of Voting Stock
of the Company by any employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary, and (4) any acquisition of Voting Stock of the Company by any Person
pursuant to a Business Combination that complies with clauses (1), (2) and (3) of Section 1(a)(iii)
below;
(B) if any Person acquires beneficial ownership of 20% or more of combined voting
power of the then-outstanding Voting Stock of the Company as a result of a transaction described in
clause (A)(1) of Section 1(a)(i) and such Person thereafter becomes the beneficial owner of any
additional shares of Voting Stock of the Company representing 1% or more of the then-outstanding
Voting Stock of the Company, other than in an acquisition directly from the Company that is
approved by a majority of the Incumbent Directors or other than as a result of a stock dividend,
stock split or similar transaction effected by the Company in which all holders of Voting Stock are
treated equally, such subsequent acquisition shall be deemed to constitute a Change in Control;
(C) a Change in Control will not be deemed to have occurred if a Person acquires
beneficial ownership of 20% or more of the Voting Stock of the Company as a result of a reduction
in the number of shares of Voting Stock of the Company outstanding unless and until such Person
thereafter becomes the beneficial owner of any additional shares of Voting Stock of the Company
representing 1% or more of the then-outstanding Voting Stock of the Company, other than in an
acquisition directly from the Company that is approved by a majority of the Incumbent Directors or
other than as a result of a stock dividend, stock split or similar transaction effected by the
Company in which all holders of Voting Stock are treated equally; and
(D) if at least a majority of the Incumbent Directors determine in good faith that a
Person has acquired beneficial ownership of 20% or more of the Voting Stock of the Company
inadvertently, and such Person divests as promptly as practicable a sufficient number of shares so
that such Person beneficially owns less than 20% of the Voting Stock of the Company, then no Change
in Control shall have occurred as a result of such Person’s acquisition; or
| (ii) | a majority of the Directors are not Incumbent Directors; or |
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| (iii) | the consummation of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another corporation, or other transaction (each, a “Business Combination”), unless, in each case, immediately following such Business Combination (A) all or substantially all of the individuals and entities who were the beneficial owners of Voting Stock of the Company immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the combined voting power of the then outstanding shares of Voting Stock of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), (B) no Person (other than the Company, such entity resulting from such Business Combination, or any employee benefit plan (or related trust) sponsored or maintained by the Company, any Subsidiary or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then outstanding shares of Voting Stock of the entity resulting from such Business Combination, and (C) at least a majority of the members of the Board of Directors of the entity resulting from such Business Combination were Incumbent Directors at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or |
| (iv) | approval by the stockholders of the Company of a complete liquidation or dissolution of the Company, except pursuant to a Business Combination that complies with clauses (A), (B) and (C) of Section 1(a)(iii). | ||
| (v) | For purposes of this Section 1(a), the following terms shall have the following meanings: |
(A) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
(B) “Incumbent Directors” means the individuals who, as of the date hereof, are
Directors of the Company and any individual becoming a Director subsequent to the date hereof whose
election, nomination for election by the Company’s stockholders, or appointment, was approved by a
vote of at least two-thirds of the then Incumbent Directors (either by a specific vote or by
approval of the proxy statement of the Company in which such person is named as a nominee for
director, without objection to such nomination); provided, however, that an individual shall not be
an Incumbent Director if such individual’s
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election or appointment to the Board occurs as a result of an actual or threatened election
contest (as described in Rule 14a-12(c) of the Exchange Act) with respect to the election or
removal of Directors or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board.
(C) “Subsidiary” means an entity in which the Company directly or indirectly
beneficially owns 50% or more of the outstanding Voting Stock.
(D) “Voting Stock” means securities entitled to vote generally in the election of
directors (or similar governing bodies).
(b) “Claim” means (i) any threatened, asserted, pending or completed claim, demand,
action, suit or proceeding, whether civil, criminal, administrative, arbitrative, investigative or
other, and whether made pursuant to federal, state or other law; and (ii) any inquiry or
investigation, whether made, instituted or conducted by the Company or any other party, including
without limitation any federal, state or other governmental entity, that Indemnitee determines
might lead to the institution of any such claim, demand, action, suit or proceeding.
(c) “Controlled Affiliate” means any corporation, limited liability company,
partnership, joint venture, trust or other entity or enterprise, whether or not for profit, that is
directly or indirectly controlled by the Company. For purposes of this definition, “control” means
the possession, directly or indirectly, of the power to direct or cause the direction of the
management or policies of an entity or enterprise, whether through the ownership of voting
securities, through other voting rights, by contract or otherwise; provided that direct or indirect
beneficial ownership of capital stock or other interests in an entity or enterprise entitling the
holder to cast 20% or more of the total number of votes generally entitled to be cast in the
election of directors (or persons performing comparable functions) of such entity or enterprise
shall be deemed to constitute control for purposes of this definition.
(d) “Disinterested Director” means a director of the Company who is not and was not
a party to the Claim in respect of which indemnification is sought by Indemnitee.
(e) “Expenses” means attorneys’ and experts’ fees and expenses and all other costs
and expenses paid or payable in connection with investigating, defending, being a witness in or
participating in (including on appeal), or preparing to investigate, defend, be a witness in or
participate in (including on appeal), any Claim.
(f) “Indemnifiable Claim” means any Claim based upon, arising out of or resulting
from (i) any actual, alleged or suspected act or failure to act by Indemnitee in his or her
capacity as a director, officer, employee or agent of the Company or as a director, officer,
employee, member, manager, trustee or agent of any other corporation, limited liability company,
partnership, joint venture, trust or other entity or enterprise, whether or not for profit, as to
which Indemnitee is or was serving at the request of the Company as a director, officer, employee,
member, manager, trustee or agent, (ii) any actual, alleged or
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suspected act or failure to act by Indemnitee in respect of any business, transaction,
communication, filing, disclosure or other activity of the Company or any other entity or
enterprise referred to in clause (i) of this sentence, or (iii) Indemnitee’s status as a current or
former director, officer, employee or agent of the Company or as a current or former director,
officer, employee, member, manager, trustee or agent of the Company or any other entity or
enterprise referred to in clause (i) of this sentence or any actual, alleged or suspected act or
failure to act by Indemnitee in connection with any obligation or restriction imposed upon
Indemnitee by reason of such status. In addition to any service at the actual request of the
Company, for purposes of this Agreement, Indemnitee shall be deemed to be serving or to have served
at the request of the Company as a director, officer, employee, member, manager, trustee or agent
of another entity or enterprise if Indemnitee is or was serving as a director, officer, employee,
member, manager, trustee or agent of such entity or enterprise and (i) such entity or enterprise is
or at the time of such service was a Controlled Affiliate, (ii) such entity or enterprise is or at
the time of such service was an employee benefit plan (or related trust) sponsored or maintained by
the Company or a Controlled Affiliate, or (iii) the Company or a Controlled Affiliate directly or
indirectly caused Indemnitee to be nominated, elected, appointed, designated, employed, engaged or
selected to serve in such capacity.
(g) “Indemnifiable Losses” means any and all Losses relating to, arising out of or
resulting from any Indemnifiable Claim.
(h) “Independent Counsel” means a law firm, or a member of a law firm, that is
experienced in matters of corporation law and neither presently is, nor in the past five years has
been, retained to represent: (i) the Company or Indemnitee in any matter material to either such
party (other than with respect to matters concerning the Indemnitee under this Agreement, or of
other indemnitees under similar indemnification agreements), or (ii) any other party to the
Indemnifiable Claim giving rise to a claim for indemnification hereunder. Notwithstanding the
foregoing, the term “Independent Counsel” shall not include any person who, under the applicable
standards of professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under
this Agreement.
(i) “Losses” means any and all Expenses, damages, losses, liabilities, judgments,
fines, penalties (whether civil, criminal or other) and amounts paid or payable in settlement,
including without limitation all interest, assessments and other charges paid or payable in
connection with or in respect of any of the foregoing.
2. Indemnification Obligation. Subject to Section 7, the Company shall indemnify,
defend and hold harmless Indemnitee, to the fullest extent permitted by the laws of the State of
Delaware in effect on the date hereof or as such laws may from time to time hereafter be amended to
increase the scope of such permitted indemnification, against any and all Indemnifiable Claims and
Indemnifiable Losses; provided, however, that, except as provided in Sections 5 and 20, Indemnitee
shall not be entitled to indemnification pursuant to this Agreement in connection with any Claim
initiated by Indemnitee against the
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Company or any director or officer of the Company unless the Company has joined in or
consented to the initiation of such Claim.
3. Advancement of Expenses. Indemnitee shall have the right to advancement by the
Company prior to the final disposition of any Indemnifiable Claim of any and all Expenses relating
to, arising out of or resulting from any Indemnifiable Claim paid or incurred by Indemnitee or
which Indemnitee determines are reasonably likely to be paid or incurred by Indemnitee.
Indemnitee’s right to such advancement is not subject to the satisfaction of any standard of
conduct. Without limiting the generality or effect of the foregoing, within five business days
after any request by Indemnitee, the Company shall, in accordance with such request (but without
duplication), (a) pay such Expenses on behalf of Indemnitee, (b) advance to Indemnitee funds in an
amount sufficient to pay such Expenses, or (c) reimburse Indemnitee for such Expenses; provided
that Indemnitee shall repay, without interest any amounts actually advanced to Indemnitee that, at
the final disposition of the Indemnifiable Claim to which the advance related, were in excess of
amounts paid or payable by Indemnitee in respect of Expenses relating to, arising out of or
resulting from such Indemnifiable Claim. In connection with any such payment, advancement or
reimbursement, Indemnitee shall execute and deliver to the Company an undertaking, which need not
be secured and shall be accepted without reference to Indemnitee’s ability to repay the Expenses,
by or on behalf of the Indemnitee, to repay any amounts paid, advanced or reimbursed by the Company
in respect of Expenses relating to, arising out of or resulting from any Indemnifiable Claim in
respect of which it shall have been determined, following the final disposition of such
Indemnifiable Claim and in accordance with Section 7, that Indemnitee is not entitled to
indemnification hereunder.
4. Indemnification for Additional Expenses. Without limiting the generality or
effect of the foregoing, the Company shall indemnify and hold harmless Indemnitee against and, if
requested by Indemnitee, shall reimburse Indemnitee for, or advance to Indemnitee, within five
business days of such request, any and all Expenses paid or incurred by Indemnitee or which
Indemnitee determines are reasonably likely to be paid or incurred by Indemnitee in connection with
any Claim made, instituted or conducted by Indemnitee for (a) indemnification or reimbursement or
advance payment of Expenses by the Company under any provision of this Agreement, or under any
other agreement or provision of the Constituent Documents now or hereafter in effect relating to
Indemnifiable Claims, and/or (b) recovery under any directors’ and officers’ liability insurance
policies maintained by the Company, regardless in each case of whether Indemnitee ultimately is
determined to be entitled to such indemnification, reimbursement, advance or insurance recovery, as
the case may be; provided, however, that Indemnitee shall return, without interest, any such
advance of Expenses (or portion thereof) which remains unspent at the final disposition of the
Claim to which the advance related.
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5. Partial Indemnity. If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of any Indemnifiable Loss but not
for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the
portion thereof to which Indemnitee is entitled.
6. Procedure for Notification. To obtain indemnification under this Agreement in
respect of an Indemnifiable Claim or Indemnifiable Loss, Indemnitee shall submit to the Company a
written request therefor, including a brief description (based upon information then available to
Indemnitee) of such Indemnifiable Claim or Indemnifiable Loss. If, at the time of the receipt of
such request, the Company has directors’ and officers’ liability insurance in effect under which
coverage for such Indemnifiable Claim or Indemnifiable Loss is potentially available, the Company
shall give prompt written notice of such Indemnifiable Claim or Indemnifiable Loss to the
applicable insurers in accordance with the procedures set forth in the applicable policies. The
Company shall provide to Indemnitee a copy of such notice delivered to the applicable insurers, and
copies of all subsequent correspondence between the Company and such insurers regarding the
Indemnifiable Claim or Indemnifiable Loss, in each case substantially concurrently with the
delivery or receipt thereof by the Company. The failure by Indemnitee to timely notify the Company
of any Indemnifiable Claim or Indemnifiable Loss shall not relieve the Company from any liability
hereunder unless, and only to the extent that, the Company did not otherwise learn of such
Indemnifiable Claim or Indemnifiable Loss and such failure results in forfeiture by the Company of
substantial defenses, rights or insurance coverage.
7. Determination of Right to Indemnification.
(a) To the extent that Indemnitee shall have been successful on the merits or
otherwise in defense of any Indemnifiable Claim or any portion thereof or in defense of any issue
or matter therein, including without limitation dismissal without prejudice, Indemnitee shall be
indemnified against all Indemnifiable Losses relating to, arising out of or resulting from such
Indemnifiable Claim in accordance with Section 2 and no Standard of Conduct Determination (as
defined in Section 7(b)) shall be required.
(b) To the extent that the provisions of Section 7(a) are inapplicable to an
Indemnifiable Claim that shall have been finally disposed of, any determination of whether
Indemnitee has satisfied any applicable standard of conduct under Delaware law that is a legally
required condition precedent to indemnification of Indemnitee hereunder against Indemnifiable
Losses relating to, arising out of or resulting from such Indemnifiable Claim (a “Standard of
Conduct Determination”) shall be made as follows: (i) if a Change of Control shall not have
occurred, or if a Change of Control shall have occurred but Indemnitee shall have requested that
the Standard of Conduct Determination be made pursuant to this clause (i), (A) by a majority vote
of the Disinterested Directors, even if less than a quorum of the Board, (B) if such Disinterested
Directors so direct, by a majority vote of a committee of Disinterested Directors designated by a
majority vote of all Disinterested Directors, or (C) if there are no such Disinterested Directors,
by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be
delivered to Indemnitee; and (ii) if a Change in Control shall have occurred and Indemnitee shall
not have requested
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that the Standard of Conduct Determination be made pursuant to clause (i), by Independent
Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to
Indemnitee. Indemnitee will cooperate with the person or persons making such Standard of Conduct
Determination, including providing to such person or persons, upon reasonable advance request, any
documentation or information which is not privileged or otherwise protected from disclosure and
which is reasonably available to Indemnitee and reasonably necessary to such determination. The
Company shall indemnify and hold harmless Indemnitee against and, if requested by Indemnitee, shall
reimburse Indemnitee for, or advance to Indemnitee, within five business days of such request, any
and all costs and expenses (including attorneys’ and experts’ fees and expenses) incurred by
Indemnitee in so cooperating with the person or persons making such Standard of Conduct
Determination.
(c) The Company shall use its reasonable best efforts to cause any Standard of
Conduct Determination required under Section 7(b) to be made as promptly as practicable. If (i)
the person or persons empowered or selected under Section 7 to make the Standard of Conduct
Determination shall not have made a determination within 30 days after the later of (A) receipt by
the Company of written notice from Indemnitee advising the Company of the final disposition of the
applicable Indemnifiable Claim (the date of such receipt being the “Notification Date”) and (B) the
selection of an Independent Counsel, if such determination is to be made by Independent Counsel,
that is permitted under the provisions of Section 7(e) to make such determination and (ii)
Indemnitee shall have fulfilled his/her obligations set forth in the second sentence of Section
7(b), then Indemnitee shall be deemed to have satisfied the applicable standard of conduct;
provided that such 30-day period may be extended for a reasonable time, not to exceed an additional
30 days, if the person or persons making such determination in good faith requires such additional
time for the obtaining or evaluation or documentation and/or information relating thereto.
(d) If (i) Indemnitee shall be entitled to indemnification hereunder against any
Indemnifiable Losses pursuant to Section 7(a), (ii) no determination of whether Indemnitee has
satisfied any applicable standard of conduct under Delaware law is a legally required condition
precedent to indemnification of Indemnitee hereunder against any Indemnifiable Losses, or (iii)
Indemnitee has been determined or deemed pursuant to Section 7(b) or (c) to have satisfied any
applicable standard of conduct under Delaware law which is a legally required condition precedent
to indemnification of Indemnitee hereunder against any Indemnifiable Losses, then the Company shall
pay to Indemnitee, within five business days after the later of (x) the Notification Date in
respect of the Indemnifiable Claim or portion thereof to which such Indemnifiable Losses are
related, out of which such Indemnifiable Losses arose or from which such Indemnifiable Losses
resulted and (y) the earliest date on which the applicable criterion specified in clause (i), (ii)
or (iii) above shall have been satisfied, an amount equal to the amount of such Indemnifiable
Losses.
(e) If a Standard of Conduct Determination is to be made by Independent Counsel
pursuant to Section 7(b)(i), the Independent Counsel shall be selected by the Board of Directors,
and the Company shall give written notice to Indemnitee advising him or her of the identity of the
Independent Counsel so selected. If a Standard of Conduct Determination is to be made by
Independent Counsel pursuant to Section 7(b)(ii), the
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Independent Counsel shall be selected by Indemnitee, and Indemnitee shall give written notice
to the Company advising it of the identity of the Independent Counsel so selected. In either case,
Indemnitee or the Company, as applicable, may, within five business days after receiving written
notice of selection from the other, deliver to the other a written objection to such selection;
provided, however, that such objection may be asserted only on the ground that the Independent
Counsel so selected does not satisfy the criteria set forth in the definition of “Independent
Counsel” in Section 1(h), and the objection shall set forth with particularity the factual basis of
such assertion. Absent a proper and timely objection, the person or firm so selected shall act as
Independent Counsel. If such written objection is properly and timely made and substantiated, (i)
the Independent Counsel so selected may not serve as Independent Counsel unless and until such
objection is withdrawn or a court has determined that such objection is without merit and (ii) the
non-objecting party may, at its option, select an alternative Independent Counsel and give written
notice to the other party advising such other party of the identity of the alternative Independent
Counsel so selected, in which case the provisions of the two immediately preceding sentences and
clause (i) of this sentence shall apply to such subsequent selection and notice. If applicable,
the provisions of clause (ii) of the immediately preceding sentence shall apply to successive
alternative selections. If no Independent Counsel that is permitted under the foregoing provisions
of this Section 7(e) to make the Standard of Conduct Determination shall have been selected within
30 days after the Company gives its initial notice pursuant to the first sentence of this Section
7(e) or Indemnitee gives its initial notice pursuant to the second sentence of this Section 7(e),
as the case may be, either the Company or Indemnitee may petition the Court of Chancery of the
State of Delaware for resolution of any objection which shall have been made by the Company or
Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person or firm selected by the Court or by such other person as the Court
shall designate, and the person or firm with respect to whom all objections are so resolved or the
person or firm so appointed will act as Independent Counsel. In all events, the Company shall pay
all of the reasonable fees and expenses of the Independent Counsel incurred in connection with the
Independent Counsel’s determination pursuant to Section 7(b).
8. Presumption of Entitlement.
(a) In making any Standard of Conduct Determination, the person or persons making
such determination shall presume that Indemnitee has satisfied the applicable standard of conduct,
and the Company may overcome such presumption only by its adducing clear and convincing evidence to
the contrary. Any Standard of Conduct Determination that is adverse to Indemnitee may be
challenged by the Indemnitee in the Court of Chancery of the State of Delaware. No determination
by the Company (including by its directors or any Independent Counsel) that Indemnitee has not
satisfied any applicable standard of conduct shall be a defense to any Claim by Indemnitee for
indemnification or reimbursement or advance payment of Expenses by the Company hereunder or create
a presumption that Indemnitee has not met any applicable standard of conduct.
9. No Other Presumption. For purposes of this Agreement, the termination of any
Claim by judgment, order, settlement (whether with or without court approval) or
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conviction, or upon a plea of nolo contendere or its equivalent, will not create a presumption
that Indemnitee did not meet any applicable standard of conduct or that indemnification hereunder
is otherwise not permitted.
10. Non-Exclusivity. The rights of Indemnitee hereunder will be in addition to any
other rights Indemnitee may have under the Constituent Documents, or the substantive laws of the
Company’s jurisdiction of incorporation, any other contract or otherwise (collectively, “Other
Indemnity Provisions”); provided, however, that (a) to the extent that Indemnitee otherwise would
have any greater right to indemnification under any Other Indemnity Provision, Indemnitee will be
deemed to have such greater right hereunder and (b) to the extent that any change is made to any
Other Indemnity Provision which permits any greater right to indemnification than that provided
under this Agreement as of the date hereof, Indemnitee will be deemed to have such greater right
hereunder. The Company will not adopt any amendment to any of the Constituent Documents the effect
of which would be to deny, diminish or encumber Indemnitee’s right to indemnification under this
Agreement or any Other Indemnity Provision.
11. Liability Insurance and Funding. For the duration of Indemnitee’s service as a
director and/or officer of the Company or a Controlled Affiliate, and thereafter for so long as
Indemnitee shall be subject to any pending or possible Indemnifiable Claim, the Company shall use
commercially reasonable efforts (taking into account the scope and amount of coverage available
relative to the cost thereof) to cause to be maintained in effect policies of directors’ and
officers’ liability insurance providing coverage for directors and/or officers of the Company that
is at least substantially comparable in scope and amount to that provided by the Company’s current
policies of directors’ and officers’ liability insurance. Upon request, the Company shall provide
Indemnitee with a copy of all directors’ and officers’ liability insurance applications, binders,
policies, declarations, endorsements and other related materials, and shall provide Indemnitee with
a reasonable opportunity to review and comment on the same. Without limiting the generality or
effect of the two immediately preceding sentences, the Company shall not discontinue or
significantly reduce the scope or amount of coverage from one policy period to the next (i)
without the prior approval thereof by a majority vote of the Incumbent Directors, even if less than
a quorum, or (ii) if at the time that any such discontinuation or significant reduction in the
scope or amount of coverage is proposed there are no Incumbent Directors, without the prior written
consent of Indemnitee (which consent shall not be unreasonably withheld or delayed). In all
policies of directors’ and officers’ liability insurance obtained by the Company, Indemnitee shall
be named as an insured in such a manner as to provide Indemnitee the same rights and benefits,
subject to the same limitations, as are accorded to the Company’s directors and officers most
favorably insured by such policy. The Company may, but shall not be required to, create a trust
fund, grant a security interest or use other means, including without limitation a letter of
credit, to ensure the payment of such amounts as may be necessary to satisfy its obligations to
indemnify and advance expenses pursuant to this Agreement.
12. Subrogation. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the related rights of recovery of Indemnitee
against other persons or entities (other than Indemnitee’s successors), including
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any entity or enterprise referred to in clause (i) of the definition of “Indemnifiable Claim”
in Section 1(f). Indemnitee shall execute all papers reasonably required to evidence such rights
(all of Indemnitee’s reasonable Expenses, including attorneys’ fees and charges, related thereto to
be reimbursed by or, at the option of Indemnitee, advanced by the Company).
13. No Duplication of Payments. The Company shall not be liable under this
Agreement to make any payment to Indemnitee in respect of any Indemnifiable Losses to the extent
Indemnitee has otherwise actually received payment (net of Expenses incurred in connection
therewith) under any insurance policy, the Constituent Documents and Other Indemnity Provisions or
otherwise (including from any entity or enterprise referred to in clause (i) of the definition of
“Indemnifiable Claim” in Section 1(f)) in respect of such Indemnifiable Losses otherwise
indemnifiable hereunder.
14. Defense of Claims. The Company shall be entitled to participate in the defense
of any Indemnifiable Claim or to assume the defense thereof, with counsel reasonably satisfactory
to the Indemnitee; provided that if Indemnitee believes, after consultation with counsel selected
by Indemnitee, that (a) the use of counsel chosen by the Company to represent Indemnitee would
present such counsel with an actual or potential conflict, (b) the named parties in any such
Indemnifiable Claim (including any impleaded parties) include both the Company and Indemnitee and
Indemnitee shall conclude that there may be one or more legal defenses available to him or her that
are different from or in addition to those available to the Company, or (c) any such representation
by such counsel would be precluded under the applicable standards of professional conduct then
prevailing, then Indemnitee shall be entitled to retain separate counsel (but not more than one law
firm plus, if applicable, local counsel in respect of any particular Indemnifiable Claim) at the
Company’s expense. The Company shall not be liable to Indemnitee under this Agreement for any
amounts paid in settlement of any threatened or pending Indemnifiable Claim effected without the
Company’s prior written consent. The Company shall not, without the prior written consent of the
Indemnitee, effect any settlement of any threatened or pending Indemnifiable Claim which the
Indemnitee is or could have been a party unless such settlement solely involves the payment of
money and includes a complete and unconditional release of the Indemnitee from all liability on any
claims that are the subject matter of such Indemnifiable Claim. Neither the Company nor Indemnitee
shall unreasonably withhold its consent to any proposed settlement; provided that Indemnitee may
withhold consent to any settlement that does not provide a complete and unconditional release of
Indemnitee.
15. Successors and Binding Agreement.
(a) The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the
business or assets of the Company expressly to assume and agree to perform this Agreement in the
same manner and to the same extent the Company would be required to perform if no such succession
had taken place. This Agreement shall be binding upon and inure to the benefit of the Company and
any successor to the Company, including without limitation any person acquiring directly or
indirectly all or substantially all of the business or assets of the
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Company whether by purchase, merger, consolidation, reorganization or otherwise (and such
successor will thereafter be deemed the “Company” for purposes of this Agreement), but shall not
otherwise be assignable or delegatable by the Company.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Indemnitee’s personal or legal representatives, executors, administrators, heirs, distributees,
legatees and other successors.
(c) This Agreement is personal in nature and neither of the parties hereto shall,
without the consent of the other, assign or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 15(a) and 15(b). Without limiting the
generality or effect of the foregoing, Indemnitee’s right to receive payments hereunder shall not
be assignable, whether by pledge, creation of a security interest or otherwise, other than by a
transfer by the Indemnitee’s will or by the laws of descent and distribution, and, in the event of
any attempted assignment or transfer contrary to this Section 15(c), the Company shall have no
liability to pay any amount so attempted to be assigned or transferred.
16. Notices. For all purposes of this Agreement, all communications, including
without limitation notices, consents, requests or approvals, required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly given when hand delivered or
dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five
business days after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid or one business day after having been sent for next-day delivery
by a nationally recognized overnight courier service, addressed to the Company (to the attention of
the Secretary of the Company) and to Indemnitee at the addresses shown on the signature page
hereto, or to such other address as any party may have furnished to the other in writing and in
accordance herewith, except that notices of changes of address will be effective only upon receipt.
17. Governing Law. The validity, interpretation, construction and performance of
this Agreement shall be governed by and construed in accordance with the substantive laws of the
State of Delaware, without giving effect to the principles of conflict of laws of such State. The
Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the Chancery Court of
the State of Delaware for all purposes in connection with any action or proceeding which arises out
of or relates to this Agreement and agree that any action instituted under this Agreement shall be
brought only in the Chancery Court of the State of Delaware.
18. Validity. If any provision of this Agreement or the application of any
provision hereof to any person or circumstance is held invalid, unenforceable or otherwise illegal,
the remainder of this Agreement and the application of such provision to any other person or
circumstance shall not be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal shall be reformed to the extent, and only to the extent, necessary to make it
enforceable, valid or legal. In the event that any court or other adjudicative body shall decline
to reform any provision of this Agreement held to be invalid, unenforceable or
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otherwise illegal as contemplated by the immediately preceding sentence, the parties thereto
shall take all such action as may be necessary or appropriate to replace the provision so held to
be invalid, unenforceable or otherwise illegal with one or more alternative provisions that
effectuate the purpose and intent of the original provisions of this Agreement as fully as possible
without being invalid, unenforceable or otherwise illegal.
19. Miscellaneous. No provision of this Agreement may be waived, modified or
discharged unless such waiver, modification or discharge is agreed to in writing signed by
Indemnitee and the Company. No waiver by either party hereto at any time of any breach by the
other party hereto or compliance with any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations, oral or otherwise,
expressed or implied with respect to the subject matter hereof have been made by either party that
are not set forth expressly in this Agreement. References to Sections are to references to
Sections of this Agreement.
20. Legal Fees and Expenses. It is the intent of the Company that Indemnitee not be
required to incur legal fees and or other Expenses associated with the interpretation, enforcement
or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost
and expense thereof would substantially detract from the benefits intended to be extended to
Indemnitee hereunder. Accordingly, without limiting the generality or effect of any other
provision hereof, if it should appear to Indemnitee that the Company has failed to comply with any
of its obligations under this Agreement or in the event that the Company or any other person takes
or threatens to take any action to declare this Agreement void or unenforceable, or institutes any
litigation or other action or proceeding designed to deny, or to recover from, Indemnitee the
benefits provided or intended to be provided to Indemnitee hereunder, the Company irrevocably
authorizes the Indemnitee from time to time to retain counsel of Indemnitee’s choice, at the
expense of the Company as hereafter provided, to advise and represent Indemnitee in connection with
any such interpretation, enforcement or defense, including without limitation the initiation or
defense of any litigation or other legal action, whether by or against the Company or any director,
officer, stockholder or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to Indemnitee’s entering into an attorney-client
relationship with such counsel, and in that connection the Company and Indemnitee agree that a
confidential relationship shall exist between Indemnitee and such counsel. Without respect to
whether Indemnitee prevails, in whole or in part, in connection with any of the foregoing, the
Company will pay and be solely financially responsible for any and all attorneys’ and related fees
and expenses incurred by Indemnitee in connection with any of the foregoing.
21. Certain Interpretive Matters. No provision of this Agreement shall be
interpreted in favor of, or against, either of the parties hereto by reason of the extent to which
any such party or its counsel participated in the drafting thereof or by reason of the extent to
which any such provision is inconsistent with any prior draft hereof or thereof.
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22. Entire Agreement. This Agreement and the Constituent Documents constitute the
entire agreement, and supersede all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter of this Agreement. Any prior
agreements or understandings between the parties hereto with respect to indemnification are hereby
terminated and of no further force or effect.
23. Counterparts. This Agreement may be executed in one or more counterparts, each
of which will be deemed to be an original but all of which together shall constitute one and the
same agreement.
[Signatures Appear On Following Page]
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IN WITNESS WHEREOF, Indemnitee has executed and the Company has caused its duly authorized
representative to execute this Agreement as of the date first above written.
| MICHAELS STORES, INC. | ||||||
| 0000 Xxxx Xxxxxx Xxxxx | ||||||
| Xxxxxx, XX 00000 | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| [NAME OF INDEMNITEE] | ||||||
| 0000 Xxxx Xxxxxx Xxxxx | ||||||
| Xxxxxx, XX 00000 | ||||||
| [Name of Indemnitee] | ||||||
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