EXHIBIT 10.1

 

SEPARATION AGREEMENT AND RELEASE

 

I.  Release.  For good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the undersigned, with the intention of binding
himself, his heirs, executors, administrators and assigns, does hereby release
and forever discharge Michaels Stores, Inc., a Delaware corporation (the
“Company”), and its present and former parent, officers, directors, executives,
agents, employees, affiliated companies, subsidiaries, successors, predecessors
and assigns (collectively, the “Released Parties”), from any and all claims,
complaints, actions, causes of action, demands, rights, damages, debts,
accounts, suits, expenses, attorneys’ fees and liabilities of whatever kind or
nature in law, equity, or otherwise, whether now known or unknown (collectively,
the “Claims”), which the undersigned now has, owns or holds, or has at any time
heretofore had, owned or held against any Released Party, arising out of or in
any way connected with the undersigned’s employment relationship with the
Company, its subsidiaries, predecessors or affiliated entities, or the
termination thereof, under any Federal, state or local statute, rule, or
regulation, or principle of common, tort or contract law, including but not
limited to, Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§
2000e et seq., the Age Discrimination in Employment Act of 1967, as amended, 29
U.S.C. §§ 621 et seq., the Americans with Disabilities Act of 1990, as amended,
42 U.S.C. §§ 12101, et seq., and any other equivalent or similar Federal, state,
or local statute; provided, however, that nothing herein shall release the
Company of its obligations under that certain Change in Control Severance
Agreement (the “Change in Control Severance Agreement”) in which the undersigned
participates and pursuant to which this Separation Agreement and Release is
being executed and delivered.  The undersigned understands that, as a result of
executing this Separation Agreement and Release, he will not have the right to
assert that the Company or any other Released Party unlawfully terminated his
employment or violated any of his rights in connection with his employment or
otherwise.

 

The undersigned affirms that he has not filed, caused to be filed, or presently
is a party to any Claim against any Released Party in any forum or form and that
he knows of no facts which may lead to any Claim being filed against any
Released Party in any forum by the undersigned or by any agency or group. 
Except for his final paycheck and other payments and benefits specifically
provided for under this Separation Agreement and Release Agreement, the
undersigned further affirms that he has been paid and/or has received all leave
(paid or unpaid), compensation, wages, bonuses, commissions, and/or benefits to
which he may be entitled and that no other leave (paid or unpaid), compensation,
wages, bonuses, commissions and/or benefits are due to him from any Released
Party. The Company acknowledges that the undersigned may be entitled to
additional payments and benefits after the Effective Date of this Separation
Agreement and Release, specifically those identified in Sections 6(b)(ii), 7, 8,
11, 13 and 16 of the Change in Control Severance Agreement.   The undersigned
furthermore affirms that he has no known workplace injuries or occupational
diseases and has been provided and/or has not been denied any leave requested
under the FMLA.  If any court assumes jurisdiction of any such Claim against any
Released Party on behalf of the undersigned, the undersigned will request such
court to withdraw the matter.

 

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The undersigned further declares and represents that he has carefully read and
fully understands the terms of this Separation Agreement and Release; that he
has been advised and had the opportunity to seek the advice and assistance of
counsel with regard to this Separation Agreement and Release; that he may take
up to and including twenty-one (21) calendar days from receipt of this
Separation Agreement and Release to consider whether to sign it; that he may
revoke this Separation Agreement and Release within seven (7) calendar days
after signing it by delivering to the Company written notification of
revocation; and that he knowingly and voluntarily, of his own free will, without
any duress, being fully informed and after due deliberate action, accepts the
terms of and signs the same as his own free act.

 

II.  Resignation and Severance Compensation. The termination of the undersigned
is effective July 2, 2008 (“Termination Date”).  Accordingly, the undersigned
hereby irrevocably and unconditionally resigns from any officer or director
position he holds within Michaels or any of its subsidiaries or divisions
effective on the Termination Date.  It is stipulated and agreed that the
undersigned’s resignation from the Company is for “Good Reason” (as that term is
defined in Section 1(t) of the Severance Agreement), and that the undersigned is
not obligated to comply with the notice provisions set forth in Section 1(t) of
the Change in Control Severance Agreement. It is further stipulated and agreed
that the Company shall pay, provide and/or grant the undersigned all
compensation and benefits set forth under Section 6(b) of the Change in Control
Severance Agreement.

 

III.  Severance Pay.  Pursuant to Section 6(b)(i) of the Change in Control
Severance Agreement, the Company shall pay a lump-sum payment in the gross
amount of One Million, One Hundred Twenty Two Thousand, Six Hundred Twelve
Dollars and 66/100 ($1,122,612.66), subject to all applicable or customary tax
withholding requirements.

 

IV.  Prorated Annual Bonus. Pursuant to Section 6(b)(ii) of the Change in
Control Severance Agreement, the Company shall pay a lump-sum payment in the
gross amount of Seventy Seven Thousand, Four Hundred Three Dollars and 89/100
($77,403.89), subject to all applicable or customary tax withholding
requirements.

 

V. Continued Welfare and Fringe Benefits.  The undersigned’s welfare and fringe
benefits will continue in accordance with Section 6(b)(iii) of the Change in
Control Severance Agreement.  The undersigned agrees that he will notify the
Company within seven calendar days of becoming eligible under another employer’s
medical and/or welfare benefits plan.  The Company will make a lump-sum payment
in the amount of Two Thousand Seventy Five Dollars and 76/100 ($2,075.76) which
is the equivalent of certain welfare benefits that are unavailable to the
undersigned after the Termination Date.

 

VI.  Savings and Retirement Plan Benefits.  Pursuant to Section 6(b)(v) of the
Change in Control Severance Agreement, the Company will pay a lump-sum payment
in the gross amount of Thirty Six Thousand Dollars and 50/100 ($36,000.50),
subject to all applicable or customary tax withholding requirements.

 

VII.  Outplacement Services.  Pursuant to Section 6(b)(vi) of the Change in
Control Severance Agreement, the Company agrees to reimburse him, or directly
pay expenses, for outplacement services up to $50,000; provided he commences
such services no later than six months following

 

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the Release Effective Date and stops using these services within one year after
the Termination Date.

 

VIII.  Protected Rights.  The Company and the undersigned agree that nothing in
this Separation Agreement and Release is intended to or shall be construed to
affect, limit or otherwise interfere with any non-waivable right of the
undersigned under any Federal, state or local law, including the right to file a
charge or participate in an investigation or proceeding conducted by the Equal
Employment Opportunity Commission (“EEOC”) or to exercise any other right that
cannot be waived under applicable law.  The undersigned is releasing, however,
his right to any monetary recovery or relief should the EEOC or any other agency
pursue Claims on his behalf.  Further, should the EEOC or any other agency
obtain monetary relief on his behalf, the undersigned assigns to the Company all
rights to such relief.

 

IX.  Nonsolicitation/Non-Interference with Business Relationships.  The
undersigned further agrees that for one-year after the Termination Date, he will
not, directly or indirectly, (i) solicit, recruit or hire any person who is at
such time, or who at any time during the six-month period prior to such
solicitation or hiring had been, an employee of, or exclusive consultant then
under contract with, the Company, its subsidiaries, affiliates or divisions
without the Company’s prior written consent; (ii) solicit or encourage any
employee of the Company or its subsidiaries, affiliates and divisions to leave
the employment of the Company or its subsidiaries; (iii) intentionally interfere
with the relationship of the Company or any of its subsidiaries with any
employee of, or exclusive consultant then under contract with, the Company or
any such subsidiary; or (iv) intentionally interfere with, disrupt or attempt to
disrupt any past, present or prospective relationship, contractual or otherwise,
between the Company or any of its subsidiaries, on the one hand, and any of
their respective customers or suppliers, on the other hand.

 

X.  Equitable Remedies.  The undersigned acknowledges that a violation by the
undersigned of any of the covenants contained in Section IX would cause
irreparable damage to the Company and its subsidiaries in an amount that would
be material but not readily ascertainable, and that any remedy at law (including
the payment of damages) would be inadequate.  Accordingly, the undersigned
agrees that, notwithstanding any provision of this Separation Agreement and
Release to the contrary, the Company shall be entitled (without the necessity of
showing economic loss or other actual damage) to injunctive relief (including
temporary restraining orders, preliminary injunctions and/or permanent
injunctions) in any court of competent jurisdiction for any actual or threatened
breach of any of the covenants set forth in Section IX in addition to any other
legal or equitable remedies it may have.

 

XI.  Third-Party Litigation.  The undersigned agrees to be available to the
Company, its affiliates and their attorneys on a reasonable basis in connection
with any pending or threatened claims, charges or litigation in which the
Company or any of its affiliates is now or may become involved, or any other
claims or demands made against or upon the Company or any of its affiliates,
regardless of whether or not the undersigned is a named defendant in any
particular case.

 

XII.  Return of Property.  Unless expressly stated otherwise herein, the
undersigned shall return to the Company on or before the Termination Date, all
property of the Company in the

 

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undersigned’s possession or subject to the undersigned’s control, including
without limitation any keys, credit cards, and files, including all copies.  The
undersigned shall not alter any of the Company’s records or computer files in
any way after the Termination Date.  The Company is allowing the undersigned to
keep his cellular phone and laptop computer, except that all company files on
such computer must be returned to the Company on or before the Termination Date.

 

XIII.  Confidential Information.  The undersigned agrees to hold confidential,
and not to disclose to any person, firm, corporation, partnership or agency, any
trade secret or Confidential Information (as defined below) gained in the course
of the undersigned’s employment with the Company concerning the Company, its
subsidiaries, affiliates, divisions, or employees except if such disclosure is
required by law or legal process. “Confidential Information” shall include,
without limitation, information concerning financial affairs, business plans or
strategies, product pricing information, operating policies and procedures,
vendor information and proprietary statistics or reports.  The undersigned
agrees not to remove any Confidential Information from the Company, not to
request that others do so on the undersigned’s behalf, and to return any
Confidential Information currently in the undersigned’s possession or control to
the Company.

 

XIV.  Stock Options.  In accordance with the Company’s 2006 Equity Incentive
Plan, upon the Termination Date, all unvested stock options granted to the
undersigned by the Company will be forfeited without further action on the part
of any party.

 

XV.  Severability.  If any term or provision of this Separation Agreement and
Release is invalid, illegal or incapable of being enforced by any applicable law
or public policy, all other conditions and provisions of this Separation
Agreement and Release shall nonetheless remain in full force and effect so long
as the economic and legal substance of the transactions contemplated by this
Separation Agreement and Release is not affected in any manner materially
adverse to any party.

 

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XVI.  GOVERNING LAW.  THIS SEPARATION AGREEMENT AND RELEASE SHALL BE DEEMED TO
BE MADE IN THE STATE OF TEXAS, AND THE VALIDITY, INTERPRETATION, CONSTRUCTION
AND PERFORMANCE OF THIS AGREEMENT IN ALL RESPECTS SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF TEXAS WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.

 

Effective on the eighth calendar day following the date set forth below.

 

 

 

MICHAELS STORES, INC.,

 

 

 

By

 

 

 

 

      /s/ Shawn Hearn

 

      Name:  Shawn Hearn

 

      Title:    SVP, Human Resources

 

 

 

EMPLOYEE,

 

 

 

 

  /s/ Thomas M. Bazzone

 

       Thomas M. Bazzone

 

       Date Signed:  7/2/08

 

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ACKNOWLEDGMENTS

 

STATE OF TEXAS

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COUNTY OF DALLAS

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BEFORE ME, the undersigned authority, on this day personally appeared SHAWN
HEARN, SVP - HUMAN RESOURCES of MICHAELS STORES, INC. a Delaware corporation,
known to me to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he executed the same for the purposes and
consideration therein expressed, in the capacity therein stated and as the act
and deed of said corporation.

 

GIVEN MY HAND AND SEAL this 7th day of July, 2008.

 

 

 

Kerri Bates

 

Notary Public in and for the

 

State of Texas

[NOTARY SEAL]

 

 

 

 

 

 

Notary’s Printed Name and

 

Commission Expiration

 

STATE OF TEXAS

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COUNTY OF DALLAS

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BEFORE ME, the undersigned authority, on this day personally appeared THOMAS M.
BAZZONE, known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that he executed the same for the purposes
and consideration therein expressed.

 

GIVEN UNDER MY HAND AND SEAL this 2nd day of July, 2008.

 

 

 

Betty J. Bauerle

 

Notary Public in and for the

 

State of Texas

[NOTARY SEAL]

 

 

 

 

Notary’s Printed Name and

 

Commission Expiration

 

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