Exhibit 10.1

 

MICHAELS STORES, INC.

OFFICER SEVERANCE PAY PLAN

Established April 17, 2008 and Amended as of May 20, 2014, December 9, 2014 and
March 21, 2017

 

I. PURPOSE

 

This Plan has been established by Michaels Stores, Inc. (the “Company”) to
provide certain severance benefits, subject to the terms and conditions set
forth, to designated officers in the event that his/her employment is
permanently terminated as a result of a Qualifying Termination, as described
below.  As a severance pay plan, this Plan is intended to comply with all
applicable requirements of the Employee Retirement Income Security Act of 1974
(“ERISA”) and the regulations promulgated under ERISA for top hat employee
welfare benefit plans and is to be interpreted in a manner consistent with those
requirements.  This document contains the provisions of the Plan and the Summary
Plan Description.  This Plan also is intended to comply with the applicable
requirements of Section 409A (“Section 409A”) of the Internal Revenue Code of
1986 as amended (the “Code”) and is to be interpreted and administered in a
manner consistent with those requirements.

 

II. ELIGIBILITY TO PARTICIPATE

 

In order to be eligible to be a participant in this Plan (a ‘Participant’), an
individual must be employed by the Company in a position with the title of Vice
President (or equivalent, as approved by the Compensation Committee), Senior
Vice President, Executive Vice President, or President.  No other individual
will be considered a Participant. 

 

III.  QUALIFICATIONS FOR RECEIPT OF PLAN BENEFITS

 

In order to qualify for benefits under this Plan, a Participant must meet all of
the following qualifications:  (A) must have a Qualifying Termination, as
defined in Section IV below; (B) must not be eligible for severance pay or other
termination benefits  under any other severance pay plan or under any employment
agreement or other agreement with the Company or any of its Affiliates
(including without limitation a change-of-control or like agreement) at the time
of the Qualifying Termination;  (C) must sign and return, following the
Termination Date, a timely and effective separation agreement and release of
claims in the form attached to this Plan and marked “Exhibit A” (the “Agreement
and Release”); and (D) must comply with the post-employment obligations set
forth in Section VII(B) of this Plan.

 

1

 

--------------------------------------------------------------------------------

 

IV.QUALIFYING TERMINATION

 

A Participant's termination of employment is a Qualifying Termination only if
all of the following requirements are met and such termination is not enumerated
in the list of exclusions in Section V:

 

A.

The Participant is on the active payroll or is on an approved leave of absence
with a right to reinstatement at the time employment terminates;

 

B.

the Participant's employment is terminated by the Company other than for “Cause”
(as hereafter defined) and other than as a result of death or Disability;

 

C.

the Participant is not offered other employment with (1) an Affiliate of the
Company (as hereafter defined), (2) a successor of the Company (a “Successor”)
or (3) a purchaser of some or all of the assets of the Company (a “Purchaser”)
(a) in a position which the Participant is qualified to perform regardless of
whether the Participant is subject to, among other things, a new job title,
different reporting relationships or a modification of Participant’s duties and
responsibilities, (b) that, when compared with the Participant’s last position
with the Company, provides a comparable base salary and bonus opportunity, and
(c) there is no change in Participant’s principal place of employment to a
location more than  35 miles from the Participant’s principal place of
employment immediately prior to the Qualifying Termination;

 

D.

the Participant has not accepted employment, in any position, with an Affiliate,
a Successor or a Purchaser at the time he or she otherwise qualifies for
benefits under this Plan; and

 

E.

the Participant continues employment until the termination date designated by
the Company or such earlier date to which the Company agrees; and, during the
period from the date the Participant receives notice of termination until the
Termination Date, the Participant continues to perform to the reasonable
satisfaction of the Company.

 

V.  EXCLUSIONS

 

The following are examples of events which would not be a Qualifying Termination
under this Plan. This is not an exclusive list.

 

A.

The Participant resigns, retires or otherwise voluntarily leaves his/her
employment with the Company; or

 

B.

the Participant's employment terminates as a result of death or Disability; or

 

C.

the Participant's employment is terminated by the Company for Cause; or

 

2

 

--------------------------------------------------------------------------------

 

D.

the Participant is offered other employment with an Affiliate, Successor or a
Purchaser in a position that he or she is qualified to perform, with a
comparable base salary and bonus opportunity and there is no change in
Participant’s principal place of employment to a location more than  35 miles
from the Participant’s principal place of employment immediately prior to the
Qualifying Termination; or

 

E.

the Participant accepts any employment with an Affiliate, a Successor or a
Purchaser.

 

VI.  BENEFITS UNDER THE PLAN  

 

A. As the sole benefits under this Plan and subject to all Plan terms and
conditions, a Participant will be entitled to the following:

 

(1)   Severance Pay:

 

(a)   A Participant in the position of Vice President (or equivalent, as
approved by the Compensation Committee) at the time of a Qualifying Termination
who has less than two years of service from his/her most recent date of hire by
the Company will be eligible for six (6) months of severance pay and such a
Participant with two or more years of service from his/her most recent date of
hire by the Company will be eligible for twelve (12) months of severance pay.

 

(b)   A Participant in the position of Senior Vice President, Executive Vice
President or President at the time of a Qualifying Termination who has less than
two years of service from his/her most recent date of hire by the Company will
be eligible for twelve (12) months of severance pay and such a Participant with
two or more years of service from his/her most recent date of hire by the
Company will be eligible for eighteen (18) months of severance pay.

 

(c)   One month of severance pay is equal to one-twelfth (1/12th) of a
Participant's base salary at the annual rate in effect at the time termination
occurs.  Automobile allowance, if applicable, is not included in severance pay
nor is it considered part of a Participant’s base salary.

 

(d)   Years of service means the total number of consecutive completed years of
service with the Company.

 

(e)   “Severance Period” means the period during which a Participant receives
severance pay pursuant to Section VI(A)(1)(a) or (b) above.

 

(2)   Pro-Rated Annual Bonus:

 

Provided that the Participant is participating in a Company executive annual
bonus plan for the fiscal year in which the Participant has a Qualifying
Termination hereunder, the Participant shall be entitled to receive a pro-rated
annual bonus, if earned based on actual performance for the full fiscal year,
based upon the number

3

 

--------------------------------------------------------------------------------

 

of full months that the Participant was employed by the Company during such
fiscal year, to be paid as provided for in Section VI(B).  Participants whose
Termination Date occurs before the 15th of a month will not receive credit for
that month.  Participants whose Termination Date occurs on or after the 15th of
a month will receive credit for that month.  For avoidance of doubt, for a
Participant eligible to receive a pro-rated earned annual bonus pursuant to this
Section VI(A)(2), the individual performance appraisal portion of the
Participant's bonus will be calculated based upon the Company’s lowest merit
eligible rating.

 

(3)   Welfare Benefits:

 

(a)   In the event of a Qualifying Termination hereunder, the Participant shall
be entitled to receive during the Severance Period cash welfare benefit payments
(“Welfare Benefit Payments”).

 

(b)   The Welfare Benefit Payments shall be paid at a rate equal to (i) the
Company-paid portion of the group medical and dental plan premiums in effect for
the Participant (and his/her spouse and dependents, as applicable) immediately
prior to the Termination Date, as pro-rated for each payroll period, multiplied
by (ii) 130%.

 

(c)   Except for any right the Participant may have under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) to elect to
continue participation in the Company’s group medical, vision, and dental plans
at the Participant’s sole cost and expense, the Participant’s (and his/her
spouse’s and eligible dependents’, as applicable) participation in all employee
benefit plans of the Company shall terminate in accordance with the terms of the
applicable benefit plans as of the Termination Date, without regard to any
continuation of base salary, Welfare Benefit Payments, or other payment to the
Participant following termination.

 

B.   Benefits payable to a Participant under Section VI(A) shall be reduced by
all taxes and other amounts that are required to be withheld under applicable
law.  Severance pay under Section VI(A)(1), which shall be payable in the form
of salary continuation, and Welfare Benefit Payments under Section VI(A)(3)
shall be paid at the Company's regular payroll periods and in accordance with
its regular payroll practices, commencing on the next regular payday which is at
least five (5) business days following the effective date of the Agreement and
Release, subject to Sections VI(C) and VII(A)(5), but the first payment shall be
retroactive to the day immediately following the Termination Date.  Any earned
pro-rated annual bonus for which a Participant is eligible under Section
VI(A)(2) shall be payable, subject to Sections VI(C) and VII(A)(5), on the later
of the date annual bonuses are paid to all active bonus participants including
active officers, in the bonus plan for the fiscal year in which Participant has
a Qualified Termination or the next regular payday which is at least five (5)
business days following the effective date of the Agreement and Release.

 

4

 

--------------------------------------------------------------------------------

 

C.Notwithstanding the foregoing, if at the time of the Participant's separation
from service, the Participant is a “specified employee,” as hereinafter defined,
any and all amounts payable under this Section VI in connection with such
separation from service that constitute deferred compensation subject to Section
409A, as determined by the Company in its sole discretion, and that would (but
for this sentence) be payable within six (6) months following such separation
from service, shall instead be paid on the date that follows the date of such
separation from service by six (6) months.  For purposes of the preceding
sentence, “separation from service” shall be determined in a manner consistent
with subsection (a)(2)(A)(i) of Section 409A and the term “specified employee”
shall mean an individual determined by the Company to be a specified employee as
defined in subsection (a)(2)(B)(i) of Section 409A.

 

VII.CONDITIONS OF RECEIVING PLAN BENEFITS

 

A.  The Agreement and Release. 

 

(1)

A Participant who has been informed that he/she will be subject to a Qualifying
Termination will be provided by the Company an Agreement and Release in the form
of attached to this Plan as Exhibit A.  In order to qualify for benefits under
this Plan, the Participant must sign, date and return the Agreement and Release
in a timely manner and it must become effective in accordance with its terms and
this Plan.  The Agreement and Release must be signed and returned no earlier
than the day immediately following the Termination Date and no later than the
twenty-first (21st) calendar day following the Termination Date, except in the
event that a Participant who is age 40 or older has a Qualifying Termination
that is part of a Termination Program, as provided in Section VII(A)(2),
immediately below.

 

(2)

In the event that a Participant who is age 40 or older is subject to a
Qualifying Termination in conjunction with one or more other Participants as a
result of a reorganization or a reduction in force or other involuntary
termination program (a “Termination Program”), the Company will provide the
Participant a memorandum containing information regarding the job titles and
ages of those selected, and those not selected, for the Termination Program in
accordance with the federal Older Workers Benefit Protection Act (the “OWBPA
Memorandum”).  Such a Participant will be entitled to consider the Agreement and
Release for forty-five (45) calendar days following the later of the
Participant’s Termination Date or the date the Participant receives the OWBPA
Memorandum.  In order to qualify for benefits under this Plan, the Participant
must sign and return the Agreement and Release after both the Participant’s
Termination Date and the Participant’s receipt of the OWBPA Memorandum have
occurred, but no later than the forty-fifth (45th) calendar day following
his/her Termination Date or the date s/he receives the OWBPA Memorandum,
whichever occurs second.  

5

 

--------------------------------------------------------------------------------

 

 

(3)

A Participant who is age 40 or older on his/her Termination Date, regardless of
whether the Participant is entitled to a twenty-one (21) calendar day
consideration period under Section VII(A)(1) or a forty-five (45) calendar day
consideration period under Section VII(A)(2), may revoke the Agreement and
Release at any time during the seven calendar day period that immediately
follows the date the Participant signs the Agreement and Release, provided that
the Participant sends a written notice of revocation to the Senior Vice
President, Human Resources during that seven (7) calendar day period.  In the
event the Participant revokes the Agreement and Release in writing in a timely
manner, the Agreement and Release shall be void and of no force or effect and
the Participant shall not be eligible to receive benefits of any kind under this
Plan.  If the Participant does not revoke the Agreement and Release, it will
take effect on the eighth calendar day following the date of the Participant’s
signing. 

 

(4)

In the case of a Participant who is less than age 40 on his/her Termination
Date, the Agreement and Release will take effect on the date the Participant
signs and returns the Agreement and Release to the Company.   

 

(5)

Subject to the terms and conditions of this Plan, including, without limitation,
Section VI(C) and this Section VII(A), any payments, including any provision or
continued benefits, made under this Plan (whether such payments or benefits are
paid or provided, in whole or in part, pursuant to this Plan or in conjunction
with any other agreement, arrangement or policy) which the Company determines
constitute nonqualified deferred compensation subject to Section 409A and that
would otherwise be paid during the sixty (60) day period following a
Participant’s Qualifying Termination shall instead be accumulated and paid, if
at all, subject to the Participant’s having previously and timely signed,
returned, and not revoked the Agreement and Release, on the next regular payday
after the sixtieth (60th) day following the Participant’s Qualifying
Termination.  For the avoidance of doubt, the required delay described in the
immediately preceding sentence shall not apply to any amounts that are exempt
from Section 409A (for example, but without limitation, by reason of the
separation-pay-plan exemption at Section 1.409A-1(b)(9)(iii) of the Treasury
Regulations under Section 409A).

 

(6)

Please Note:  The Agreement and Release contains legally binding obligations and
the Company advises each Participant to consult an attorney before signing the
Agreement and Release. 

 

B.  Post-Employment Restrictions.

6

 

--------------------------------------------------------------------------------

 

 

(1)  Introduction.  In order to qualify for receipt of benefits under this Plan,
in addition to other qualifications set forth in this Plan, the Participant must
comply fully with all of the obligations set forth in this Section VII(B) (the
“Post-Employment Restrictions”) from and after the date the Participant is
informed of the Company's decision to terminate his/her employment in a
Qualifying Termination.

 

a)

Non-Compete.  Until the expiration of the later of (i) the period of severance
pay provided to the Participant under this Plan; or (ii) twelve (12) months
following the Termination Date (in the aggregate, the “Restricted Period”), with
such Restricted Period to be tolled on a day-to-day basis for each day during
which the Participant participates in any activity in violation of the
restrictions set forth in this Section VII(B)(1)(a), the Participant will not,
directly or indirectly, alone or in association with others, anywhere in the
Territory, own, manage, operate, control or participate in the ownership,
management, operation or control of, or be connected as an officer, employee,
investor, principal, joint venturer, shareholder, partner, director, consultant,
agent or otherwise with, or have any financial interest (through stock or other
equity ownership, investment of capital, the lending of money or otherwise) in,
any business, venture or activity that directly or indirectly competes, or is in
planning, or has undertaken any preparation, to compete, with the Business of
the Company or any of its Immediate Affiliates (any Person who engages in any
such business venture or activity, a “Competitor”), except that nothing
contained in this Section VII(B)(1)(a) shall prevent the Participant’s wholly
passive ownership of two percent (2%) or less of the equity securities of any
Competitor that is a publicly-traded company.  For purposes of this Section
VII(B)(1), “Business of the Company or any of its Immediate Affiliates” is that
of arts and crafts, or framing specialty retailer or wholesaler providing
materials, ideas and education for creative activities, or framing, as well as
any other business that the Company or any of its Immediate Affiliates conducts
or is actively planning to conduct at any time during the twelve (12) months
immediately preceding the Termination Date; provided, that the term “Competitor”
shall not include any business, venture or activity whose gross receipts derived
from the retail or wholesale sale of arts and crafts, or framing products and
services (aggregated with the gross receipts derived from the retail and
wholesale sale of such products or any related business, venture or activity)
are less than ten percent (10%) of the aggregate gross receipts of such
businesses, ventures or activities. For purposes of this Section VII(B)(1)(a),
 the “Territory” is comprised of those states within the United States and those
provinces of Canada, and any other geographic area in which the Company or any
of its Immediate Affiliates was doing business or actively planning to do
business at any time during the twelve (12) months immediately preceding the
Termination Date. 

 

b)

Non-Solicitation of Employees and Contractors. The Participant must agree that
during the Restricted Period, with such Restricted Period to be tolled on a

7

 

--------------------------------------------------------------------------------

 

day-to-day basis for each day during which the Participant participates in any
activity in violation of the restrictions set forth in this Section
VII(B)(1)(b), the Participant shall not, and shall not assist any other Person
to, (x) hire or solicit for hire any employee of the Company or any of its
Immediate Affiliates or seek to persuade any employee of the Company or any of
its Immediate Affiliates to discontinue employment or (y) solicit or encourage
any independent contractor providing services to the Company or any of its
Immediate Affiliates to terminate or diminish its relationship with them;
provided, however, that these restrictions shall apply only with respect to
employees of, and independent contractors providing services to, the Company or
one of its Immediate Affiliates, who were doing such on the Termination Date or
at any time during the nine (9) months immediately preceding the Termination
Date.

 

 

c)

Non-Solicitation of Distributors and Vendors. The Participant must agree that
during the Restricted Period, with such Restricted Period shall be tolled on a
day-to-day basis for each day during which the Participant participates in any
activity in violation of the restrictions set forth in this Section
VII(B)(1)(c), the Participant shall not directly or indirectly solicit or
encourage any distributor or vendor to the Company or any of its Immediate
Affiliates to terminate or diminish its relationship with the Company or any of
its Immediate Affiliates; provided, however, that these restrictions shall apply
only with respect to those distributors and vendors who are doing business with
the Company or any of its Immediate Affiliates on the Termination Date or at any
time during the twelve (12) months immediately preceding the Termination Date.

 

d)

Remedies.  In the event of a breach or threatened breach by the Participant of
any of the covenants contained in Sections VII(A)(1), (B)(1)(a) -(c) or the
Company’s confidential information (as further set forth in Exhibit A), in
addition to any remedies available to the Company pursuant to any other
agreement between the Participant and the Company, the Company shall be entitled
to:

 

(i)

immediately terminate Participant’s right to receive any further severance
benefits under Section VI(A) above;

 

(ii)

seek reimbursement for the severance benefits provided to Participant under
Section VI, except for the first installment of severance pay pursuant to
Section VI(A)(1); and

 

 

(iii)

seek, in addition to other available remedies, a temporary or permanent
injunction from a court of law or other equitable relief

8

 

--------------------------------------------------------------------------------

 

against such breach or threatened breach, without the necessity of showing any
actual damages or that money damages would not afford an adequate remedy, and
without the necessity of posting any bond or other security. The aforementioned
equitable relief shall be in addition to, not in lieu of, legal remedies,
monetary damages or other available forms of relief.

 

VIII.TERMINATION OF PLAN BENEFITS

 

Notwithstanding anything to the contrary contained in this Plan, benefits for
which a Participant has qualified and is receiving under this Plan shall
terminate under the following circumstances:

 

A.

If the Participant accepts employment with the Company or one of its Affiliates,
a Successor or a Purchaser after qualifying for benefits under this Plan, all
such benefits shall cease as of the date the Participant commences such
employment.

 

B.

In the event that the Company determines that the Participant has breached the
Agreement and Release or has violated any obligation under Section VII hereof or
otherwise breached any material provision of any written agreement with the
Company or any of its Affiliates.  Further, in case of a breach, the Company may
seek reimbursement for severance pay and the severance benefits already paid or
provided to Participant, except for the first installment of severance pay.  In
addition, the Company may offset any such severance benefits already provided to
Participant against any remuneration owed by the Company to the Participant.

 

C.

As set forth in Section VII(B)(1)(d).

 

 

IX. GENERAL INFORMATION CONCERNING THE PLAN

 

 

A.

The Company pays the full cost of benefits provided under this Plan from its
general assets and the right of a Participant to receive any payment hereunder
shall be an unsecured claim against the general assets of the Company.  The Plan
at all times shall be entirely unfunded.  

 

B.

Notwithstanding anything to the contrary contained herein, benefits to which a
Participant is otherwise entitled under this Plan shall be reduced by any other
payments or benefits to which the Participant is entitled under applicable law
as a result of termination of his/her employment, including without limitation
any federal, state or local law with respect to plant closings, mass layoffs or
the like, but exclusive of any unemployment benefits to which the Participant is
entitled under applicable law.

 

9

 

--------------------------------------------------------------------------------

 

C.

Benefits under this Plan are not assignable or subject to alienation. Likewise,
benefits are not subject to attachments by creditors or through legal process
against the Company or any employee or any person claiming through an employee.

 

D.

Notwithstanding anything to the contrary contained herein, any and all payments
to be provided hereunder to or on behalf of any Participant are subject to
reduction to the extent required by applicable statutes, regulations, rules and
directives of federal, state and other governmental and regulatory bodies having
jurisdiction over the Company.

 

E.

This Plan does not constitute a contract of employment for a specific term or
otherwise alter the at-will nature of the employment relationship between any
employee and the Company or any of its Affiliates.

 

X.  DEFINITIONS

 

Words or phrases, which are initially capitalized or within quotation marks
shall have the meanings provided in this Section X and as provided elsewhere in
this Plan. For purposes of this Plan, the following definition applies:

 

A.

An “Affiliate” means an individual, corporation and other entity directly or
indirectly controlling, controlled by or under common control with the Company,
where control may be by management authority, equity interest or otherwise.

 

B.

“Cause” shall mean the following events or conditions, as determined by the
Board of Directors of the Company in its reasonable judgment:  (i) the
Participant's refusal or failure to perform (other than by reason of
disability), or material negligence in the performance of his or her duties and
responsibilities to the Company or any of its Affiliates, or refusal or failure
to follow or carry out any reasonable direction of the Board of Directors of the
Company, and the continuance of such refusal, failure or negligence for a period
of ten (10) calendar days after written notice delivered by the Company to the
Participant that specifically identifies the manner in which the Participant has
failed to perform his or her duties; (ii) the material breach by the Participant
of any provision of any material agreement between the Participant and the
Company or any of its Affiliates; (iii) fraud, embezzlement, theft or other
dishonesty by the Participant with respect to the Company or any of its
Affiliates; (iv) the conviction of, or a plea of guilty or nolo contendere by,
the Participant to any felony or any other crime involving dishonesty or moral
turpitude; (v) any other conduct that involves a breach of fiduciary duty to the
Company on the part of the Participant; or (vi) Participant’s violation of a
Company policy, rule or code of conduct that could expose the Company to civil
or criminal liability or pose a risk of damaging the Company’s business or
reputation. 

 

C.

“Disability” means a Participant's mental or physical impairment that has
prevented the Participant from performing substantially all of the duties and
responsibilities of his/her

10

 

--------------------------------------------------------------------------------

 

position for at least 180 days in any 365 consecutive days, as a result of which
employment is terminated by the Company.   

 

D.

“Immediate Affiliates” means those Affiliates which are one of the following:
(i) a direct or indirect subsidiary of the Company, (ii) a direct or indirect
parent of the Company or (iii) a direct or indirect subsidiary of such a parent.

 

E.

“Person” means an individual, a corporation, a limited liability company, an
association, a partnership, an estate, a trust and any other entity or
organization, other than the Company or any of its Affiliates.

 

F.

“Termination Date” means the date on which the Participant's employment with the
Company terminates.

 

 

XI. ADMINISTRATION, CLAIMS PROCEDURE AND GENERAL INFORMATION

 

A.

The Company reserves the right to amend, modify and terminate this Plan at any
time by a written instrument signed by the Board or its designee. There are no
vested benefits under this Plan. Also, the Company, as the Plan administrator
within the meaning of ERISA, reserves full discretion to administer the Plan in
all of its details, subject to the requirements of law. Company shall have such
discretionary powers as are necessary to discharge its duties. Any
interpretation or determination that the Company makes regarding this Plan,
including without limitation determinations of eligibility, participation and
benefits, will be final and conclusive, in the absence of clear and convincing
evidence that the Company acted arbitrarily and capriciously.

 

B.

Anyone who believes he/she is being denied any rights under this Plan may file a
claim in writing with the Company, as Plan administrator, addressed to the
attention of the Senior Vice President, Human Resources. If the claim is denied,
in whole or in part, the Plan administrator will notify the claimant in writing,
giving the specific reasons for the decision, including specific reference to
the pertinent Plan provisions and a description of any additional material or
information necessary to perfect the claim and an explanation of why such
material or information is necessary. The written notice will also advise the
claimant of his/her right to request a review of the claim and the steps that
need to be taken if the claimant wishes to submit the claim for review. If the
Plan administrator does not notify the claimant of its decision within 90
calendar days after it had received the claim (or within 180 calendar days, if
special circumstances exist requiring additional time, and if the claimant had
been given a written explanation for the extension within the initial
90-calendar day period), the claimant should consider the claim to have been
denied. At this time the claimant may request a review of the denial of his/her
claim.

 

C.

A request for review must be made in writing by the claimant or his/her duly
authorized representative to the Company, as Plan administrator, within 60
calendar days after receipt of notice of denial. As part of the claimant's
request, the claimant may submit written issues and comments to the Plan
administrator, review pertinent documents, and

11

 

--------------------------------------------------------------------------------

 

request a hearing. The Plan administrator's written decision will be made within
60 calendar days (or 120 calendar days if a hearing is held or if other special
circumstances exist requiring more than 60 calendar days and written notice of
the extension is provided to the claimant within the initial 60-calendar day
period) after the claimant's request has been received. Again, the decision will
include specific reasons, including references to pertinent Plan provisions.

 

12

 

--------------------------------------------------------------------------------

 

Exhibit A

 

AGREEMENT AND RELEASE

13

 

--------------------------------------------------------------------------------

 

SEVERANCE AGREEMENT AND RELEASE OF CLAIMS

 

 

I, ________________, the undersigned, am entering into this Separation Agreement
and Release of Claims (this "Agreement") with Michaels Stores, Inc. (the
"Company").

 

WHEREAS, I was employed by the Company as ____________ and, in that position,
was a Participant, as defined in the Michaels Stores, Inc. Severance Pay Plan
(the “Plan”); and

 

WHEREAS, the termination of my employment with the Company on __________ (the
"Separation Date") is a Qualifying Termination for purpose of the Plan; and

 

WHEREAS, my acceptance of this Agreement in a timely and effective manner and my
meeting of my obligations under it are conditions to my eligibility to receive
severance benefits as defined in this Agreement and under the Plan, to which I
would not otherwise be entitled; and

 

NOW, THEREFORE, in consideration of the foregoing premises and for the purpose
of qualifying for severance benefits in accordance with this Agreement and under
the Plan, I agree with the Company as follows:

 

1.Definitions.  Capitalized terms used in this Agreement shall have the
respective meanings set forth below or elsewhere in this Agreement.  Any
capitalized term not defined in this Agreement shall have the meaning ascribed
to it in the Plan.  Certain definitions from the Plan are reproduced below for
the convenience of the parties.

 

(a)

An "Affiliate" means an individual, corporation or other entity directly or
indirectly controlling, controlled by or under common control with the Company,
where control may be by management authority, equity interest or otherwise.

 

(b)

"Confidential Information" means, without limitation, such information relating
to (i) the development, research, testing, manufacturing, marketing and
financial activities of the Company and its Affiliates, (ii) the products and
services of the Company and its Affiliates, (iii) the costs, sources of supply,
financial performance and strategic plans of the Company and its Affiliates,
(iv) the identity and special needs of the customers of the Company and its
Affiliates and (v) the people and organizations with whom the Company and its
Affiliates have business relationships and those relationships.  Confidential
Information also includes any information that the Company or any of its
Affiliates have received, or may receive hereafter, belonging to customers or
others with any understanding, express or implied, that the information would
not be disclosed.  Confidential Information does not include information that
has entered the public domain other than through my disclosure in violation of
my obligations to the

14

 

--------------------------------------------------------------------------------

 

Company or any of its Affiliates under this Agreement or otherwise or through a
third party in violation of a duty of confidentiality owed to the Company or any
of its Affiliates.

 

(c)

"Immediate Affiliates" means those Affiliates which are one of the following:
(i) a direct or indirect subsidiary of the Company, (ii) a direct or indirect
parent to the Company or (iii) a direct or indirect subsidiary of such a parent.

 

(d)

"Person" means an individual, a corporation, a limited liability company, an
association, a partnership, an estate, a trust or any other entity or
organization, other than the Company or any of its Affiliates.

 

2.Severance Benefits under this Agreement and under the Plan.  Subject to the
terms and conditions of this Agreement and pursuant to Section VI of the Plan, I
will be eligible for (a) ___________ (__) months of severance pay in the form of
base salary continuation, payable in accordance with the Company’s regular
payroll practices and shall be reduced by all taxes and other amounts that are
required to be withheld under applicable law or as provided for in the Plan, (b)
a pro-rated annual bonus for fiscal year 20__, if earned based on actual
performance for the full fiscal year, calculated for the period to the
Separation Date, and calculated based upon the Company’s lowest merit eligible
rating, payable on the date annual bonuses are paid to participants including
active officers, in the Company’s Bonus Plan for fiscal year 20__, (c)
outplacement services by the Company selected vendor, Right Management, for a
pre-determined value approved by the Company; provided I initiate procuring such
services no later than ninety (90) days after the Separation Date and such
services are completed within one year following the Separation Date, and (d)
payments (“Welfare Benefit Payments”) during the Severance Pay Period equal to
the Company-paid portion of the premium cost of my participation and that of my
spouse and eligible beneficiaries, if any, in the group medical and dental plans
of the Company, as pro-rated for each payroll period, multiplied by 130% (all of
the foregoing, the “Severance Benefits”).  Participation in all other benefits
plans shall end as of the Separation Date.  The period commencing on the
Separation Date and continuing until the expiration of a number of months equal
to the period of severance pay for which I may qualify under the Plan (as set
forth in the immediately preceding sentence) is the "Severance Pay Period."  I
understand that my executing, and not revoking, this Agreement is the material
inducement of, and condition to, the Company offering the Severance Benefits.

 

3. Timing and Certain Conditions to Receipt of Severance Benefits:

 

(a)

Commencement of Obligations under this Agreement. It is expressly understood and
agreed that my obligations under Section 7 and Section 8 of this Agreement shall
commence on the earlier to occur of the Separation Date or the date I first
receive this Agreement (the "Commencement Date"), although the Commencement Date
shall be no earlier than the date I am first

15

 

--------------------------------------------------------------------------------

 

informed of the termination of my employment.  Without limiting the generality
of the foregoing, I understand that I must comply with these obligations even
before the effective date of this Agreement in order to be eligible to accept
this Agreement and receive the Severance Benefits, and that I may only sign this
Agreement on or after the Separation Date.   If I fail to comply in full with
any of my obligations under Section 7 or Section 8 of this Agreement at any time
from the Commencement Date through the effective date of this Agreement, the
offer and provision of the Severance Benefits shall automatically cease, and the
Company shall be relieved of  its obligations under Section 2 of this Agreement,
except as provided for herein in this Section, and may, in addition to any other
remedies available to it, seek reimbursement for Severance Benefits already
paid.  Nonetheless, I acknowledge that I shall be entitled to keep the first
installment of severance payments described in Section 2(a) that are paid under
the terms of this Agreement.  Further, and in addition to seeking reimbursement
as referenced in this Section 3(a), in the event of any such failure to comply
with my obligations hereunder, the Company may offset any such Severance
Benefits already provided to me against any benefits or amounts owed to me by
the Company under the Surviving Agreements, as defined in Section 11(a)
(excluding, for the avoidance of doubt, any final compensation described in
Section 4(a) of this Agreement), to the extent (i) that such benefits or amounts
are not otherwise fully vested thereunder and (ii) permitted by applicable law.

   

(b)

Obligations as a Condition of Receipt of Severance Benefits.  The obligation of
the Company to make payments and provide benefits to me in accordance with this
Agreement and under the Plan is expressly conditioned on my continued full
performance of my obligations under this Agreement, including without limitation
under Section 7 and Section 8 hereof. 

 

4. Acknowledgement of Full Payment.    

 

(a)

I acknowledge that, except for (x) wages due to me through the Separation Date
only as they relate to the pay period on which the Separation Date falls, and
(y)  the unpaid reimbursement of business expenses incurred by me prior to the
Separation Date which are properly documented and submitted to the Company
within five (5) days after Separation Date; each of which shall be paid
according to the Company’s standard payroll practices within six (6) days
following the Separation Date (or with respect to (y), within thirty (30) days
of my submission of such expenses and any necessary documentation and
substantiation), I have been paid in full any and all compensation due me from
the Company or any of its Affiliates, whether for services provided or
otherwise, through the Separation Date and that, exclusive of any Severance
Benefits for which I qualify in accordance with the terms and conditions of this
Agreement and under the Plan, as set forth in Section 2 of this Agreement,
nothing further is owed to me.  Without limiting the generality of the foregoing
acknowledgement, I specifically acknowledge, except as set forth in

16

 

--------------------------------------------------------------------------------

 

this Section 4(a),  that I have received (i) all wages due through the
Separation Date, (ii) reimbursement for any business expenses I had incurred
through the Separation Date that are eligible for reimbursement under applicable
Company policies, and (iii) payment of all bonus or other incentive compensation
due me, exclusive only of any pro-rated earned bonus for which I may be eligible
under this Agreement or under the Plan for the year in which my employment with
the Company terminated.   

 

(b)

I also represent and warrant that I am not entitled to any payments (in cash or
equity) or any other benefits under any representation, agreement or
understanding, whether oral or written, or any plan, program or arrangement of
any kind, with the Company or any of its Affiliates as a result of the
termination of my employment and I hereby waive irrevocably any such
entitlement, should it exist, except as provided for in this Agreement. 

 

5.Reduction of Severance Benefits for Certain Statutory Payments. I acknowledge
that Severance Benefits to which I may otherwise be entitled under this
Agreement or under Plan shall be reduced by any payments or benefits to which I
may be entitled under applicable law as a result of termination of my
employment, including without limitation any federal, state or local law with
respect to plant closings, mass layoffs or group benefit plan continuation
following termination or the like, but excluding any unemployment benefits to
which I may be eligible under applicable law.

 

6.Status of Employee Benefits, Paid Time Off and Stock Options.   Except for any
right I may have provided under Section 2 of this Agreement or any right I may
have under the federal law known as “COBRA” to continue my participation and
that of my qualified beneficiaries in any Company plan to which COBRA is
applicable (such as, by way of example only, a dental or vision plan, if made
available by the Company) following the Separation Pay Period, my participation
in all Company employee benefit plans will end as of the Separation Date, in
accordance with the terms of those plans.  I also acknowledge that I will not
earn paid time off or other similar benefits after the Separation Date.  My
rights and obligations with respect to any equity granted to me by the Company
or any of its Immediate Affiliates which had vested as of the Separation Date,
if any, shall be governed by any applicable equity participation plans and any
agreements and other requirements and limitations applicable to such equity or
to Company employees who have been granted equity in connection with their
employment.  All equity granted to me by the Company which remained unvested as
of the Separation Date shall have been cancelled and shall have terminated as of
that date.  

 

7. Ancillary Covenants.  The covenants set forth below are ancillary to this
Agreement with the Company, which concerns the termination of my employment and
my qualification for the Severance Benefits.  My acceptance of these covenants
and my complying with my obligations under them are a condition to my
eligibility to receive the Severance Benefits.

 

 

17

 

--------------------------------------------------------------------------------

 

(a)

Acknowledgement of the Company's Interest and the Adequacy of the Consideration
for the Covenants.  I acknowledge the importance to the Company and its
Immediate Affiliates of protecting their legitimate business interests,
including without limitation the valuable Confidential Information (as defined
in Section 1 above) and goodwill that they have developed or acquired at
considerable expense.  I acknowledge that, in my employment with the Company,
the Company has granted me access to Confidential Information that, if it were
disclosed, would assist in competition against the Company and its Affiliates,
including without limitation proprietary customer information, and that I also
have generated goodwill for the Company and its Affiliates in the course of my
employment.  I further acknowledge and I agree that the restrictions on my
activities set forth below are necessary to protect the goodwill, Confidential
Information and other legitimate interests of the Company and its Affiliates and
that my acceptance of these restrictions is a condition of my receipt of the
Severance Benefits, to which I would not otherwise be entitled, and such
Severance Benefits, together with the access to Confidential Information granted
to me by the Company and other good and valuable consideration,  are good and
sufficient consideration to support my agreement to and compliance with these
covenants.

 

 

(i)

Non-Compete.  From the Commencement Date until the expiration of the later of
(i) the Severance Pay Period; or (ii) twelve (12) months following the
Separation Date (in the aggregate, the “Restricted Period”), with such
Restricted Period to be tolled on a day-to-day basis for each day during which I
participate in any activity in violation of the restrictions set forth in
herein, I will not, directly or indirectly, alone or in association with others,
anywhere in the Territory, own, manage, operate, control or participate in the
ownership, management, operation or control of, or be connected as an officer,
employee, investor, principal,  joint venturer, shareholder, partner, director,
consultant, agent or otherwise with, or have any financial interest (through
stock or other equity ownership, investment of capital, the lending of money or
otherwise) in, any business, venture or activity that directly or indirectly
competes, or is in planning, or has undertaken any preparation, to compete, with
the Business of the Company or any of its Immediate Affiliates (any Person who
engages in any such business venture or activity, a “Competitor”), except that
nothing contained in this Section 7(a)(i) shall prevent my wholly passive
ownership of two percent (2%) or less of the equity securities of any Competitor
that is a publicly-traded company.  For purposes of this Section 7(a)(i),
“Business of the Company or any of its Immediate Affiliates” is that of arts and
crafts, or framing specialty retailer or wholesaler providing materials, ideas
and education for creative activities, or framing, as well as any other business
that the Company or any of its Immediate Affiliates conducts or is actively
planning to

18

 

--------------------------------------------------------------------------------

 

conduct at any time during the twelve (12) months immediately preceding the
Separation Date; provided, that the term “Competitor” shall not include any
business, venture or activity whose gross receipts derived from the retail or
wholesale sale of arts and crafts, or framing products and services (aggregated
with the gross receipts derived from the retail and wholesale sale of such
products or any related business, venture or activity) are less than ten percent
(10%) of the aggregate gross receipts of such businesses, ventures or
activities. For purposes of this Section 7(a)(i), the “Territory” is comprised
of those states within the United States, those provinces of Canada, and any
other geographic area in which the Company or any of its Immediate Affiliates
was doing business or actively planning to do business at any time during the
twelve (12) months immediately preceding the Separation Date.  

 

(ii)

Non-Solicitation of Employees and Contractors. During the Restricted Period,
with such Restricted Period to be tolled on a day-to-day basis for each day
during which I participate in any activity in violation of the restrictions set
forth in this Section 7(a)(ii), I shall not, and shall not assist any other
Person to, (x) hire or solicit for hire any employee of the Company or any of
its Immediate Affiliates or seek to persuade any employee of the Company or any
of its Immediate Affiliates to discontinue employment or (y) solicit or
encourage any independent contractor providing services to the Company or any of
its Immediate Affiliates to terminate or diminish its relationship with them;
provided, however, that these restrictions shall apply only with respect to
employees of, and independent contractors providing services to, the Company or
one of its Immediate Affiliates, who were doing such on the Separation Date or
at any time during the nine (9) months immediately preceding the Separation
Date.

(iii)

Non-Solicitation of Distributors and Vendors.  During the Restricted Period,
with such Restricted Period to be tolled on a day-to-day basis for each day
during which I participate in any activity in violation of the restrictions set
forth in this Section 7(a)(iii), I shall not directly or indirectly solicit or
encourage any distributor or vendor to the Company or any of its Immediate
Affiliates to terminate or diminish its relationship with the Company or any of
its Immediate Affiliates; provided, however, that these restrictions shall apply
only with respect to those distributors and vendors who are doing business with
the Company or any of its Immediate Affiliates on the Separation Date or at any
time during the twelve (12) months immediately preceding the Separation Date.

 

(b)

Notification Requirement.  I agree that, during the Restricted Period, I will
provide the Company notice in writing of any change in my address and of each
new job or other business activity in which I plan to engage if it is related

19

 

--------------------------------------------------------------------------------

 

to the Business of the Company and its Immediate Affiliates.  I further agree to
provide such notice at least fifteen (15) business days prior to beginning any
such job or activity.  Such notice shall state the name and address of the
Person to whom I propose to provide services and the nature of my position with
that Person.  I agree to provide the Company with such other pertinent
information concerning such new job or other business activity as the Company
may reasonably request in order to determine my continued compliance with my
obligations under this Agreement.  I further agree to notify any Person to whom
I intend to provide services, as an employee, independent contractor or
otherwise, of my obligations under this Agreement and hereby consent to
notification by the Company or its agents to any such Persons about my
obligations under this Agreement. 

 

8. Other Obligations.

 

(a)

Agreement Not to Use or Disclose Confidential Information.  I agree that I shall
not at any time disclose to any Person or use any Confidential Information that
I obtained incident to my service to, or any other association with, the Company
or any of its Affiliates or any of their predecessors or successors, other than
as required by applicable law or legal process (e.g., a subpoena or court order)
after notice to the Company and a reasonable opportunity for the Company to seek
protection of the Confidential Information prior to any such disclosure. 

(b)

Agreement of No Public Comment and Non-Disparagement.  I agree that I will not
make any public statement or comment concerning the Company or any of its
Affiliates, their direct or indirect investors, their management, their products
and services or their businesses and agree that this restriction applies whether
communication is oral or in writing, whether made directly or indirectly, and
includes without limitation communication to or through the media (print,
electronic or otherwise).  I further agree that I will not disparage or
criticize the Company or any of its Affiliates, their direct or indirect
investors, management, products and services or businesses, not only through
public statement or comment, but also to any of the employees of the Company or
any of its Affiliates, or to any Person with whom the Company or any of its
Affiliates is doing, or is planning to do, business.  I agree to keep the
negotiations leading to, as well as the terms of, this Agreement
confidential.  I further agree that I have not disclosed and will not disclose
such terms to any third party other than my attorneys, accountants, and members
of my immediate family, and then only on condition that they agree not to
further disclose this Agreement or any of its terms to others.  Notwithstanding
the foregoing, I may reveal the terms of this Agreement if I am required to
disclose them by a court order.

 

(c)

Return of Company Property. I represent and warrant that I have returned to the
Company any and all documents, materials and information (whether in

20

 

--------------------------------------------------------------------------------

 

hardcopy, on electronic media or otherwise) related to the business (present or
otherwise) of the Company or any of its Affiliates and all other property of the
Company or any of its Affiliates in my possession or control, including without
limitation keys, access cards, credit cards, computer, telephone and other
office equipment.  Further, I represent and warrant that I have not retained any
copy of any document, material or information of the Company or any of its
Affiliates (other than documentation provided expressly for my personal use and
retention, such as, by way of example and not limitation, documentation
concerning my participation in Company benefit plans).  I also agree that I will
not, for any purpose, attempt to access or use any computer or computer network
or system of the Company or any of its Affiliates after the Separation Date,
unless expressly requested to do so by an authorized representative of the
Company.  Further, I represent and warrant that I have disclosed to the Company
all passwords necessary or desirable to obtain access to, or that would assist
in obtaining access to, any information which I have password-protected on any
of the computer equipment or computer network or system of the Company or any of
its Affiliates. 

 

(d)

Employee Cooperation.  I agree that, during the Severance Pay Period, and
without additional compensation, I will provide to the Company, promptly on its
request, advice and consultation with respect to my former duties and
responsibilities.  I also agree, during the Severance Pay Period and thereafter,
to cooperate with the Company with respect to all matters arising during or
related to my employment, including without limitation matters in connection
with any governmental investigation, litigation or regulatory or other
proceeding which may have arisen or which may arise following the signing of
this Agreement.  I understand that the Company will make reasonable efforts not
to materially interfere with the timing of any employment or other business
obligations I may have.  While it is agreed that I will not be entitled to
compensation for any such cooperation during the Severance Pay Period, the
Company will reimburse my out-of-pocket expenses incurred in complying with the
Company's requests hereunder, provided such expenses are authorized by the
Company in advance and the Company will pay me a reasonable hourly or per diem
rate for any such cooperation requested by the Company after the Severance Pay
Period ends, exclusive of any time spent in testifying as a fact witness in any
legal proceeding. 

 

9. Enforcement.  I acknowledge that I have carefully read and considered all the
terms and conditions of this Agreement, including the restraints imposed on me
pursuant to Sections 7 and 8 of this Agreement.  I agree that those restraints
are necessary for the reasonable and proper protection of the Company and its
Affiliates and that each and every one of the restraints is reasonable with
respect to subject matter, length of time and geographic area.  I further
acknowledge that, were I to breach any of the covenants contained in Section 7
or Section 8 of this Agreement, the damage to the Company and its Affiliates
would be irreparable.  Further, I freely acknowledge that the restrictions
contained in Sections 7 and 8 will not, individually or in the aggregate,
prevent me from earning a livelihood while they are in effect.  I

21

 

--------------------------------------------------------------------------------

 

therefore agree that the Company, in addition to any other remedies available to
it under this Agreement, pursuant to any other agreement between me and the
Company, or at law, shall be entitled to preliminary and permanent injunctive
relief against any breach or threatened breach by me of any of the obligations
set forth in Section 7 or Section 8 of this Agreement, without having to post
bond, together with an award of its reasonable attorney’s fees incurred in
enforcing its rights hereunder.  I further agree with the Company that, in the
event that any provision of Section 7 or Section 8 of this Agreement shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of its being extended over too great a time, too large a geographic area or too
great a range of activities, such provision shall be deemed to be modified to
permit its enforcement to the maximum extent permitted by law.  I also agree
that each of the Affiliates shall have the right to enforce all of my
obligations to the Affiliate under this Agreement.  No claimed breach of this
Agreement or other violation of law attributed to the Company shall operate to
excuse me from the performance of my obligations under Section 7 or Section 8 of
this Agreement.

 

10.  Release of Claims.  For and in consideration of the Severance Benefits to
be provided to me in connection with my separation from employment with the
Company as set forth in this Agreement and in the Plan, to which I would not
otherwise be entitled, and as a condition of my receipt of those Severance
Benefits, I, on my own behalf and on behalf of my heirs, beneficiaries,
executors, administrators, assigns and representatives, and all others connected
with or claiming through me, hereby release and forever discharge the Company
and its Affiliates and all of the respective past, present and future
shareholders, officers, directors, general and limited partners, members,
managers, employees, agents, predecessors, successors and assigns of the
foregoing, and all others connected with any of them, and any and all benefit
plans maintained by the Company and its Affiliates and all present and former
representatives, agents, trustees, fiduciaries and administrators of such plans,
all of the foregoing, both individually and in their official capacities, from
any and all causes of action, rights, claims and liabilities of any nature
whatsoever, whether known or unknown, which I had in the past, now have or might
now have, through the Separation Date, in any way related to, connected with or
arising out of my employment with the Company, the cessation thereof or my other
association with the Company or any of its Affiliates, or based on any federal,
state or local law, regulation or other requirement.   Without limiting the
foregoing, this general release of claims includes any claims I may have through
the Separation Date pursuant to the federal Age Discrimination in Employment
Act, 29 U.S.C. Section 621 et seq., Title VII of the Civil Rights Act, the
Americans with Disabilities Act, the Fair Credit Reporting Act and/or state
equivalent law, and/or the wage and hour and wage payment and fair employment
practices laws and statutes of the state or states in which I have provided
services to the Company.  I acknowledge that signing this Agreement does not
limit or otherwise interfere with my right to file a charge or participate in or
to cooperate with an investigation or proceeding initiated with or conducted by
the EEOC or other appropriate federal, state or local government agency
enforcing federal, state or local laws, guidance, ordinances or regulations.  I
understand, however, that I am releasing the right to any monetary recovery or
other individual relief should the EEOC or any other agency or party pursue
claims on my behalf.  I acknowledge that signing this Agreement does not limit
or otherwise interfere with my right to file a charge or participate in or to
cooperate with an investigation or proceeding initiated with or conducted by the
EEOC or other appropriate federal, state or local government agency

22

 

--------------------------------------------------------------------------------

 

enforcing federal, state or local laws, guidance, ordinances or regulations.  I
understand, however, that I am releasing the right to any monetary recover or
other individual relief should the EEOC or any other agency or party pursue
claims on my behalf.    Additionally, I acknowledge that nothing in this
Agreement prohibits me from, or otherwise affects my, communicating with or
reporting possible violations of law or regulation to any governmental agency or
entity (including any official or staff person thereof), including but not
limited to the Department of Justice, to the Department of Labor, to the
National Labor Relations Board, the Securities and Exchange Commission, the
Congress, and/or any agency Inspector General, or making other disclosures that
are protected under the whistleblower provisions of federal law or regulation. I
do not need the prior authorization of the Company to engage in any such
communications or make any such reports or disclosures and I am not required to
notify the Company that I have engaged in such communications or made such
reports or disclosures. 

 

Excluded from the scope of this general release of claims are any rights I have
to indemnification under the charter, by-laws or other governing documents of
the Company or any of its Affiliates; any vested benefits I have under the
Company's qualified retirement plan or other benefit plans as of the Separation
Date, as defined below in Section 11(a); and any rights arising under this
Agreement or the Plan following the effective date of this Agreement.

 

11.Entire Agreement, Amendments, Waivers and Governing Law.    

 

(a)

This Agreement constitutes the entire agreement between me and the Company, and
supersedes all prior and contemporaneous agreements and understandings, written
or oral, concerning my employment, its termination and all related matters,
excluding only the Mutual Agreement to Resolve Issues and Arbitrate Claims (the
“Arbitration Agreement”), [(             )] and any obligations that I have to
the Company or any of its Affiliates concerning protection of confidential
information, assignment of rights to inventions or other intellectual property,
or covenants against competition or solicitation of employees, independent
contractors, customers, vendors, distributors or others, any outstanding loans
or other financial obligations that I have to the Company or any of its
Affiliates or under any benefit plan maintained by the Company or any of its
Affiliates, my obligations under the Plan and my obligations, if any, with
respect to the securities of the Company or any of its Immediate Affiliates all
of which shall remain in full force and effect in accordance with their terms
(together, the “Surviving Agreements”).  With the exception of the Arbitration
Agreement that survives this Agreement and remains in full force and effect, to
the extent that this Agreement and the terms in the remaining Surviving
Agreements conflict, the terms and provisions of this Agreement govern and shall
be given their full force and effect.  This Agreement cannot be changed except
pursuant to a written agreement executed by the Parties.

 

(b)

This Agreement may not be modified or amended and no breach shall be deemed to
be waived unless in writing signed by me and an expressly

23

 

--------------------------------------------------------------------------------

 

authorized representative of the Company.  I understand and agree that the
obligation of the Company to make payments and provide benefits to me under this
Agreement or the Plan is expressly conditioned on my continued full performance
of my obligations under this Agreement and under the Plan.

 

(c)

If any provision or term of this Agreement is held to be illegal, invalid, or
unenforceable, such provision or term shall be fully severable; this Agreement
shall be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised part of this Agreement; and the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid, or unenforceable provision or by its
severance from this Agreement.  Furthermore, in lieu of each such illegal,
invalid, or unenforceable provision or term there shall be added automatically
as a part of this Agreement another provision or term as similar to the illegal,
invalid, or unenforceable provision as may be possible and that is legal, valid,
and enforceable.

 

(d)

One or more waivers of a breach of any covenant, term, or provision of this
Agreement by me or the Company shall not be construed as a waiver of a
subsequent breach of the same covenant, term, or provision, nor shall it be
considered a waiver of any other then existing or subsequent breach of a
different covenant, term, or provision.

 

(e)

The captions and headings in this Agreement are for convenience only and in no
way define or describe the scope or content of any provision of this Agreement.
This Agreement may be executed in two or more counterparts, each of which shall
be an original and all of which together shall constitute one and the same
instrument.

 

(f)

This Agreement shall be governed by and construed in accordance with the laws of
the State of Texas, without giving any effect to any choice or conflict of law
provision or rule that would cause the application of the laws of any other
jurisdiction, except where preempted by Federal law.  The Company and I agree to
use arbitration in accordance with the Arbitration Agreement that exists between
us to resolve any disputes arising from this Agreement and as otherwise provided
for in the Arbitration Agreement; provided, however, that the Company or I may
seek temporary or preliminary injunctive relief from a court of competent
jurisdiction to temporarily enforce a restriction in this Agreement or to
temporarily secure specific performance of an obligation created by this
Agreement pending resolution of any matters of final relief through
arbitration.  Any such action shall not constitute a waiver of our agreement to
arbitrate by myself or by the Company.  The arbitrator shall also have the power
to issue both preliminary and permanent injunctive relief to enforce this
Agreement.  In all other respects, the Arbitration Agreement between myself and
the Company shall control. 

 

24

 

--------------------------------------------------------------------------------

 

(g)

I warrant that I am not a Medicare beneficiary as of the date I sign this
Agreement.  I am not 65 years of age and have not received 24 months of SSDI
benefits.  I agree to indemnify, defend and hold the Company and any of its
insurance carrier(s) from all claims, liens, Medicare conditional payments and
rights to payment, known or unknown including any claim by a governmental
entity.

 

12. Acceptance of this Agreement and Related Matters.   

(a)

 This Agreement creates legally binding obligations and I am therefore advised
by the Company to consult an attorney prior to signing this Agreement.  I
acknowledge that I also was so advised by the Company in the Plan.    

   

(b)

I acknowledge that I may not sign this Agreement prior to the Separation
Date.  I further acknowledge that I have had at least twenty-one (21) days from
the later of the Separation Date or the date of my receipt of this Agreement to
consider the terms of this Agreement.  In signing this Agreement, I give the
Company assurance that I have signed it voluntarily, without any coercion, undue
influence or threat, and with a full understanding of its terms; that I have had
full and sufficient opportunity, before signing this Agreement, to consider its
terms and to consult with an attorney, if I wished to do so, or to consult with
any other of persons of my choosing; and that, in signing this Agreement, I do
not have any contractual right or claim to the benefit described herein except
as stated in this Agreement; and I have not relied on any promises or
representations, express or implied, that are not set forth expressly in this
Agreement or the Plan.

(c)

I understand that I may revoke this Agreement at any time within seven (7) days
of the date of my signing by written notice to the General Counsel of the
Company, and that this Agreement will take effect only upon the expiration of
the seven-day revocation period and only if I have not timely revoked it.

 

13.      Code Section 409A and the Patient Protection and Affordable Care Act.
  The terms of this Agreement and any amounts paid hereunder are intended to be
construed in such manner as to be exempt from Section 409A (“Section 409A”) of
the Internal Revenue Code of 1986, as amended (the “Code”) and Treasury
Regulations Sections 1.409A-1(b)(4) and (b)(9), as applicable.  To the
extent any portion of the payments made pursuant to this Agreement becomes
subject to Section 409A and applicable guidance issued thereunder, the Agreement
shall be construed, and benefits paid hereunder, as necessary to comply with
such Code Section and/or guidance.   Notwithstanding the foregoing, the Company
shall not have any liability to me if any payment or benefit is determined to
constitute "nonqualified deferred compensation" within the meaning of Section
409A where the conditions applicable thereunder are not satisfied.  Further, in
the event that the Company’s payment of the Welfare Benefit Payments would
subject it to any tax or penalty under the Patient Protection and Affordable
Care Act, as amended from time to time, the “ACA”) or Section 105(h) of the
Code, or applicable regulations or guidance issued under the ACA or Section
105(h) of the Code, the Company and I will work together, in good faith,
consistent with the requirements for compliance with, or exemption from, Section
409A, to restructure such benefit.

25

 

--------------------------------------------------------------------------------

 

 

           14.Trade Secrets.  I understand that, notwithstanding anything
contained in this Agreement, I will not be held criminally or civilly liable
under any federal or state trade secret law for disclosing a trade secret in
confidence to a federal, state or local government official, either directly or
indirectly, or to an attorney, in each case solely for the purpose of reporting
or investigating a suspected violation of law, or for disclosing a trade secret
in a complaint or other document filed in a lawsuit or other proceeding, if such
filing is made under seal.  I further understand that, notwithstanding anything
contained in this Agreement, I may disclose a trade secret to my attorney in
connection with filing a lawsuit for retaliation for reporting a suspected
violation of law, and I may use such trade secret in that court proceeding, so
long as any document containing such trade secret is filed under seal and I do
not otherwise disclose such trade secret, except pursuant to court order.

 

 

[Signature page follows immediately.]

26

 

--------------------------------------------------------------------------------

 

 

INTENDING TO BE LEGALLY BOUND, I have signed this Agreement under seal on the
date indicated below.  If I do not revoke this Agreement, then, on the eighth
(8th) day following the date indicated below, this Agreement shall take effect
as a legally binding agreement between me and the Company on the basis set forth
above.

 

Signature:  __________________________________

Name (Printed): _____________________________

 

Date of signing:  _____________________________

 

ACCEPTED AND AGREED:

MICHAELS STORES, INC.

 

 

By:  ______________________________________

 

Name (Printed) _____________________________

 

Title:  _____________________________________

 

Date of signing:  _____________________________

 

 

 

 

 

 

27

 

--------------------------------------------------------------------------------