Exhibit 10.2

 

Execution Version

 

February 27, 2019

 

Carl Rubin

 

Dear Chuck:

 

As we have discussed, your employment with Michaels Stores, Inc. (the “Company”)
and The Michaels Companies, Inc. (“Parent”) is terminating.  The purpose of this
letter agreement (this “Agreement”) is to confirm the terms concerning your
separation from employment.  Reference is made to the agreement between you and
the Company, dated as of February 13, 2013 (the “Employment Agreement”).

 

1.             Transition Period.

 

(a)           Effective as of February 28, 2019 (the “Transition Date”), you
will resign as Chief Executive Officer of the Company and, from the Transition
Date through the date that your employment terminates (the “Separation Date”),
you will continue to be employed by the Company on a full-time basis and serve
as Chairman of the board of directors of Parent (the “Board”).  Provided that
you comply in full with your obligations hereunder, it is expected that the
Separation Date will be April 1, 2019.  The period beginning on the Transition
Date and concluding on the Separation Date is hereinafter referred to as the
“Transition Period”.

 

(b)           During the Transition Period, you will continue to receive your
base salary, payable at the rate in effect as of the Transition Date, and to
participate in all employee benefit plans of the Company (including your car
lease) in accordance with the terms of those plans, provided that, on and after
the Transition Date, you will not continue to earn paid time-off or other
similar benefits and you will not be eligible to participate in the Michaels
Stores, Inc. Annual Incentive Plan (the “Annual Incentive Plan”) or to receive
grants of stock options, restricted stock, restricted stock units or other
equity incentive awards under Parent’s long-term incentive plans.

 

(c)           During the Transition Period, you will perform reasonable duties
as may be assigned to you from time to time by the Board, and to assist with the
transition of your duties and responsibilities to any Company designees. You
will continue to devote your best professional efforts to the Company, and to
abide by all Company policies and procedures as in effect from time to time.

 

(d)           The Company may terminate your employment at any time during the
Transition Period upon notice to you.  If the Company terminates your employment
for Cause (as defined in the Employment Agreement) or if you voluntarily resign,
you will not be eligible to receive the severance benefits described in
Section 3 hereof.

 

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(e)           Your last full day at the Company’s offices will be February 27,
2019, but you will be provided access from March 2, 2019 to March 4, 2019 to
facilitate your transition.

 

(f)            Effective as of the Separation Date, you hereby resign from the
Board and, effective as of the Transition Date, you hereby resign from any and
all other director, officer, trustee, or other positions you then hold with
Parent, the Company and any of their Affiliates, and any of their respective
related committees, trusts, foundations, or similar entities, in each case
unless otherwise agreed in writing by Parent or the Company and you
(collectively, the “Resignations”).  The Company, on its own behalf, and on
behalf of its Affiliates, hereby accepts the Resignations as of the Separation
Date.  You agree to sign any documents evidencing the Resignations as the
Company may reasonably request.

 

2.             Final Compensation.  By signing this Agreement, you acknowledge
that you will receive, on or before the next regular Company payroll date
following the Separation Date, pay for all work you have performed for the
Company through the Separation Date, to the extent not previously paid, as well
as pay, at your final base rate of pay, for any vacation days you have earned
but not used as of the Separation Date, determined in accordance with Company
policy and as reflected on the books of the Company.  You also acknowledge that
you are entitled to a bonus under the Annual Incentive Plan in respect of fiscal
year 2018, determined in accordance with the terms of the Annual Incentive Plan
and based on a Board assessment of your performance for fiscal 2018 as
communicated to you by the Compensation Committee.  Such fiscal 2018 bonus will
be paid to you at the time fiscal 2018 bonuses are paid to employees of the
Company generally under the Annual Incentive Plan.  You will receive the
payments described in this Section 2 regardless of whether you elect to sign
this Agreement.

 

3.             Severance Payments.  In consideration of your acceptance of this
Agreement and subject to your meeting in full your obligations hereunder and the
Continuing Obligations (as defined in Section 7(a) below), and in full
satisfaction of any rights you may have under the Letter Agreement, the Company
will provide you with the following severance benefits:

 

(a)           The Company will continue to pay you your salary, at your final
base rate of pay as of the Separation Date, which you acknowledge and agree is
$1,202,000 per year, for a period of two (2) years following the Separation Date
(the “Severance Pay Period”).  Payments will be made in the form of salary
continuation, and will begin on the next regular Company payroll date that is at
least five (5) business days following the later of the Effective Date (as
defined below) and the Separation Date (such date, the “Severance Commencement
Date”).  The first payment will be retroactive to the day following the
Separation Date.

 

(b)           The Company will also pay you in equal installments over the
Severance Pay Period an amount equal to two (2) times your target bonus under
the Annual Incentive Plan as of the Separation Date, which you acknowledge and
agree will total $3,005,000 over the Severance Period.

 

(c)           If you are enrolled in the Company’s group medical and/or dental
plans on the Separation Date, you may elect to continue your participation and
that of your eligible dependents in those plans for a period of time under the
federal law known as “COBRA.”  You may make such an election whether or not you
accept this Agreement.  However, if you accept

 

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this Agreement and you timely elect to continue your participation and that of
your eligible dependents in the plans, the Company will pay you on the Severance
Commencement Date a lump-sum amount equal in its reasonable estimation to what
would have been the Company’s premium cost during the full COBRA period, subject
only to your payment of the employee portion (determined on the same basis as
applied to you on the Separation Date for you and your eligible dependents).

 

(d)           The Company will cover the expense of one executive physical for
you conducted prior to April 15, 2019.

 

4.             Withholding.  All payments made by the Company or any of its
Affiliates under this Agreement shall be reduced by any tax or other amounts
required to be withheld by the Company or its Affiliates under applicable law
and all other lawful deductions authorized by you.  For purposes of this
Agreement, “Affiliates” means all persons and entities directly or indirectly
controlling, controlled by or under common control with the Company, whether
control may be by management authority, equity interest or otherwise.

 

5.             Equity Awards.  You acknowledge and agree that Exhibit A sets
forth each outstanding stock option, restricted stock, restricted stock unit,
and any other equity incentive award you hold under Parent’s long-term incentive
plans as of the date hereof (collectively, the “Equity Awards”).  You and Parent
agree to work together in good faith during the Transition Period to determine
the treatment of your Equity Awards upon and following your Separation Date.

 

6.             Status of Employee Benefits and Expenses.

 

(a)           Except as otherwise provided in Section 1, your and your eligible
dependents’ participation in all employee benefit plans of the Company will end
as of the Separation Date in accordance with the terms of those plans.  You will
receive information about your COBRA continuation rights under separate cover.

 

(b)           Within two (2) weeks following the Separation Date, you must
submit your final expense reimbursement statement reflecting all business
expenses you incurred through the Separation Date, if any, for which you seek
reimbursement, and, in accordance with Company policy, reasonable substantiation
and documentation for the same.  The Company will reimburse you for any such
authorized and documented expenses within thirty (30) days of receiving such
statement pursuant to its regular business practice.

 

7.             Continuing Obligations, Confidentiality, and Cooperation.

 

(a)           You acknowledge and agree that you will continue to be bound by
your obligations relating to confidentiality, non-competition, non-solicitation,
no-hire, invention assignment and/or any other restrictive covenants set forth
in any agreement by and between you and the Company or any of its Affiliates, to
the extent that such obligations survive termination of your employment by the
terms thereof (collectively, the “Continuing Obligations”).  The obligation of
the Company to make payments to you or on your behalf under Section 3 of this

 

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Agreement, and your right to retain the same, is expressly conditioned upon your
continued full performance of your obligations hereunder and of the Continuing
Obligations.

 

(b)           You acknowledge and agree that you will continue to protect
Confidential Information, as defined herein, and that you will never, directly
or indirectly, use or disclose it, except as required by applicable law.  For
purposes of this Agreement, “Confidential Information” means any and all
information of the Company or any of its Affiliates that is not generally known
to the public, together with any and all information received by the Company or
any of its Affiliates from any third party with any understanding, express or
implied, that the information would not be disclosed.

 

(c)           Subject to Section 8(g), you acknowledge and agree that, until the
Transition Date, you will not disclose this Agreement or any of its terms or
provisions, directly or by implication, except to members of your immediate
family and to your legal and tax advisors, and then only on condition that they
agree not to further disclose this Agreement or any of its terms or provisions
to others.

 

(d)           You agree to cooperate with the Company and its Affiliates
hereafter with respect to all matters arising during or related to your
employment, including but not limited to all 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.  The
Company will reimburse your out-of-pocket expenses incurred in complying with
Company requests hereunder, provided such expenses are authorized by the Company
in advance.

 

(e)           Subject to Section 8(g), you acknowledge and agree you will not
disparage or criticize the Company, its Affiliates, their business, their
management or their products or services, or any of the Released Parties (as
defined in Section 8(a) below) and that you will not otherwise do or say
anything that could disrupt the good morale of employees of the Company or any
of its Affiliates or harm the interests or reputation of the Company or any of
its Affiliates.  The Company agrees to (i) instruct its directors and executive
officers not to disparage you to third parties and (ii) not disparage you in
authorized corporate communications to third parties; provided, that nothing
herein shall or shall be construed or interpreted to prevent or impair the
Company or its directors and executive officers from (x) making public comments,
such as in media interviews, which include good faith, candid discussions or
acknowledgements regarding the Company’s performance or business, or
(y) discussing you in connection with performance evaluations.  Notwithstanding
the foregoing, nothing in this Section 7(e) shall prevent either you or any of
the Company’s directors and executive officers from testifying truthfully in any
legal or administrative proceeding where such testimony is compelled or
requested, or from otherwise complying with applicable legal requirements.  This
Section 7(e) shall expire in its entirety on the thirtieth (30th) day following
the Transition Date.

 

8.             General Release and Waiver of Claims.

 

(a)           For and in consideration of the severance benefits to be provided
to you in connection with the termination of your employment, as set forth in
Section 3 herein, which are conditioned on your signing this Agreement,
including this release of claims (the “Release of Claims”), and to which you are
not otherwise entitled, and for other good and valuable

 

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consideration, the receipt and sufficiency of which is hereby acknowledged, you,
on your own behalf and on behalf of your heirs, executors, administrators,
beneficiaries, representatives and assigns, and all others connected with or
claiming through you, hereby release and forever discharge the Company, its
subsidiaries and other Affiliates and all of their respective past, present and
future officers, directors,  shareholders, employees, employee benefit plans,
agents, general and limited partners, members, managers, joint venturers,
representatives, successors and assigns and all others connected with any of
them (all of the foregoing, the “Released Parties”) both individually and in
their official capacities, from any and all causes of action, rights or claims
of any type or description, known or unknown, which you have had in the past,
now have, or might now have, through the date of your signing of this Agreement,
in any way related to, resulting from, arising out of or connected with your
employment by the Company or any of its subsidiaries or other Affiliates or the
termination of that employment or pursuant to any federal, state or local law,
regulation or other requirement (including without limitation Title VII of the
Civil Rights Act of 1964, the Age Discrimination in Employment Act, as amended
by the Older Workers Benefit Protection Act, the Employee Retirement Income
Security Act, the Americans with Disabilities Act, and the wage and hour, wage
payment, and fair employment practices laws of the state or states in which you
have been employed by the Company or any of its subsidiaries or other
Affiliates, each as amended from time to time).

 

(b)           Excluded from the scope of the Release of Claims is (i) any claim
arising under the terms of the Agreement after the effective date of the Release
of Claims, (ii) any right of indemnification or contribution that you have
pursuant to the articles of incorporation or by-laws of the Company, (iii) any
claim relating to the Equity Awards, and (iv) if the Company terminates your
employment for Cause, any procedural rights you have under Section 5(c) of the
Employment Agreement or your substantive right to challenge the for Cause
determination pursuant to Section 25 of the Employment Agreement.

 

(c)           Subject to Section 5, you hereby represent, warrant and agree that
Section 2 of this Agreement sets forth in full all compensation due to you,
whether for services rendered by you to the Company, its subsidiaries and other
Affiliates, or otherwise, through the date on which your employment with the
Company will terminate and that, exclusive only of the Company’s provision to
you of the severance benefits in accordance with the terms and conditions set
forth in Section 3 of this Agreement, no further compensation of any kind shall
be due to you from the Company or any of the other Company Released as a result
of your employment now ending.

 

(d)           In signing this Agreement, you represent and warrant that, except
as mutually agreed between you and the Board, you will return to the Company, on
or before March 4, 2019, any and all documents, materials and information
(whether in hardcopy, on electronic media or otherwise) related to the business
of the Company, its subsidiaries and other Affiliates and all keys, access
cards, credit cards, computer hardware and software, telephones and other
property of the Company, its subsidiaries and other Affiliates in your
possession or control.  Further, you represent and warrant that, except as
mutually agreed between you and the Board, you will not retain any copy or
derivation of any such documents, materials or information (whether in hardcopy,
on electronic media or otherwise) of the Company, its subsidiaries and other
Affiliates.  You also represent and warrant that, except as mutually agreed
between you and the Board, you will not, following March 4, 2019, for any
purpose, attempt to access or use any

 

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computer or computer network or system of the Company or any of its Affiliates,
including without limitation the electronic mail system, and you agree that,
except as mutually agreed between you and the Board, you will not do so. 
Further, you acknowledge that you will disclose to the Company, on or before the
Transition Date, all passwords necessary or desirable to obtain access to, or
that would assist in obtaining access to, all information which you have
password-protected on any computer equipment, network or system of the Company
or any of its Affiliates.  Promptly following the Separation Date, you will be
provided instructions on how to set up an account with ADP so that you can
access your electronic pay stub or its equivalent.

 

(e)           This Agreement, including the Release of Claims set forth in this
Section 8, creates legally binding obligations and you acknowledge that you are
hereby advised by the Company to seek the advice of an attorney prior to signing
this Agreement.

 

(f)            In signing this Agreement, you acknowledge your understanding
that you may consider the terms of this Agreement for up to twenty-one (21) days
from the date you receive it, provided that you sign and return it to the
Company no later than the twenty-first (21st) day after such receipt.  You
acknowledge that you will have had sufficient time to consider this Agreement,
including the Release of Claims, and to consult with an attorney, if you wished
to do so, or to consult with any other person of your choosing before signing;
and that you are signing this Agreement voluntarily and with a full
understanding of its terms.  You further acknowledge that, in signing this
Agreement you have not relied on any promises or representations, express or
implied, that are not set forth expressly in this Agreement.

 

(g)           Nothing in this Agreement shall be construed to prohibit you from
filing a charge with or participating in any investigation or proceeding
conducted by the federal Equal Employment Opportunity Commission or a comparable
state or local agency, provided, however, that you hereby agree to waive your
right to recover monetary damages or other personal relief in any such charge,
investigation or proceeding, or in any related complaint or lawsuit, filed by
you or by anyone else on your behalf.  Nothing in this Agreement, the Employment
Agreement, or any agreements containing restrictive covenants to which you are
bound limits, restricts or in any other way affects your communicating with any
governmental agency or entity, or communicating with any official or staff
person of a governmental agency or entity, concerning matters relevant to the
governmental agency or entity.

 

9.             Section 409A.

 

(a)           This Agreement and the payments and benefits provided hereunder
are intended to be exempt from, or comply with, the requirements of Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”) (Section 409A of
the Code and the regulations promulgated thereunder, “Section 409A”), and shall
be construed consistently with that intent.  Notwithstanding the foregoing, in
no event shall the Company have any liability relating to the failure or alleged
failure of any payment or benefit under this Agreement to be exempt from, or
comply with, the requirements of Section 409A.  Each payment made under this
Agreement shall be treated as a separate payment and the right to a series of
installment payments under this Agreement shall be treated as a right to a
series of separate payments.

 

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(b)           Any reimbursement for expenses payable to you hereunder that would
constitute nonqualified deferred compensation subject to Section 409A shall be
subject to the following additional rules:  (i) no reimbursement of any such
expense shall affect your right to reimbursement of any such expense in any
other taxable year; (ii) reimbursement of the expense shall be made, if at all,
promptly, but not later than the end of the calendar year following the calendar
year in which the expense was incurred; and (iii) the right to reimbursement
shall not be subject to liquidation or exchange for any other benefit.

 

(c)           If you are a “specified employee” (as defined below) at the time
of your “separation from service” (as defined below), any payments or benefits
that are payable under this Agreement or otherwise on account of your separation
from service that would (but for this provision) be payable within six
(6) months following the date of such separation from service, shall instead be
paid on the next business day following the expiration of such six (6)-month
period or, if earlier, upon your death; except (i) to the extent of amounts that
do not constitute a deferral of compensation within the meaning of
Section 1.409A-1(b) of the Treasury Regulations (including without limitation by
reason of the safe harbor set forth in Section 1.409A-1(b)(9)(iii), as
determined by the Company in its reasonable good faith discretion);
(ii) benefits which qualify as excepted welfare benefits pursuant to
Section 1.409A-1(a)(5) of the Treasury Regulations; or (iii) other amounts or
benefits that are not subject to the requirements of Section 409A.

 

(d)           For purposes of this Agreement, the term “separation from service”
shall have the meaning set forth in Section 1.409A-1(h) of the Treasury
Regulations (after giving effect to the presumptions contained therein), and the
term “specified employee” means an individual determined by the Company to be a
specified employee under Section 1.409A-1(i) of the Treasury Regulations.

 

10.          Miscellaneous.

 

(a)           This Agreement constitutes the entire agreement between you and
the Company or any of its Affiliates, and supersedes all prior and
contemporaneous communications, agreements and understandings, whether written
or oral, with respect to your employment, its termination and all related
matters, excluding only the Continuing Obligations and your rights and
obligations with respect to the Equity Awards, all of which shall remain in full
force and effect in accordance with their terms.

 

(b)           This Agreement may not be modified or amended, and no breach shall
be deemed to be waived, unless agreed to in writing by you and an expressly
authorized representative of the Company. 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.

 

(c)           The obligation of the Company to make payments or provide benefits
to you or on your behalf under this Agreement, and your right to retain the
same, are expressly conditioned upon your continued full performance of your
obligations under this Agreement and under the Continuing Obligations.

 

(d)           This is a Texas contract and shall be governed and construed in
accordance with the laws of the State of Texas, without regard to any conflict
of laws principles that would

 

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result in the application of the laws of another jurisdiction.  You agree to
submit to the exclusive jurisdiction of the courts of the State of Texas in
connection with any dispute arising out of this Agreement.

 

If the terms of this Agreement are acceptable to you, please sign, date and
return it to me within twenty-one (21) days following the date hereof.  You may
revoke this Agreement at any time with seven (7) days of the date of your
signing by notifying me in writing (including by email at
veitenheimer@michaels.com) of your revocation within that period.  If you do not
revoke this Agreement, then, on the eighth (8th) day following the date that you
signed it (the “Effective Date”), this Agreement shall take effect as a legally
binding agreement between you and the Company on the basis set forth above.

 

 

 

Sincerely,

 

 

MICHAELS STORES, INC.

 

 

 

 

 

 

 

 

By:

/s/ Michael J. Veitenheimer

 

 

 

Name:

Michael J. Veitenheimer

 

 

 

Title:

EVP

 

 

 

 

 

 

 

 

THE MICHAELS COMPANIES, INC.

 

 

 

 

 

 

 

 

By:

/s/ Michael J. Veitenheimer

 

 

 

Name:

Michael J. Veitenheimer

 

 

 

Title:

EVP

 

 

 

 

 

 

Accepted and agreed:

 

 

 

 

 

 

 

 

Signature:

/s/ Carl Rubin

 

 

 

Carl Rubin

 

 

 

 

 

 

Date:

2/27/19

 

 

 

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EQUITY AWARDS

 

Date of
Grant

 

Type of Award

 

Number of Shares
Granted Under Equity
Award

 

Exercise Price

 

3/18/2013

 

Non-qualified stock options

 

1,845,000

 

$

13.86

 

3/18/2013

 

Restricted shares

 

39,088

 

N/A

 

3/18/2013

 

Restricted shares

 

295,200

 

N/A

 

9/30/2015

 

Non-qualified stock options

 

252,525

 

$

23.10

 

9/30/2015

 

Restricted shares

 

50,505

 

N/A

 

9/14/2016

 

Non-qualified stock options

 

348,675

 

$

23.90

 

9/14/2016

 

Restricted stock units

 

69,735

 

N/A

 

3/31/2017

 

Non-qualified stock options

 

446,628

 

$

22.39

 

3/31/2017

 

Restricted stock units

 

74,438

 

N/A

 

3/29/2018

 

Non-qualified stock options

 

507,354

 

$

19.71

 

3/29/2018

 

Restricted stock units

 

84,559

 

N/A

 

 

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