Exhibit
10.2


 


MICHAELS
STORES, INC.


OFFICER
SEVERANCE PAY PLAN


Established
as of April 17, 2008


 


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 of the Internal
Revenue Code of 1986 as amended (“Section 409A”) 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 or Executive Vice 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, while continuing to be Participant; (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
in accordance with its terms.


 


 


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


 


B.    the
Participant’s employment is terminated by the Company for Cause; or


 


C.    the
Participant is offered other employment with an Affiliate, Successor or a
Purchaser in a position that he or she qualified to perform, with a comparable
base 


 


2

















 


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


 


D.    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 or Executive Vice 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 of a Participant’s base salary at the annual rate in effect at the
time termination occurs.


 


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


 


(2)  
Pro-Rated Annual Bonus:


 


Provided
that the Participant is participating in a Company executive annual bonus plan
and has been assigned a target bonus under that plan for the fiscal year in
which the Participant has a Qualified Termination hereunder, the Participant
shall be entitled to a pro-rated annual bonus for that fiscal year determined
by multiplying the Participant’s target bonus by a fraction, the numerator of
which is the number of calendar days that the Participant was 


 


3

















 


employed
during the fiscal year, through the date of termination, and the denominator of
which is 365.


 


(3)   Premium Welfare Benefits:


 


During
the period of severance pay, and subject to any employee contribution
applicable to the Participant on the date of termination, the Company shall
continue to contribute to the premium cost of Participant’s participation in
the Company’s group medical and dental plans, provided that the Participant is
entitled to continue such participation under applicable law and plan terms and
pays the remainder of such premium cost, and any required administrative fee,
in a timely manner from month to month, and further provided, however,
that (A) if the Participant becomes reemployed with another
employer-provided plan, the medical and 
dental benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility.   Nothing in this Section VI(A)(3) shall
operate to reduce, or be construed as reducing, the Participant’s group health
plan continuation rights under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended (“COBRA”), in any manner and, upon the end of
the period of severance pay, the Participant, if participating in one or more
of the Company’s medical or dental plans and if otherwise eligible under COBRA,
shall be entitled to elect COBRA continuation coverage at the Participant’s
sole cost and expense for the full period applicable  upon termination of the period of severance
pay.


 


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) shall be payable in the form of salary
continuation 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, but the first payment shall be retroactive to the day
immediately following the date of termination of the Participant’s
employment.  Any pro-rated annual bonus
for which a Participant is eligible under Section VI(A)(2) shall be payable
on the later of the date annual bonuses are payable to active participants 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.


 


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 


 


4

















 


sentence) be payable within
six 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 severance 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 21st day following
the Termination Date, except in the event that a Participant who is aged 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 aged 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 45 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 45th day following his/her Termination Date or the date s/he receives
the OWBPA Memorandum, whichever occurs second.


 


(3)       A Participant who is aged
40 or older on his/her Termination Date, regardless of whether the Participant
is entitled to a 21-day consideration period under Section VII A(1) or
a 45-day consideration period under Section VII A(2), may revoke the
Agreement and Release at any time during the seven day period that 


 


5

















 


immediately follows the
date the Participant signs the Agreement and Release, provided that the
Participant sends a written notice of revocation to the Company during that
seven 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 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)    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.


 


(1) 
Introduction.  In order to qualify for receipt of severance
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.


 


(2)  Restriction on Competition.
 From the date the Participant is
notified of the Company’s decision to terminate his/her employment until the
expiration of twelve (12) months immediately following the Termination Date,
the Participant shall 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 (a
“Competitor”), except that nothing contained here shall prevent the Participant’s
passive ownership of two percent (2%) or less of the equity securities of any
Competitor that is a publicly-traded company. 
For the purposes of this Agreement, the “Business of the Company and its
Immediate Affiliates” or “Business” is that of arts and crafts specialty
retailer providing materials, ideas and education for creative activities and
the “Territory” is those states within the United States and those provinces of
Canada in which the Company or any of its Immediate Affiliates is doing or 


 


6

















 


actively
planning to do business at any time during the twelve (12) months immediately
preceding the date of the Participant’s Qualifying Termination.


 


(3)  Restriction on
Solicitation of Employees and Independent Contractors.  From the date the Participant is notified of
the Company’s decision to terminate his/her employment until the expiration of
twelve (12) months immediately following the Termination Date, the Participant
shall not, and shall not assist any other Person to, (a) 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 (b) 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 at any time during the twelve (12) months immediately preceding the
date of the Participant’s Qualifying Termination.


 


(4)  Restriction on
Solicitation of Distributors and Vendors.  From the date the Participant is notified of
the Company’s decision to terminate his/her employment until the expiration of
twelve (12) months immediately following the Termination Date, 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 breach any
agreement which such distributor or vendor has with the Company or any of its
Immediate Affiliates or 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 at
any time during the twelve (12) months immediately preceding the date of the
Participant’s Qualifying Termination.


 


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.      All
benefits under this Plan may be terminated by the Company in the event that it
determines that the Participant has breached the Agreement and Release or the
Final Release or has violated any obligation under Section VII hereof or 


 


7

















 


otherwise breached
any material provision of any written agreement with the Company or any of its
Affiliates.


 


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.


 


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.


 


8

















 


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) 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 nolo contendere by, the Participant to any
felony or any other crime involving dishonesty or moral turpitude; or 

(v) any other conduct that involves a breach of fiduciary duty to the Company
on the part of the Participant.


 


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 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. 


 


9

















 


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 days
after it had received the claim (or within 180 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-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 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 request a hearing. The Plan administrator’s
written decision will be made within 60 days (or 120 days if a hearing is held
or if other special circumstances exist requiring more than 60 days and written
notice of the extension is provided to the claimant within the initial 60-day
period) after the claimant’s request has been received. Again, the decision
will include specific reasons, including references to pertinent Plan
provisions.


 


[Signature page follows immediately.]


 


10

















 


IN WITNESS WHEREOF, Michaels
Stores, Inc. has caused this Plan to be executed as of the date first
above written.


 


 


	
  MICHAELS STORES, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
						



 


11
















 


Exhibit A


 


AGREEMENT AND RELEASE


 


* Standard Under 40 Severance Agreement


 


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”)
pursuant to the terms and conditions of the Michaels Stores, Inc. Officer
Severance Pay Plan (the “Plan”).


 


WHEREAS, I was employed by the Company as
                
and, in that position, was a Participant, as defined in the Plan; and


 


WHEREAS, the termination of my employment
with the Company, which occurred on
                      ,
20       (the “Separation Date”), was 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 under the Plan, to
which I would not otherwise be entitled;


 


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


 


1.             Definitions.  Capitalized terms used in this Agreement
shall have the meaning 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
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)           “Confidential Information” means any and all
information of the Company and its Affiliates that is not generally known by
those Persons with whom they compete or do business, or with whom any of them
plans to compete or do business and any and all information, publicly known in
whole or in part or not, which, if disclosed by the Company or its Affiliates
would assist in competition against them. 
Confidential Information includes 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 


 


 


1





















 


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 Company or 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 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 and any other entity or
organization, other than the Company or any of its Affiliates.


 


2.             Severance Benefits under
the Plan.   Subject to the
terms and conditions of Section VI of the Plan, I will be eligible for (a) severance
pay, (b) a pro-rated bonus for the year in which termination of my
employment occurred, and (c) Company contributions during the Severance
Pay Period to the premium cost of my participation and that of my eligible
beneficiaries, if any, in the Company’s group health plan and certain other
welfare plans in which I and my eligible beneficiaries may continue
participation.  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.”


 


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 that the date I am first informed of the
termination of my employment.  Without
limiting the generality of the foregoing, 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 severance benefits under the Plan.   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 of this Agreement shall automatically be withdrawn.


 


(b)           Obligations as a Condition of Receipt of Severance Benefits.  The obligation of the Company to make
payments to me in accordance with this Agreement and 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.


 


2





















 


4.             Acknowledgement of Full
Payment.


 


(a)           I acknowledge that 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 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 that I have received (i) all salary due through
the Separation Date, (ii) pay in full for any vacation I had earned but
not used through the Separation Date, (iii) reimbursement for any business
expenses I had incurred through the Separation Date that are eligible for
reimbursement under applicable Company policies, and (iv) payment of all
bonus or other incentive compensation due me, exclusive only of any pro-rated
bonus for which I may be eligible 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.


 


5.             Reduction of Severance
Benefits for Certain Statutory Payments. I acknowledge that
severance benefits to which I may otherwise be entitled under the 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
under COBRA to continue my participation and that of my qualified beneficiaries
in the Company’s medical plan or any other 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), my participation in all Company employee benefit
plans has ended as of the Separation Date, in accordance with the terms of
those plans.  I also acknowledge that I
will not continue to earn vacation or other paid time off 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 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 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 severance benefits
under the Plan.  My acceptance of these
covenants and my complying with my obligations under them are a condition to my
eligibility to receive severance benefits under the Plan.


 


3





















 


(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, I have had
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 severance benefits under the Plan, to which I
would not otherwise be entitled, and such severance benefits are good and
sufficient consideration to support my agreement to and compliance with these
covenants.


 


(b)           Covenants
of Non-Competition and Non-Solicitation


 


(i)            Agreement
Not to Compete.   I agree that,
during the twelve (12) months immediately following the Separation Date, I
shall 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 (a “Competitor”),
except that nothing contained here shall prevent my passive ownership of two
percent (2%) or less of the equity securities of any Competitor that is a
publicly-traded company.  For the
purposes of this Agreement, the “Business of the Company and its Immediate
Affiliates” or the “Business” is that of arts and crafts specialty retailer
providing materials, ideas and education for creative activities and the “Territory”
is comprised of those states within the United States and those provinces of
Canada in which the Company or any of its Immediate Affiliates was doing or
actively planning to do business at any time during the twelve (12) months
immediately preceding the Separation Date.


 


(ii)           Restriction on Solicitation of Employees and Independent Contractors.  I agree that, during the twelve (12) months
immediately following the Separation Date, I shall not, and shall not assist
any other Person to, (A) 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 (B) 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 


 


4





















 


its Immediate
Affiliates who were such on the Separation Date or at any time during the nine (9) months
immediately preceding the Separation Date.


 


(iii)          Restriction on Solicitation of Distributors and Vendors.  I agree that, during the twelve (12) months
immediately following the Separation Date, 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.


 


(c)           Notification Requirement.  I agree that, until the first anniversary of
the Separation Date, 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 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 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 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.


 


5





















 


(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 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 enable the Company to access 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 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 therefore agree that the Company, in addition to any other remedies
available to it under this Agreement 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. 
I further agree with the Company that, in the event that any 


 


6





















 


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.


 


10.           Release of
Claims.   For and in consideration of the severance
benefits to be made to me in connection with my separation from employment with
the Company as set forth in the Plan and this Agreement, 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 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 liabilities, of any nature whatsoever, whether
known or unknown, which I had in the past, now have or might now have, through
the date on which I sign this Agreement, based on any federal, state or local
law, regulation or other requirement, which
may have arisen in connection with my employment with the Company or the
cessation thereof.     I acknowledge that signing this Agreement
does not limit or otherwise interfere with my right to file a charge or
participate in an investigation or proceeding conducted by the Equal Employment
Opportunity Commission (the “EEOC”) or other appropriate state agency.  I understand, however, that I am releasing
the right to any monetary recovery or relief should the EEOC or any other
agency pursue claims on my behalf.  Excluded
from the scope of this release, however, 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; 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 any agreements between me and 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.


 


7





















 


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


 


(c)           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.


 


(d)           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.


 


12.           Acceptance of this Agreement and Related Matters. I
acknowledge that I may not sign this Agreement prior to the Separation
Date.  I further acknowledge that I
understand I may take up to twenty-one (21) days from the later of the
Separation Date or the date of my receipt of this Agreement to consider this
Agreement before signing it.  In signing
this Agreement, I give the Company assurance that I have signed it voluntarily
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 any person of my choosing; and that, in signing this Agreement, I
have not relied on any promises or representations, express or implied, that
are not set forth expressly in this Agreement or the Plan.


 


[Signature page follows immediately.]


 


8





















 


INTENDING TO BE LEGALLY BOUND, I have signed this Agreement under seal
on the date indicated below.


 


 


	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name (Printed):

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date of signing:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ACCEPTED AND AGREED:

  	
   

  	
   

  
	
  MICHAELS STORES, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name (Printed)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date of signing:

  	
   

  	
   

  
											



 


9