Exhibit 10.5


 


SEPARATION AGREEMENT AND
RELEASE


 


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


 


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


 


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


 


II.            Resignation and
Severance Compensation.  The
termination of the undersigned is effective May 25, 2008 (“Termination
Date”) and shall be treated as a resignation for good reason by Mr. Kanter.  Accordingly, the undersigned hereby
irrevocably and unconditionally resigns from any officer position he holds
within Michaels or any of its subsidiaries or divisions effective on the
Termination Date.  It is stipulated and
agreed that the undersigned’s separation from the Company is other than for “Cause”
(as that term is defined in Section 1(i) of the Change in Control
Severance Agreement).  It is further
stipulated and agreed that the Company shall pay, provide and/or grant the
undersigned all compensation and benefits set forth under Section 6(b) and
Section 7 of the Change in Control Severance Agreement.


 


III.           Severance Pay.  Pursuant to Section 6(b)(i) of the
Change in Control Severance Agreement, the Company shall pay  Mr. Kanter a lump-sum payment in the gross amount of
One Million, One Hundred Forty-Three Thousand,


 

















 


Four Hundred Fifty-Nine Dollars and 72/100 ($1,143,459.72), subject to
all applicable or customary tax withholding requirements.


 


IV.           Prorated Annual
Bonus.  Pursuant to Section 6(b)(ii) of
the Change in Control Severance Agreement, the Company shall pay Mr. Kanter
a lump-sum payment in the gross amount of Fifty Nine Thousand Dollars and
43/100 ($59,000.43), subject to all applicable or customary tax withholding
requirements.


 


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


 


VI.           Savings and
Retirement Plan Benefits.  Pursuant
to Section 6(b)(v) of the Change in Control Severance Agreement, the
Company will pay a lump-sum payment in the gross amount of Thirty Six Thousand,
Seventy Three Dollars and 80/100 ($36,073.80), subject to all applicable or
customary tax withholding requirements.


 


VII.          Outplacement
Services.  Pursuant to Section 6(b)(vi) of
the Change in Control Severance Agreement, the Company agrees to reimburse him,
or directly pay expenses, for outplacement services up to $50,000; provided he
commences such services no later than six months following the Release
Effective Date and stops using these services within one year after the
Termination Date.


 


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


 


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


 


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


 


XI.           Third-Party.  The undersigned agrees to be available to the
Company, its affiliates and their attorneys on a reasonable basis in connection
with any pending or threatened claims, charges or litigation in which the
Company or any of its affiliates is now or may become involved, or any other
claims or demands made against


 

















 


or upon the Company or any of its affiliates, regardless of whether or
not the undersigned is a named defendant in any particular case.


 


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


 


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


 


XIV.        Non-Disparagement.  Mr. Kanter agrees not to make any
disparaging comments or statements, whether orally, electronically, or in
writing concerning the Company.  The
Company agrees that no director or officer shall make any disparaging comments,
whether orally, electronically, or in writing, concerning Mr. Kanter.


 


XV.         Reimbursement of
Legal Fees.  The Company shall
reimburse Mr. Kanter for legal fees in connection with review of this
Agreement in an amount not to exceed ten thousand dollars ($10,000.00).


 


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


 


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


 


[Remaining portion intentionally left black]


 

















 


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


 


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


 


 


	
   

  	
  MICHAELS STORES, INC.
  (“Company”)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Shawn Hearn

  
	
   

  	
  Name: 

  	
  Shawn Hearn

  
	
   

  	
  Title:

  	
    SVP, Human
  Resources

  
	
   

  	
  Date Signed:  5/23/08

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EMPLOYEE  (“undersigned” or “Mr. Kanter”)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/   Harvey
  S. Kanter

  
	
   

  	
  Harvey S. Kanter

  	
   

  
	
   

  	
  Date Signed:

  	
    5/27/08

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Audra Fower

  
	
   

  	
  Audra Fowler  5-27-08

  
	
   

  	
   

  
	
   

  	
  [NOTARY SEAL]

  
	
   

  	
   

  
	
   

  	
  I have
  identified & notarized the signature of

  
	
   

  	
  Mr. Harvey Kanter.