EXHIBIT 10.1


 


SEPARATION AGREEMENT AND RELEASE


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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portion intentionally left black]


 

















 


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


 


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


 


 


	
   

  	
  MICHAELS STORES, INC.,

  
	
   

  	
   

  
	
   

  	
  By

  
	
   

  	
   

  
	
   

  	
   

  	
        /s/
  Shawn Hearn

  
	
   

  	
        Name:  Shawn Hearn 

  
	
   

  	
        Title:    SVP, Human Resources

  
				



 


 


	
   

  	
  EMPLOYEE,

  
	
   

  	
   

  
	
   

  	
   

  	
    /s/ Thomas M.
  Bazzone

  
	
   

  	
         Thomas
  M. Bazzone

  
	
   

  	
         Date
  Signed:  7/2/08

  
				



 

















 


ACKNOWLEDGMENTS


 


	
  STATE OF
  TEXAS

  	
  ‘

  	
   

  
	
   

  	
  ‘

  	
   

  
	
  COUNTY OF
  DALLAS

  	
  ‘

  	
   

  



 


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


 


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


 


 


	
   

  	
  Kerri Bates

  
	
   

  	
  Notary Public in and for
  the

  
	
   

  	
  State of Texas

  
	
  [NOTARY SEAL]

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Notary’s Printed Name and

  
	
   

  	
  Commission Expiration

  



 


	
  STATE OF
  TEXAS

  	
  ‘

  	
   

  
	
   

  	
  ‘

  	
   

  
	
  COUNTY OF
  DALLAS

  	
  ‘

  	
   

  



 


 


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


 


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


 


 


	
   

  	
  Betty J. Bauerle

  
	
   

  	
  Notary Public in and for
  the

  
	
   

  	
  State of Texas

  
	
  [NOTARY SEAL]

  	
   

  
	
   

  	
   

  
	
   

  	
  Notary’s Printed Name and

  
	
   

  	
  Commission Expiration