Exhibit 10.17


 


MICHAELS
STORES, INC.


OFFICER
SEVERANCE PAY PLAN


Established
April 17, 2008 and Amended as of July 28, 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, Executive Vice President, or President.  No other individual will be considered a
Participant.


 


III.           QUALIFICATIONS
FOR RECEIPT OF PLAN BENEFITS


 


In order to qualify for benefits under this Plan, a Participant must
meet all of the following qualifications: 
(A) must have a Qualifying Termination, as defined in Section IV
below; (B) must not be eligible for severance pay or other termination benefits (other
than incidental perquisites such as continued use of a Company vehicle or an
air travel allowance) 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.


 


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IV.           QUALIFYING TERMINATION


 


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


 


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


 


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


 


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


 


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


 


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


 


V.            EXCLUSIONS


 


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


 


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


 


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


 


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


 


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D.    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 salary and bonus opportunity
and there is no change in Participant’s principal place of employment to a location
more than 35 miles from the Participant’s principal place of employment
immediately prior to the Qualifying Termination; or


 


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


 


VI.           BENEFITS UNDER THE PLAN


 


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


 


(1)   Severance Pay:


 


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


 


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


 


(c)  One month of severance pay is equal to one-twelfth 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 employed during
the fiscal 


 


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


 


(3)   Premium Welfare Benefits:


 


During
the period of severance pay, the Company shall continue the participation of
the Participant and his/her spouse and dependants in the group medical, vision
and dental plans of the Company made available to active employees of the
Company at the level of benefits provided to active employees similarly
situated to the Participant prior to the Termination Date, provided that the
Participant is entitled to continue such participation under applicable law and
plan terms.  During this period, the
Company will contribute to the premium cost of Participant’s participation in
the Company’s group medical, vision and dental plans, provided that the
Participant pays the remainder of such premium cost, if any, and any required
administrative fee, in a timely manner from month to month, and further provided,
however, that if the Participant becomes reemployed with another
employer-provided plan, the medical, vision and dental benefits described
herein shall be secondary to those provided under such other plan during such
applicable period of eligibility.  
Notwithstanding anything to the contrary contained herein, Participant
shall provide the Company with notice of eligibility under another
employer-provided health benefit plan within seven (7) calendar days of
becoming eligible.  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, vision 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.


 


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


 


VII.         CONDITIONS OF RECEIVING PLAN
BENEFITS


 


A.    The
Agreement and Release.


 


(1)       A Participant who has been informed that he/she will
be subject to a Qualifying Termination will be provided by the Company an
Agreement and Release in the form of attached to this Plan as Exhibit A.  In order to qualify for benefits under this
Plan, the Participant must sign, date and return the Agreement and Release in a
timely manner and it must become effective in accordance with its terms and
this Plan.  The Agreement and Release
must be signed and returned no earlier than the day immediately
following the Termination Date and no later than the 21st calendar 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 calendar days following the later of the Participant’s
Termination Date or the date the Participant receives the OWBPA
Memorandum.  In order to qualify for
benefits under this Plan, the Participant must sign and return the Agreement
and Release after both the Participant’s Termination Date and the
Participant’s receipt of the OWBPA Memorandum have occurred, but no later
than the 45th calendar day following his/her Termination Date or the date s/he
receives the OWBPA Memorandum, whichever occurs second.


 


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


 


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


 


(5)         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 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 


 


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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 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 Termination Date.


 


(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 Termination Date.


 


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


 


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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 has violated any obligation under Section VII
hereof or otherwise breached any material provision of any written agreement
with the Company or any of its Affiliates.


 


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:


 


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


 


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


 


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


 


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XI.           ADMINISTRATION,
CLAIMS PROCEDURE AND GENERAL INFORMATION


 


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


 


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


 


C.            A
request for review must be made in writing by the claimant or his/her duly
authorized representative to the Company, as Plan administrator, within 60
calendar days after receipt of notice of denial. As part of the claimant’s
request, the claimant may submit written issues and comments to the Plan
administrator, review pertinent documents, and request a hearing. The Plan
administrator’s written decision will be made within 60 calendar days (or 120
calendar days if a hearing is held or if other special circumstances exist
requiring more than 60 calendar days and written notice of the extension is
provided to the claimant within the initial 60-calendar day period) after the
claimant’s request has been received. Again, the decision will include specific
reasons, including references to pertinent Plan provisions.


 


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[Signature page follows immediately.]


 


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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:

  	
   

  	
   

  



 


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Exhibit A


 


AGREEMENT AND
RELEASE


 


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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 


 


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and
organizations with whom the Company and its Affiliates have business
relationships and those relationships. 
Confidential Information also includes any information that the Company
or any of its Affiliates have received, or may receive hereafter, belonging to
customers or others with any understanding, express or implied, that the
information would not be disclosed. 
Confidential Information does not include information that has entered
the public domain other than through my disclosure in violation of my
obligations to the 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 direct 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 than 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 


 


3

















 


Plan.


 


(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


 


4

















 


them;
provided, however, that these restrictions shall apply only with respect to
employees of, and independent contractors providing services to, the Company or
one of its Immediate Affiliates who were 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 


 


5

















 


whom the
Company or any of its Affiliates is doing, or is planning to do, business.   I
agree to keep the terms of this Agreement confidential.  I further agree that I have not
disclosed and will not disclose such terms to any third party other
than my attorneys, accountants and spouse. 
Notwithstanding the foregoing, I may reveal the terms of this
Agreement if I am required to disclose them by a court order.


 


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


 


6

















 


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 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


 


7

















 


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.


 


(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:

  	
   

  	
   

  
					



 


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