Exhibit 10.1


 


Execution Copy


 


AGREEMENT


 


AGREEMENT made and entered into by and between Michaels Stores, Inc.
(the “Company”) and John B. Menzer (the “Executive”), this 6th day of March,
2009.


 


WHEREAS, the operations of the Company and its Affiliates are a complex
matter requiring direction and leadership;


 


WHEREAS, the Executive is possessed of certain experience and expertise
that qualify him to provide the direction and leadership required by the
Company and its Affiliates; and


 


WHEREAS, subject to the terms and conditions hereinafter set forth, the
Company therefore wishes to employ the Executive as its Chief Executive Officer
and the Executive wishes to accept such employment;


 


NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, terms, provisions and conditions set forth in this Agreement,
the parties hereby agree:


 


1.             Employment.         Subject to the terms and
conditions set forth in this Agreement, the Company hereby offers, and the
Executive hereby accepts, employment.


 


2.             Term.      Subject to earlier
termination as hereinafter provided, the Executive’s employment hereunder shall
be for a term of five (5) years, commencing on April 15, 2009 or such
early date as the Company and the Executive may mutually agree (the “Effective
Date”), and shall renew automatically thereafter for successive terms of one
year each. The term of this Agreement, as from time to time renewed, is
hereafter referred to as “the term of this Agreement” or “the term hereof.”


 


3.             Capacity and Performance.


 


(a)           During the term hereof, the Executive shall
serve the Company as its Chief Executive Officer (“CEO”).  In addition,
and without further compensation, the Executive agrees to serve as a director
of the Company and, subject to Executive’s Separation Agreement dated January 21,
2008 with Wal-Mart Stores, Inc., as a director and/or officer of one or
more of the Company’s Immediate Affiliates (as defined in Section 13
hereof), in each case if so elected or appointed from time to time.


 


(b)           During the term hereof, the Executive shall
report to the Board of Directors of the Company or its designees, currently
Matthew Levin and Michael Chae.


 


(c)           During the term hereof, the Executive shall
be employed by the Company on a full-time basis and shall perform the duties
and responsibilities of his position, including, without limitation, general
oversight and direction of the operations of the Company and such other duties
and responsibilities on behalf of the Company consistent with the
responsibilities of a Chief Executive Officer, as well as the duties and
responsibilities reasonably related to other positions on behalf of the
Immediate Affiliates, as may be designated from time to time by the Board or by
its Chair or other designee.


 

















 


(d)           During the term hereof, the Executive shall
devote substantially all of his business time and his best efforts, business
judgment, skill and knowledge exclusively to the advancement of the business
and interests of the Company and, if so elected or appointed, its Immediate
Affiliates and to the discharge of his duties and responsibilities
hereunder.  The Company hereby agrees that the Executive may continue to
serve as a director of Emerson Electric Co. and may participate in appropriate
trade associations.  In addition, he may engage in appropriate civic,
charitable, religious or personal activities that do not conflict or interfere
with the proper performance of his duties hereunder.  However, the
Executive shall not engage in any other business activity or serve in any industry,
professional, governmental or academic position during the term of this
Agreement, except as may be expressly approved in advance by the Board in
writing.


 


4.             Compensation and Benefits.  As
compensation for all services performed by the Executive under and during the
term hereof and subject to performance of the Executive’s duties and of the
obligations of the Executive to the Company and its Immediate Affiliates,
pursuant to this Agreement or otherwise:


 


(a)           Base Salary.  During the term
hereof, the Company shall pay the Executive a base salary at the rate of One
Million Dollars ($1,000,000) per annum, payable in accordance with the payroll
practices of the Company for its executives and subject to increase from time
to time by the Board, in its sole discretion.  Such base salary, as from
time to time increased, is hereafter referred to as the “Base Salary”.


 


(b)           Bonuses.  For each fiscal year
completed during the term hereof, the Executive shall be eligible to earn an
annual bonus under the Company’s annual performance-based bonus plan as from
time to time in effect, subject to the achievement of such performance targets
as shall be determined in the discretion of the Board.  The Executive’s
target bonus shall be one hundred percent (100%) of Base Salary, with a maximum
bonus potential of two hundred percent (200%) of Base Salary for performance in
excess of the performance targets and with the actual amount of bonus, if any,
to be determined by the Board in its sole discretion.  Such bonus is
hereafter referred to as the “Annual Bonus.”   Subject to Section 5, Executive shall be
entitled to a non-pro rated bonus in respect of fiscal 2009 in a minimum amount
of $1 million.


 


(c)           Vacations.  During the term
hereof, the Executive shall be entitled to earn vacation at the rate of five (5) weeks
per year, to be taken at such times and intervals as shall be determined by the
Executive, subject to the reasonable business needs of the Company and the
approval of the person to whom the Executive reports.  Vacation shall otherwise
be governed by the policies of the Company, as in effect from time to time.


 


(d)           Other Benefits.  During the term
hereof, the Executive shall be entitled to participate in any and all Employee
Benefit Plans from time to time in effect for the Chief Executive Officer of
the Company (including a premium car lease) or senior executives of the Company
generally (including participation in any air mileage programs) .  Such
participation shall be subject to the terms of the applicable plan documents
and generally applicable Company policies.  For purposes of this
Agreement, “Employee Benefit Plan” shall have the meaning ascribed to
such term in Section 3(3) of ERISA, as amended from time to time.


 


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(e)           Business Expenses.  The Company
shall pay or reimburse the Executive for all reasonable, customary and
necessary business expenses incurred or paid by the Executive in the
performance of his duties and responsibilities hereunder, subject to any
maximum annual limit and other restrictions on such expenses set by the Board
and to such reasonable substantiation and documentation as may be specified by
the Company from time to time.  Such expenses shall include, without
limitation, the following:


 


(i)            reasonable expenses associated with
relocation of Executive, his family and household goods to Texas and with
obtaining suitable housing in Texas, all in accordance with the Company’s
current executive relocation plan, including engagement of a relocation
service, such as Sirva, Inc., whereby after a customary (60-90 days)
marketing period, the relocation service provider will offer to purchase
Executive’s existing house located at 3005 Red Fox Ridge, Bentonville, Arkansas
at a price determined by the average of two independent appraisals,


 


(ii)           reasonable legal fees incurred in connection
with his negotiation with the Company of this Agreement and the option and
restricted stock award documents described in (f) and (g) below, and


 


(iii)          reasonable travel expenses, including
business class airfare when available.


 


(f)            Restricted Stock Grant.  On the
Effective Date, the Company shall provide Executive with a grant of 1,000,000
shares of restricted stock pursuant to the form of Restricted Stock Award
Agreement attached as Exhibits A-1 and A-2.


 


(g)           Option
Grant.  On the Effective Date, the Company will grant to Executive an
option to purchase 2,000,000 shares of common stock pursuant to the Stock
Option Agreement attached as Exhibit B.


 


5.             Termination of Employment and Severance
Benefits.  Notwithstanding the provisions of Section 2 hereof,
the Executive’s employment hereunder shall terminate prior to the expiration of
the term hereof under the following circumstances:


 


(a)           Death.  In the event of the
Executive’s death prior to the expiration of the term hereof, the Executive’s
employment hereunder shall immediately and automatically terminate.  In
such event, the Company shall pay to the Executive’s designated beneficiary or,
if no beneficiary has been designated by the Executive in writing, to his
estate, (i) any Base Salary earned but not paid during the final payroll
period of the Executive’s employment through the date of termination, (ii) pay
for any vacation time earned but not used through the date of termination, (iii) a
pro-rata bonus for the year in which termination occurs, based on the actual
Annual Bonus that the Executive would have received for such year had he
remained employed by the Company for the full year and determined (except to
the extent of the pro rated portion of the minimum target entitlement for 2009
(the “pro-rated 2009 minimum”)) based on the Company’s actual results for such
year (payable (A) if death should occur during fiscal 2009, within thirty
(30) days following death to the extent of the pro-rated 2009 minimum, and (B) in
every other case at the time provided in the Company’s then


 


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applicable performance bonus plan, (iv) any bonus compensation
earned for the fiscal year preceding that in which termination occurs, but
unpaid on the date of termination (paid at the time provided in the Company’s
then applicable performance bonus plan), and (v) any business expenses
incurred by the Executive but un-reimbursed on the date of termination, provided
that such expenses and required substantiation and documentation are submitted
within sixty (60) days of termination and that such expenses are reimbursable
under Company policy (all of the foregoing, “Final Compensation”).  The
portion of the Final Compensation specified in clauses (i) and (ii) above
shall be paid within thirty (30) days following the date of termination.  The Company shall have no further obligation
to the Executive hereunder.


 


(b)           Disability.


 


(i)            The Company may
terminate the Executive’s employment hereunder, upon notice to the Executive,
in the event that the Executive becomes disabled during his employment
hereunder through any illness, injury, accident or condition of either a
physical or psychological nature and, as a result, is unable to perform
substantially all of his duties and responsibilities hereunder, notwithstanding
the provision of any reasonable accommodation, for one hundred and eighty (180)
days during any period of three hundred and sixty-five (365) consecutive calendar
days (“Disability”).  In the event of such termination, the Company shall
have no further obligation to the Executive, other than for payment of Final
Compensation (which shall be paid at the same time or times as in the case of a
termination by reason of death).


 


(ii)           The Board may designate
another employee to act in the Executive’s place during any period of the
Executive’s disability.  Notwithstanding any such designation, the
Executive shall continue to receive the Base Salary in accordance with Section 4(a) and
benefits in accordance with Section 4(e), to the extent permitted by the
then-current terms of the applicable benefit plans, until the Executive becomes
eligible for disability income benefits under the Company’s disability income
plan or until the termination of his employment, whichever shall first occur.


 


(iii)          While receiving
disability income payments under the Company’s disability income plan, the
Executive shall not be entitled to receive any Base Salary under Section 4(a) hereof,
but shall continue to participate in Company benefit plans in accordance with Section 4(e) and
the terms of such plans, until the termination of his employment.


 


(iv)          If any question shall
arise as to whether during any period the Executive is disabled through any
illness, injury, accident or condition of either a physical or psychological
nature so as to be unable to perform substantially all of his duties and
responsibilities hereunder, the Executive may, and at the request of the
Company shall, submit to a medical examination by a physician selected by the
Company to whom the Executive or his duly appointed guardian, if any, has no
reasonable objection to determine whether the Executive is so disabled and such
determination shall for the purposes of this Agreement be conclusive of the
issue.  If such question shall arise and the Executive shall fail to
submit to such medical examination, the Company’s determination of the issue
shall be binding on the Executive.


 


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(c)           By the Company for Cause.  The
Company may terminate the Executive’s employment hereunder for Cause at any
time upon notice to the Executive setting forth in reasonable detail the nature
of such Cause.  “Cause” shall mean the following events or conditions, as
determined by the Board in its reasonable judgment:  (i) the
Executive’s refusal to perform (other than by reason of disability), or
material negligence in the performance of, his duties and responsibilities to
the Company or any of its Affiliates, or refusal to follow or carry out any
lawful and reasonable direction of the Board, and the continuance of such
refusal or negligence for a period of ten (10) days after notice to the
Executive; (ii) the material breach by the Executive of any provision of
any material agreement between the Executive and the Company or any of its
Affiliates; (iii) fraud, embezzlement, theft or other dishonesty by the
Executive with respect to the Company or any of its Affiliates; (iv) the
conviction of, or a plea of nolo contendere
by, the Executive to any felony or any other crime involving dishonesty or
moral turpitude; and (v) any other conduct that involves a breach of
fiduciary obligation on the part of the Executive.  Upon the giving of
notice of termination of the Executive’s employment hereunder for Cause, the
Company shall have no further obligation to the Executive, other than for Final
Compensation (which shall be paid at the same time or times as in the case of a
termination by reason of death).


 


(d)           By the Company Other than for Cause. 
The Company may terminate the Executive’s employment hereunder other than for
Cause at any time upon notice to the Executive.  In the event of such
termination, in addition to Final Compensation (which shall be paid at the same
time or times as in the case of a termination by reason of death), then for the
period of two (2) years following the date of termination, the Company
shall provide the Executive Severance Benefits as follows:  (i) the
Company will pay the Executive Severance Pay equal to the sum of (A) the
Base Salary at the annual rate in effect on the date of termination and (B) the
Executive’s target Annual Bonus determined in accordance with Section 4(b) hereof
and (ii) (A) if the Company in its discretion determines that it can
do so consistent with the requirements of Section 105(h) of the Code
and with applicable law and plan terms, it shall provide continued coverage to
the Executive under its group medical and dental plans, at the Company’s cost
subject only to the Executive’s payment of the employee portion (determined on
the same basis as applied to the Executive on the date of termination) plus any
required administrative fee, or (B) if the Company in its discretion
determines that it cannot provide continued coverage on the basis described in
clause (A), it shall instead provide continued coverage to the extent required
by the so-called “COBRA” coverage continuation rules and shall pay to the
Executive, at the same time as it pays the first severance payment under clause
(i)(A), a lump sum equal in its reasonable estimation to what would have been
its premium cost under clause (ii)(A) had clause (ii)(A) applied. 
It shall be a condition to any obligation of the Company to the Executive under
this Section 5(d) or Section 5(e) below, other than the
Company’s obligation to pay the Final Compensation, that the Executive shall
have signed and returned to the Company, not later than forty-five (45) days
after the date of termination (or by such earlier date as the Company may
specify), a release of claims in the form attached as Exhibit C (the “Release
of Claims”) and that seven days after the delivery of such Release of Claims
shall have elapsed without the Executive’s having revoked the Release of
Claims.  The Release of Claims creates legally binding obligations on the
part of the Executive, and the Company and its Affiliates therefore advise the
Executive to seek the advice of an attorney before signing the Release of
Claims.  Provided the foregoing conditions to payment are satisfied, the
severance pay described in Section 5(d)(i) above shall be paid
commencing with the first payroll that 


 


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follows the date of termination by sixty (60) days, with the first such
payment to include all amounts that would have been paid under Section 5(d)(i) had
payment commenced with the first payroll after termination of employment. 
In the event that Executive is entitled to receive benefits upon termination
under any other agreement with, or plan or policy of, the Company (an “alternative
severance arrangement”), the provisions of such alternative severance
arrangement shall be given effect, if at all, (A) so as not to duplicate
the benefits payable hereunder, and (ii) only to the extent they do not
result in an impermissible acceleration or deferral of any benefits payable
hereunder that are subject to the requirements of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”). Severance Pay to which
the Executive is entitled hereunder shall be payable on a pro-rated basis at
the Company’s regular payroll periods and in accordance with its normal payroll
practices.


 


(e)           By the Executive for Good Reason. 
The Executive may terminate his employment hereunder for Good Reason pursuant
to the procedures hereinafter specified.  The following shall constitute
Good Reason for termination by the Executive:


 


(i)            Removal of the
Executive, without his consent, from the position of CEO of the Company (or a
successor corporation);


 


(ii)           Material diminution in
the nature or scope of the Executive’s responsibilities, duties or authority;
provided, however, that the Company’s failure to continue the Executive’s
appointment or election as a director or officer of any of its Affiliates, a
change in reporting relationships resulting from the direct or indirect control
of the Company (or a successor corporation) by another corporation or other
entity and any diminution of the business of the Company or any of its
Affiliates or any sale or transfer of equity, property or other assets of the
Company or any of its Affiliates shall not constitute “Good Reason”; or


 


(iii)          Material failure of the
Company to provide the Executive the Base Salary and benefits in accordance
with the terms of Section 4 hereof.


 


To qualify as a termination for Good Reason under this Section 5(e),
the Executive must have given notice to the Company, setting forth in
reasonable detail the nature of the Good Reason. within ninety (90) days of the
initial existence or occurrence of the event or events purportedly giving rise
to Good Reason, the Company must have failed to cure the Good Reason within
thirty (30) days of receiving notice, and termination of employment must have
occurred within thirty (30) days following the expiration of the thirty-day
cure period.  In the event of termination
in accordance with this Section 5(e), the Executive will be entitled to
the payments and benefits to which he would have been had he been terminated by
the Company other than for Cause in accordance with Section 5(d) above,
subject to the same conditions to payment as are specified in Section 5(d) above
and with any payments and benefits to be paid or provided at the same time and
in the same manner as prescribed in Section 5(d) above.


 


(f)            By the Executive Other than for Good
Reason.  The Executive may terminate his employment hereunder at any
time upon sixty (60) days’ notice to the Company. In the event of termination
of the Executive pursuant to this Section 5(f), the Board may elect to
waive the period of notice, or any portion thereof, and, if the Board so
elects, the Company will pay the 


 


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Executive his Base Salary for the initial sixty (60) days of the notice
period (or for any remaining portion of such period).  The Company shall
have no further obligation to the Executive, other than for any Final
Compensation due to him (which shall be paid at the same time or times as in
the case of termination by reason of death).


 


(g)           Timing of Payments.  Separate
Payments.  For purposes of determining whether any payment or series of payment
owed to the Executive hereunder qualify for the “short-term deferral” exception
under Section 409A of the Code, each such payment (and each payment in a
series of payments) shall be treated as a separate payment.


 


(h)           Miscellaneous.   For purposes of this Agreement, references
to termination of employment, retirement, separation from service and similar
or correlative terms mean a “separation from service” (as defined at Section 1.409A-1(h) of
the Treasury Regulations) from the Company and from all other corporations and
trades or businesses, if any, that would be treated as a single “service
recipient” with the Company under Section 1.409A-a(h)(3) of the Treasury
Regulations, and any reference to date of termination or to similar or
correlative terms means the date of the separation from service.  If at the relevant time the Executive is a “specified
employee” (as defined in the regulations under Section 409A of the Code),
as determined by the Company, any payments hereunder that are payable on
account of the Executive’s separation from service and that are subject to Section 409A
of the Code as nonqualified deferred compensation shall be paid on the later of
(i) the date they would have been paid without regard to this subsection
(h), and (ii) the date which follows by six months the date of the
Executive’s separation from service.


 


6.             Effect of Termination.  The
provisions of this Section 6 shall apply to any termination, whether due
to the expiration of the term hereof, pursuant to Section 5 or otherwise.


 


(a)           In the event of the termination of the
Executive’s employment hereunder, payment by the Company of any amounts due in
accordance with the applicable termination provision of Section 5 hereof
shall constitute the entire obligation of the Company to the Executive. 
The Executive shall promptly give the Company notice of all facts necessary for
the Company to determine the amount and duration of its obligations in
connection with any termination pursuant to Section 5(d) or 5(e) hereof.


 


(b)           Except for any right of the Executive to
continue medical and dental plan participation in accordance with applicable
law, benefits shall terminate pursuant to the terms of the applicable benefit
plans based on the date of termination of the Executive’s employment without
regard to any continuation of Base Salary or other payment to the Executive
following such date of termination.


 


(c)           Provisions of this Agreement shall survive
any termination or expiration of the term hereof, if so provided in this
Agreement or if necessary or desirable to accomplish the purposes of other
surviving provisions, including without limitation the obligations of the
Executive under Sections 7, 8 and 9 hereof.  Any obligation of the Company
otherwise to make payments to or on behalf of the Executive under Section 5(d) or
5(e) hereof is expressly conditioned upon the Executive’s continued full
performance of obligations under Sections 7, 8 and 9 hereof.  The
Executive recognizes that no compensation is earned after termination of his 


 


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employment hereunder, except as otherwise expressly provided in
accordance with Section 5(d), 5(e) or 5(f) (for any portion of
the notice period waived).


 


7.             Confidential Information.


 


(a)           The Executive acknowledges that the Company
and its Affiliates continually develop Confidential Information; that the
Executive may develop Confidential Information for the Company or its
Affiliates; and that the Executive may learn of Confidential Information during
the course of employment.  The Executive will comply with the policies and
procedures of the Company and its Affiliates for protecting Confidential
Information and shall not disclose to any Person or use any Confidential
Information obtained by the Executive incident to his employment or other
association with the Company or any of its Affiliates, other than as required
for the proper performance of the Executive’s duties and responsibilities to
the Company and its Affiliates or as required by applicable law or legal
process after notice to the Company and a reasonable opportunity for it to seek
protection of such Confidential Information prior to disclosure.  The Executive
understands that these restrictions shall continue to apply after his
employment terminates, regardless of the reason for such termination.  The
confidentiality obligation under this Section 7 shall not apply to
information which is generally known or readily available to the public at the
time of disclosure or becomes generally known through no wrongful act on the
part of the Executive or any other Person having an obligation of
confidentiality to the Company or any of its Affiliates.


 


(b)           All documents, records, tapes and other
media of every kind and description relating to the business, present or
otherwise, of the Company or its Affiliates and any copies, in whole or in
part, thereof (the “Documents”), whether or not prepared by the Executive,
shall be the sole and exclusive property of the Company and its
Affiliates.  The Executive shall safeguard all Documents and shall
surrender to the Company at the time his employment terminates, or at such
earlier time or times as the Board or its designee may specify, all Documents
then in the Executive’s possession or control.


 


8.             Assignment of
Rights to Intellectual Property.  The
Executive shall promptly and fully disclose all Intellectual Property to the
Company.  The Executive hereby assigns and agrees to assign to the Company
(or as otherwise directed by the Company) the Executive’s full right, title and
interest in and to all Intellectual Property developed at any time during his
employment with the Company, its Affiliates, successors or assigns.  The
Executive agrees to execute any and all applications for domestic and foreign
patents, copyrights or other proprietary rights and to do such other acts
(including without limitation the execution and delivery of instruments of
further assurance or confirmation) requested by the Company to assign the
Intellectual Property to the Company and to permit the Company to enforce any
patents, copyrights or other proprietary rights to the Intellectual Property.
The Executive will not charge the Company for time spent in complying with
these obligations.  All copyrightable works that the Executive creates
shall be considered “work made for hire” and shall, upon creation, be owned
exclusively by the Company.


 


9.             Restricted Activities.  The
Executive acknowledges the importance to the Company and its Affiliates of
protecting their trade secrets and other Confidential Information and their
other legitimate business interests, including without limitation the valuable
trade 


 


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secrets, other Confidential Information and goodwill that they have
developed or acquired and which they shall continue to develop and acquire
while the Executive’s employment continues.  The Company agrees, in
consideration of the Executive’s acceptance of the restrictions set forth
below, to grant the Executive access to trade secrets and other Confidential
Information of the Company and its Immediate Affiliates and to their valuable
business relationships and their goodwill.  The Executive acknowledges and
agrees that the restrictions on his activities during and after his employment
set forth below are necessary to protect the goodwill, Confidential Information
and other legitimate interests of the Company and its Affiliates:


 


(a)           The Executive agrees that, during his
employment with the Company and for the period of twenty-four (24) months
immediately following the termination of his employment, regardless of the
basis or timing of such termination, the Executive will 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 in this Section 9(a) shall prevent the Executive’s
wholly 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 Executive’s employment or, with respect to his obligations
hereunder following termination of his employment with the Company, at any time
during the six (6) months immediately preceding such termination.


 


(b)           The Executive agrees that, during his
employment with the Company, he will comply with any and all codes of ethics or
business conduct of the Company applicable to his position, as in effect from
time to time, and will not undertake any outside activity, whether or not competitive
with the business of the Company or its Affiliates, that could reasonably give
rise to a conflict of interest or otherwise interfere with his duties and
obligations to the Company or any of its Affiliates.


 


(c)           The Executive agrees that, during his
employment and during the period  of twenty-four (24) months immediately
following termination of his employment, regardless of the basis or timing of
such termination, the Executive will not, and will 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, after termination of the Executive’s employment
with the Company, these restrictions shall apply only with respect to employees
of, and independent contractors providing services to, the Company or any of
its Immediate Affiliates on the date the Executive’s 


 


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employment with the Company terminates or at any time during the
preceding twelve (12) months.


 


(d)           The Executive agrees that, during his
employment and during the period  of  twenty-four (24) months
immediately following termination of his employment, regardless of the basis or
timing of such termination, the Executive will 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 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, after termination of
the Executive’s employment with the Company, these restrictions shall apply
only with respect to those distributors and vendors who were doing business with
the Company or any of its Affiliates on the date the Executive’s employment
terminates or at any time during the preceding twelve (12) months.


 


10.           Notification
Requirement.  Until the conclusion of twenty-four (24) months
following termination of his employment with the Company, the Executive shall
give notice to the Company of each new business activity he plans to undertake,
at least ten (10) business days prior to beginning any such
activity.  Such notice shall state the name and address of the Person for
whom such activity is undertaken and the nature of the Executive’s business
relationship(s) and position(s) with such Person.  The Executive
shall provide the Company with such other pertinent information concerning such
business activity as the Company may reasonably request in order to determine
the Executive’s continued compliance with his obligations under Sections 7, 8
and 9 hereof.


 


11.           Enforcement
of Covenants.  The Executive acknowledges that he has carefully read
and considered all the terms and conditions of this Agreement, including the
restraints imposed upon him pursuant to Sections 7, 8 and 9 hereof.  The
Executive agrees without reservation that each of the restraints contained
herein is necessary for the reasonable and proper protection of the goodwill,
Confidential Information and other legitimate interests of the Company and its
Affiliates; that each and every one of those restraints is reasonable in
respect to subject matter, length of time and geographic area; and that these
restraints, individually or in the aggregate, will not prevent him from
obtaining other suitable employment during the period in which the Executive is
bound by these restraints.  The Executive further agrees that he will
never assert, or permit to be asserted on his behalf, in any forum, any
position contrary to the foregoing.   The Executive further
acknowledges that, were he to breach any of the covenants contained in Sections
7, 8 or 9 hereof, the damage to the Company and its Affiliates would be irreparable. 
The Executive therefore agrees that the Company, in addition to any other
remedies available to it, shall be entitled to preliminary and permanent
injunctive relief against any breach or threatened breach by the Executive of
any of said covenants, without having to post bond.  The parties further
agree that, in the event that any provision of Section 7, 8 or 9 hereof
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.


 


12.           Conflicting
Agreements.  The Executive hereby represents and warrants that the
execution of this Agreement and the performance of his obligations hereunder
will not breach or


 


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be in conflict with any other agreement to which the Executive is a
party or is bound and that the Executive is not now subject to any covenants
against competition or similar covenants or any court order or other legal
obligation that would affect the performance of his obligations
hereunder.  The Executive will not disclose to or use on behalf of the
Company any proprietary information of a third party without such party’s
consent.


 


13.           Definitions. 
Words or phrases which are initially capitalized or are within quotation marks
shall have the meanings provided in this Section and as provided elsewhere
herein.  For purposes of this Agreement, the following definitions apply:


 


(a)           “Affiliates” means
all persons and entities directly or indirectly controlling, controlled by or
under common control with the Company, where control may be by either
management authority, contract or equity interest.


 


(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 understanding, express or implied,
that the information would not be disclosed.


 


(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)           “Intellectual
Property” means inventions, discoveries, developments, methods, processes,
compositions, works, concepts and ideas (whether or not patentable or
copyrightable or constituting trade secrets) conceived, made, created,
developed or reduced to practice by the Executive (whether alone or with
others, whether or not during normal business hours or on or off Company
premises) during the Executive’s employment that relate to the Business of the
Company or any of its Immediate Affiliates or to any prospective activity of
the Company or any of its Immediate Affiliates or to any work performed by the
Executive for the Company or any of its Immediate Affiliates or that make use
of  Confidential Information or any of the equipment or facilities or
other resources of the Company or any of its Immediate Affiliates.


 


(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.


 


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15.           Withholding. 
All payments made by the Company under this Agreement shall be reduced by any
tax or other amounts required to be withheld by the Company under applicable
law.


 


16.           Assignment. 
Neither the Company nor the Executive may make any assignment of this Agreement
or any interest herein, by operation of law or otherwise, without the prior
written consent of the other; provided, however, that the Company may assign
its rights and obligations under this Agreement without the consent of the
Executive in the event that the Executive is transferred to a position with any
of the Affiliates or in the event that the Company shall hereafter effect a
reorganization, consolidate with, or merge into, any Person or transfer all or
substantially all of its properties or assets to any Person.  This
Agreement shall inure to the benefit of and be binding upon the Company and the
Executive, their respective successors, executors, administrators, heirs and
permitted assigns.


 


17.           Severability. 
If any portion or provision of this Agreement shall to any extent be declared
illegal or unenforceable by a court of competent jurisdiction, then the
remainder of this Agreement, or the application of such portion or provision in
circumstances other than those as to which it is so declared illegal or
unenforceable, shall not be affected thereby, and each portion and provision of
this Agreement shall be valid and enforceable to the fullest extent permitted
by law.


 


18.           Waiver. 
No waiver of any provision hereof shall be effective unless made in writing and
signed by the waiving party.  The failure of either party to require the
performance of any term or obligation of this Agreement, or the waiver by
either party of any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of any subsequent
breach.


 


19.           Notices. 
Any and all notices, requests, demands and other communications provided for by
this Agreement shall be in writing and shall be effective when delivered in
person, consigned to a reputable national courier service or deposited in the
United States mail, postage prepaid, registered or certified, and addressed to
the Executive at his last known address on the books of the Company or, in the
case of the Company, at its principal place of business, attention of the Chair
of the Board, or to such other address as either party may specify by notice to
the other actually received.


 


20.           Entire
Agreement.  This Agreement constitutes the entire agreement between
the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of
the Executive’s employment.


 


21.           Amendment. 
This Agreement may be amended or modified only by a written instrument signed
by the Executive and by a expressly authorized representative of the Board.


 


22.           Headings. 
The headings and captions in this Agreement are for convenience only and in no
way define or describe the scope or content of any provision of this Agreement.


 


23.           Counterparts.  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.


 


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24.           Governing Law. 
This is a Texas contract and shall be construed and enforced under and be governed
in all respects by the laws of the State of Texas, without regard to the
conflict of laws principles thereof.


 


[Signature page follows immediately.]


 


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IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company, by its duly authorized representative, and by the
Executive, as of the date first above written.


 


	
  THE EXECUTIVE:

  	
   

  	
  THE COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MICHAELS STORES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ John B. Menzer

  	
   

  	
  By:

  	
  /s/ Matthew S. Levin

  
	
   John B. Menzer

  	
   

  	
   

  	
  Matthew S. Levin

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Michael S. Chae

  
	
   

  	
   

  	
   

  	
  Michael S. Chae

  



 


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