EXHIBIT 10.1
AGREEMENT
THIS AGREEMENT ("Agreement") is entered into effective
as of January 21, 1997, between MICHAELS STORES, INC.
("Michaels") and R. XXX XXXXXX ("Xxxxxx").
WHEREAS, Xxxxxx has been an employee and officer of
Michaels and in such capacities has performed services for Michaels;
and
WHEREAS, Xxxxxx wishes to retire from the positions he
holds with Michaels; and
WHEREAS, the parties wish to set forth in full their
agreement regarding certain matters;
NOW, THEREFORE, in consideration of the covenants
contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties do hereby agree as follows:
Section 1. Resignation as Officer; Continued
Employment. Xxxxxx hereby resigns as an officer of Michaels and
from any position he holds with Michaels and any subsidiary of
Michaels (including without limitation fiduciary appointments),
effective as of March 24, 1997. Xxxxxx shall remain a non-officer
employee of Michaels from March 25, 1997 through September 30,
1997, and for his services as such shall be compensated at a rate
equal to his current base salary, subject to all applicable or
customary tax, benefits and insurance premium withholding
requirements, and in accordance with Michaels' customary payroll
practices, for such period. During the period of such continued
employment, Michaels will provide Xxxxxx with office space,
furniture and equipment reasonably adequate to facilitate his
performance of the duties of such employment, and will provide
standard utilities and local telephone service at the location of such
office space. Xxxxxx will promptly reimburse Michaels for any out
of pocket expenses (excluding the allocated costs of rent, utilities
and local telephone service) incurred in connection with such office
space, furniture and equipment (including without limitation the
costs of supplies and long distance telephone charges) which exceed
$500 in any month during such period. Any charges incurred by
Xxxxxx in connection with any cellular or car telephone shall be at his
sole expense.
Section 2. Effectiveness. Upon the expiration of the 7-day
revocation period described in Section 25 below, this Agreement
will become effective as of the date first set forth above, unless
Xxxxxx revokes the Agreement during such revocation period. If the
Agreement becomes effective, it may not thereafter be revoked by
either party.
Section 3. Benefits.
(a) Retirement/Death Benefits. Subject to the
terms of Section 13 below, Michaels agrees to pay Xxxxxx monthly
retirement and/or death benefits of $15,000, subject to all applicable
or customary tax, benefits and insurance premium withholding
requirements (including without limitation Xxxxxx' (or his current
eligible dependents') share of the cost of health care benefits as
provided in Section 3(b) below), beginning on October 1, 1997 and
continuing on the first day of each month thereafter until the later to
occur of (i) Xxxxxx' death or (ii) September 1, 2012. If Xxxxxx dies
before September 1, 2012, the payments under this Section shall be
to such beneficiary as designated in writing to Michaels by Xxxxxx,
or, if no beneficiary has been so designated, such payments shall be
paid to Xxxxxx' estate. The retirement/death benefits provided for in
this Section are agreed to with the expectation that Michaels will
obtain a benefit from the agreements contained in Section 13 below.
(b) Health Care Benefits. Michaels will permit
Xxxxxx and his current eligible dependents to participate in Michaels'
medical plan on substantially the same basis as senior executive
employees and their eligible dependents participate in such medical
plan from time to time. If such continued participation is not
possible for any reason, Michaels will purchase health insurance
coverage for Xxxxxx and his current eligible dependents that
provides, to the extent practicable, reasonably comparable benefits.
Such medical plan participation or insurance coverage will terminate
with respect to Xxxxxx upon the earliest to occur of (i) August 6,
2004, (ii) the date of Xxxxxx' death or (iii) the date on which Xxxxxx
becomes eligible to receive similar benefits from another person or
entity; and will terminate with respect to any current eligible
dependent on the earliest to occur of (A) the date on which the
dependent ceases to be an eligible dependent (as determined under
the terms of the Michaels medical plan in effect from time to time),
(B) the date on which the dependent becomes eligible to receive
Medicare or similar benefits from another person or entity or (C)
September 30, 2012. Notwithstanding anything to the contrary
contained herein, beginning on October 1, 1997 the cost of such
benefits, whether provided under the Michaels medical plan or other
insurance coverage, based on COBRA rates applicable to senior
executive employees from time to time, shall be shared equally by
Michaels and Xxxxxx (or his current eligible dependents, as the case
may be). In the event that any monthly retirement/death benefit
provided for in Section 3(a) above is reduced pursuant to the terms
of Section 13 below to an amount less than Xxxxxx' (or his current
eligible dependents') share of the cost of the health care benefits
provided hereunder for such month, then such shortfall will be paid
by Michaels on Xxxxxx' (or his current eligible dependents') behalf,
and the Reduction Amount (as defined in Section 13), and the
$1,570,000 maximum total reduction specified in Section 13, shall
both be increased by an amount equal to the amount of such shortfall
so paid by Michaels.
(c) Whole Life Insurance Policy Premiums.
Michaels will pay to Xxxxxx the current monthly premium for 55
months with respect to that certain Whole Life - Adjustable
Insurance Policy issued by Northwestern Mutual Life Insurance
Company ("Northwestern"), dated October 2, 1991, Policy Number
11 917 570, beginning with the premium due in June 1997, subject
to all applicable withholding requirements.
(d) Split-Dollar Insurance. Michaels and Xxxxxx
are parties to that certain Contributory Split-Dollar Insurance
Agreement dated February 28, 1990 (the "Split-Dollar Agreement").
Michaels hereby forgives and discharges the loan to Xxxxxx
described in Article Three of the Split-Dollar Agreement, and will
execute and deliver to Xxxxxx a reassignment of the Insurance
Contract (as defined in Article One of the Split-Dollar Agreement)
or a release of the original collateral assignment of the Insurance
Contract. It is acknowledged and agreed that Michaels will make no
further payments under or with respect to the Split-Dollar Agreement
or the Insurance Contract.
(e) Liability Insurance. Michaels will cause
Xxxxxx to continue to be covered under a policy of officers' and
directors' liability insurance with respect to Xxxxxx' prior services as
an executive officer of Michaels which will provide coverage that is
comparable to that provided to other individuals serving as executive
officers of Michaels during the period of such prior service by
Xxxxxx.
(f) Automobile. Xxxxxx may continue to use the
automobile leased for his use by Michaels and currently in his
possession until the expiration of the applicable lease in December
1997, whereupon Michaels will enable Xxxxxx to purchase such
automobile at the purchase price stated in such lease. During the
term of such lease, Michaels shall continue to make all rent
payments required thereunder. Xxxxxx will be solely liable for all
operating costs associated with such automobile, including without
limitation fuel, oil, parts (other than parts required in connection
with any routine maintenance in accordance with the manufacturer's
recommended maintenance schedule), tires and paint, but excluding
insurance premiums and the costs of routine maintenance in
accordance with the manufacturer's recommended maintenance
schedule, which will continue to be paid by Michaels.
(g) AAirpass. Michaels hereby transfers and
assigns to Xxxxxx its interest in and to the American Airlines
AAirpass (the "AAirpass") purchased for his use by Michaels and
currently in his possession. Xxxxxx hereby assumes full
responsibility for all current and future charges, fees and assessments
incurred under or with respect to the AAirpass, agrees to indemnify
Michaels and hold it harmless from and against any and all such
charges, fees and assessments and agrees promptly to execute and
deliver a standard American Airlines form of Assumption
Agreement relating to the AAirpass.
(h) Tax Information. Michaels will use
reasonable efforts to provide to Xxxxxx information which is in
Michaels' possession or subject to its control and which is requested
by Xxxxxx in connection with the preparation of his personal tax
returns.
Section 4. Assistance with Litigation. Xxxxxx will make
himself available and will assist Michaels and its affiliates in
connection with any litigation in which Michaels or any of its
affiliates is now or may become involved, including without
limitation that certain action styled Xxxxxx Xxxxxxxx, et al. x.
Xxxxxxxx Stores, Inc., et al. pending in the United States District
Court for the Northern District of Texas, Dallas Division. Any
reasonable costs and expenses incurred by Xxxxxx in providing such
assistance will be promptly reimbursed, or paid in advance, by
Michaels.
Section 5. Taxes. Xxxxxx shall promptly pay and be
solely liable for all income and other taxes and charges imposed on
Xxxxxx as a result of payments made or other benefits provided to
him pursuant to this Agreement.
Section 6. Return of Property. Xxxxxx shall promptly
return to Michaels all property of Michaels in Xxxxxx' possession or
subject to his control, except that Xxxxxx shall be entitled to keep as
his personal property (a) the personal computer and related
equipment and software currently located in his office at Michaels
and (b) two fax machines currently located at his residences. As
between Xxxxxx and Xxxxxxxx, Xxxxxx will be solely liable for all
charges incurred for periods after March 24, 1997 in connection with
any property, services or benefits whatsoever, including without
limitation charges incurred in connection with any cellular or car
telephone, except as otherwise specifically provided in this
Agreement.
Section 7. Advice in Writing. Michaels hereby advises
Xxxxxx to consult with an attorney of his choice prior to signing this
Agreement.
Section 8. Period of Consideration. It is acknowledged
and agreed that Xxxxxx has at least twenty-one (21) days to consider
whether to execute this Agreement.
Section 9. Voluntary Act. Xxxxxx represents and agrees
that he has thoroughly discussed all aspects of this Agreement with
his attorney, that Xxxxxx is fully aware of his right to discuss any and
all aspects of this matter with an attorney of his choice, that he has
carefully read and fully understands all of the provisions of this
Agreement, and that he is voluntarily entering into this Agreement.
Section 10. Release. Except for Michaels' continuing
obligations under this Agreement, Xxxxxx, his representatives, heirs,
successors and assigns do hereby completely release and forever
discharge Michaels, its parent, affiliated and subsidiary corporations
and entities, and its current and former officers, directors,
shareholders, agents, employees, attorneys, successors and assigns
from all claims, rights, demands, actions, liabilities, causes of action
and obligations of any kind whatsoever, whether known or unknown,
suspected or unsuspected, which Xxxxxx may now have or has ever
had against them (collectively, "Claims") including, but not limited
to, Claims of age discrimination under the Age Discrimination in
Employment Act of 1967, as amended.
Section 11. Confidential Information. Xxxxxx agrees to
hold confidential, and not to disclose to any person, firm, corporation
or agency, any trade secret information gained in the course of his
employment with, or engagement as a consultant by, Michaels
concerning Michaels and/or any of its affiliates, subsidiaries, parents,
predecessors or related entities and any confidential information
concerning Michaels or any of its affiliates, subsidiaries, parents,
predecessors or related entities, except if such disclosure is required
by law or legal process. Confidential information shall include,
without limitation, information concerning financial affairs, business
plans, proprietary statistics, reports, pricing information, customer
or supplier data or contracts, but shall not include information that
is or becomes publicly available other than as a result of Xxxxxx'
violation of his obligations hereunder or information that is or
becomes available to Xxxxxx on a non-confidential basis from
another source not bound, to Xxxxxx' knowledge, by any contractual,
fiduciary or other obligation of confidentiality owed to Michaels or
any of its affiliates, subsidiaries, parents, predecessors or related
entities.
Section 12. Non-Interference with Business Relationships.
Xxxxxx agrees that, for a period of 18 months from the effective date
of this Agreement, Xxxxxx will not solicit, entice or otherwise induce
any employee of Michaels (or of any franchisee, subsidiary or
affiliate of Michaels) to leave the employ of Michaels (or of any
such franchisee, subsidiary or affiliate) for any reason whatsoever;
nor xxxx Xxxxxx directly or indirectly hire or aid, assist or abet any
other person or entity in soliciting or hiring any employee of
Michaels (or of any such franchisee, subsidiary or affiliate); nor xxxx
Xxxxxx otherwise intentionally interfere with any contractual or other
business relationship between Michaels (or any such franchisee,
subsidiary or affiliate) and any other person or entity.
Section 13. Stock Options. Xxxxxx and Michaels
acknowledge and agree that the options held by Xxxxxx as of the date
hereof (the "Options") to purchase a total of 283,250 shares of
Michaels' Common Stock (the "Common Stock"), granted to him
pursuant to the terms of Michaels' Key Employee Stock
Compensation Program, shall survive Xxxxxx' retirement and the
termination of Xxxxxx' employment and may be exercised in whole
or in part by Xxxxxx, subject to all of the other terms and conditions
of the Options, including without limitation the vesting and
termination provisions thereof. The retirement/death benefits
provided for in Section 3(a) hereof will be reduced (up to a
maximum total reduction of $1,570,000) by an amount (the
"Reduction Amount") equal to 33 percent of the difference between
(a) the aggregate fair market value of the shares of Common Stock
received by Xxxxxx upon exercise of the Options, measured at the
date(s) of exercise ("Fair Market Value"), and (b) the aggregate price
paid by Xxxxxx to Michaels to exercise the Options (the "Exercise
Price"), but only to the extent such difference exceeds $1,000,000.
The Reduction Amount will be applied to reduce the next monthly
retirement/death benefit to be paid after the exercise of any of the
Options results in the cumulative Fair Market Value exceeding the
cumulative Exercise Price by at least $1,000,000, then to each
succeeding monthly payment obligation until the total Reduction
Amount has been exhausted or the $1,570,000 maximum total
reduction has been reached.
For example:
If the Fair Market Value of 200,000 shares of
Common Stock received by Xxxxxx upon his first
exercise of Options is $4,500,000 ($22.50 per share)
and the Exercise Price of such Options is $2,500,000
($12.50 per share), then the Reduction Amount is
calculated as follows:
$4,500,000
(2,500,000)
2,000,000
(1,000,000)
1,000,000
x 33%
Reduction Amount: $ 330,000
In this example, the next following 22 monthly
payments provided for in Section 3(a) above will be
reduced to zero. Furthermore, additional monthly
payments will be reduced upon Xxxxxx' subsequent
exercise of additional Options by amounts equal to
the difference between the Fair Market Value of the
additional shares so acquired and the Exercise Price
of such additional Options.
If, at the time an Option is exercised, the shares of Common Stock
are admitted to trading on a national securities exchange for which
sale prices are regularly reported, the Fair Market Value of the shares
covered by such Option shall be the last reported trade price of the
Common Stock on that exchange on the date of exercise. For
purposes of the preceding sentence, the term "national securities
exchange" shall include without limitation the National Association
of Securities Dealers Automated Quotation System and the over-the-counter
market. In the event that Xxxxxx assigns or transfers any of
the Options or any interest therein, Xxxxxx will be deemed for
purposes of this Section to have exercised such Options on the date
of such assignment or transfer, to have received the shares of
Common Stock covered thereby and to have paid the Exercise Price
of such Options. Notwithstanding anything to the contrary contained
herein, the Reduction Amount, and the $1,570,000 maximum total
reduction specified above, shall both be subject to increase as
provided in Section 3(b) above.
Section 14. Equitable Remedies. Xxxxxx expressly affirms
and recognizes that this Agreement contains obligations which, in
the event of his breach thereof, afford Michaels no adequate remedy
at law. As a result thereof, in the event of Xxxxxx' breach, or
threatened breach, of any term or provision contained in this
Agreement, Xxxxxx agrees that Michaels shall be entitled to both
temporary and permanent injunctive relief. The right of Michaels to
such relief shall not be construed to prevent Michaels from pursuing,
either consecutively or concurrently, any and all other legal or
equitable remedies available to it for such breach or threatened
breach, specifically including without limitation the recovery of
monetary damages.
Section 15. Expenses of Counsel. Each party agrees that
he or it, respectively, will pay and be solely responsible for all legal
and other fees and expenses incurred by him or it in connection with
the negotiation, preparation and execution of this Agreement. In the
event either party in any respect breaches the terms and conditions
of this Agreement, or threatens to do the same, and in the event that
it becomes necessary for the other party to employ legal counsel to
enforce any provision of this Agreement or to seek or obtain relief
through legal proceedings on account of such breach or threatened
breach of this Agreement, the breaching party (or the party
threatening to breach this Agreement) shall pay to the other party
reasonable attorneys' fees, as well as all court costs, disbursements
and other expenses of any nature whatsoever, which such other party
may expend or incur in connection with the enforcement of this
Agreement or of any rights and remedies provided by this
Agreement.
Section 16. Non-Denigration. Michaels and Xxxxxx agree
that it or he will not criticize, denigrate or otherwise speak adversely
against the other in regard to past or present activities.
Section 17. Amendment. This Agreement may be
amended, modified or supplemented only by an instrument in
writing executed by both of the parties hereto.
Section 18. Assignment. Neither this Agreement nor any
right or obligation created hereby shall be assignable by either party
hereto, without the express written permission of the other party,
except by operation of law, including, but not limited to, the
applicable laws of descent and distribution.
Section 19. Entire Agreement. This Agreement contains
the entire agreement of the parties and supersedes any and all other
agreements between the parties hereto with respect to the subject
matter hereof.
Section 20. Governing Law. THIS AGREEMENT
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HERETO SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE
SUBSTANTIVE LAWS (BUT NOT THE RULES
GOVERNING CONFLICTS OF LAWS) OF THE STATE OF
TEXAS. THE PARTIES AGREE THAT THIS AGREEMENT
SHALL BE PERFORMABLE IN DALLAS COUNTY, TEXAS.
Section 21. Invalid Provisions. If any provision hereof is
held to be illegal, invalid or unenforceable under present or future
laws effective during the term hereof, such provision shall be fully
severable; this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a
part hereof; and the remaining provisions hereof shall remain in full
force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance therefrom. Furthermore,
in lieu of such illegal, invalid or unenforceable provision there shall
be added automatically as a part of this Agreement a provision as
similar in terms to such illegal, invalid or unenforceable provision as
may be possible and yet be legal, valid and enforceable.
Section 22. Headings. The headings, captions and
arrangements used herein are for convenience only and shall not be
deemed to limit, amplify or modify the terms hereof, nor affect the
meaning thereof.
Section 23. Multiple Counterparts. This Agreement has
been executed in a number of identical counterparts, all of which
constitute, collectively, one agreement; but in making proof of this
Agreement, it shall not be necessary to produce or account for more
than one such counterpart.
Section 24. Parties Bound. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective representatives, heirs, successors and permitted assigns.
Section 25. Revocation Period. It is expressly agreed that
for seven (7) days following execution of this Agreement by Xxxxxx,
Xxxxxx may revoke this Agreement; it is further expressly agreed by
the parties that this Agreement shall not become effective or
enforceable until the seven (7) day revocation period described
above has expired without Xxxxxx' having exercised his right to
revoke this Agreement.
EXECUTED effective as of the date first set forth above.
MICHAELS STORES, INC.
By: ____________________________________
Xxx Xxxx
Chairman of the Board of Directors
____________________________________
R. Xxx Xxxxxx
