Exhibit 10.2
MICHAELS STORES,
INC.
OFFICER SEVERANCE PAY
PLAN
Established as of
April 17, 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 or Executive Vice 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,
while continuing to be Participant; (B) must not be eligible
for severance pay or other termination benefits 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 in accordance with its
terms.
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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
(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 the Participant’s employment terminates
as a result of death or Disability; or
B. the
Participant’s employment is terminated by the Company for
Cause; or
C. 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
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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
D. 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 or
Executive Vice 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
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employed during the
fiscal year, through the date of termination, and the denominator
of which is 365.
(3) Premium
Welfare Benefits:
During the period of
severance pay, and subject to any employee contribution applicable
to the Participant on the date of termination, the Company shall
continue to contribute to the premium cost of Participant’s
participation in the Company’s group medical and dental
plans, provided that the Participant is entitled to continue such
participation under applicable law and plan terms and pays the
remainder of such premium cost, and any required administrative
fee, in a timely manner from month to month, and further
provided , however , that (A) if the Participant
becomes reemployed with another employer-provided plan, the medical
and dental benefits described herein shall be secondary to
those provided under such other plan during such applicable period
of eligibility. 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 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.
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
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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 severance
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 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 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 day following his/her Termination
Date or the date s/he receives the OWBPA Memorandum, whichever
occurs second.
(3) A
Participant who is aged 40 or older on his/her Termination Date,
regardless of whether the Participant is entitled to a 21-day
consideration period under Section VII A(1) or a 45-day
consideration period under Section VII A(2), may revoke the
Agreement and Release at any time during the seven day period
that
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immediately follows the date the Participant
signs the Agreement and Release, provided that the Participant
sends a written notice of revocation to the Company during that
seven 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 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 severance 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 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
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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 date
of the Participant’s Qualifying Termination.
(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 date of the
Participant’s Qualifying Termination.
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 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 the Final Release or has violated any
obligation under Section VII hereof or
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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:
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.
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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 perform
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