SEPARATION AGREEMENT

Exhibit 10.1

Separation Agreement

     This Separation Agreement is between Lawrence H. Fine (“Executive”) and A.C. Moore Arts & Crafts, Inc. (the “Company”) (collectively the “Parties”) (the “Agreement”).

Recitals

     A. Executive served the Company as its President since June 2001 and as its Chief Operating Officer since February 2003.

     B. Executive resigned from the Company effective as of June 11, 2007 (the “Separation Date”).

     C. The Parties have agreed that a severance payment equal to one (1) year’s compensation at Executive’s rate as of the Separation Date is appropriate consideration in exchange for compliance with the terms and conditions contained in this Agreement.

     D. As a condition of receipt of the payments being provided to Executive, including without limitation the severance and other consideration provided by the Company to Executive and by Executive to the Company, the receipt and sufficiency of which are acknowledged by the Parties, the Parties have agreed to enter into this Agreement.

      NOW THEREFORE , in consideration of the foregoing recitals and other good and valuable consideration, the Parties hereby agree as follows:

     1.  Consideration. The Company will pay to Executive a severance payment in the aggregate amount of $350,000, which amount is equal to one (1) years’ compensation at Executive’s rate as of the Separation Date, paid in nine (9) equal installments, less appropriate tax withholdings and authorized deductions (the “Severance Payment”). One-half of the Severance Payment constitutes consideration in exchange for the release set forth in Paragraph 2 below, and one-half constitutes consideration in exchange for the non-competition and non-solicitation covenants set forth in Paragraph 7 below. The first installment of the Severance Payment shall be made within ten (10) calendar days subsequent to the expiration of the revocation period referred to in Paragraph 9 below, and the remaining eight (8) installments shall be paid on the first Friday of each month thereafter (beginning on August 3, 2007) in accordance with the Company’s current monthly payroll practices; provided however that all nine (9) installments shall be paid in full no later than March 15, 2008. In the event of Executive’s death prior to payment in full of the Severance Payment, said payment shall be disbursed to Executive’s estate in accordance

with Executive’s last will and testament or applicable law in the event of death. Payments will be made to the Executive’s estate in accordance with the foregoing schedule; provided that all payments hereunder shall be made no later than March 15, 2008.

     2.  Releases. In consideration of the payments and other benefits being provided to Executive by the Company, which are hereby acknowledged and agreed as being over and above any existing obligations of the Company to Executive as of the date hereof and as constituting sufficient consideration for his agreements set forth herein, Executive hereby RELEASES and FOREVER DISCHARGES the Company and all of its subsidiaries, affiliated companies, and their respective predecessor entities, their present and former officers, directors, shareholders, agents, employees, legal representatives, successors, trustees, fiduciaries and assigns (individually a “Released Party” and collectively the “Released Parties”) of and from (and does hereby WAIVE) any and all rights, claims, grievances or causes of action (or rights to mediation or arbitration) which Executive has or could assert, or which could be asserted on his behalf, and any and all attorney fees in connection therewith (individually, a “Claim” and collectively, “Claims”), against the Released Parties from the beginning of time through the date of the signing of this Agreement, including but not limited to those relating in any manner to his hiring, employment with the Company or any Released Party, libel, slander, defamation or tortious interference with actual or prospective business or contractual relations, which are based in whole or in part on any facts, circumstances or events which are now existing or which occurred on or prior to the date hereof, or his separation from employment with the Company, whether by reason of contract or of any state, federal, or local law, ordinance, or rule, except of course, any rights provided to Executive by this Agreement. However, nothing contained in this Agreement shall be construed to release Executive’s vested rights under the terms of any employee benefit plan of the Company in effect during his employment with the Company.

     Except as expressly provided to the contrary in the first paragraph of this Section 2, Executive agrees that this Agreement and the releases and waiver contained herein further include but is not limited to any and all Claims and rights arising from or in connection with any agreement of any kind Executive may have had with the Company or any Released Party or in connection with Executive’s status or separation of employment from the Company, any and all Claims or rights for wrongful discharge, breach of contract, either express or implied, emotional distress, back pay, front pay, benefits, fraud or misrepresentation, any and all Claims and rights arising under the New Jersey Law Against Discrimination and all similar state or local fair employment practices statutes, the Age Discrimination in Employment Act (ADEA), the Americans with Disabilities Act, as amended (ADA), Title VII of the Civil Rights Act of 1964 and the Civil Rights Act of 1991, as amended, Sections 1981 through 1988 of Title 42 of the United States Code, as amended, the Employee Retirement Income

Security Act, as amended (ERISA), all other wage and hour/wage payment statutes and laws, the Health Insurance Portability and Accountability Act (HIPAA), to the extent such statutes and laws may be applicable, any and all claims growing out of any legal restrictions on the Company’s right to terminate its employees, and any and all other Claims or rights whether arising under any other statute, rule, regulation, state or local law, ordinance or public policy, and any and all common law claims of any nature whatsoever.

     Executive understands and acknowledges, among other matters, that he is waiving and releasing the Released Parties from and against any and all Claims, including without limitation, claims for pain and suffering, emotional distress, compensatory and punitive damages and for employment discrimination based upon age (including without limitation claims under the ADEA) or any comparable state laws. He also understands that he is waiving and releasing any Claims based upon gender, national origin, race or color, mental or physical handicap or disability or religious belief. This Agreement does not prohibit Executive from participating in any investigation or proceeding conducted by the U.S. Equal Employment Opportunity Commission.

     3.  Waiver. Executive also WAIVES ANY AND ALL RIGHTS under the laws of any jurisdiction in the United States that would or might limit the foregoing release.

     4.  Exclusions from Release. Executive is not releasing and hereby expressly retains any and all rights to which he is entitled under the terms of this Agreement. Executive also excludes from this Agreement and retains any claim for indemnification to which he may be entitled as a former officer and director of the Company, whether by contract or under applicable law or the Bylaws of the Company, and the Company hereby affirmatively agrees to honor such indemnification obligations.

     5.  Confidentiality; Confidential Information. Executive acknowledges and agrees that the terms and provisions of this Agreement, as well as any and all incidents leading to or resulting from this Agreement, are confidential and that Executive shall not discuss them with any individual without the prior written consent of the Company’s Chief Executive Officer or its General Counsel, except this Agreement shall not prohibit Executive from making required confidential disclosures to Executive’s attorney, accountant, or legally required disclosures to any governmental authority, or discussing the matter with Executive’s respective immediate family on a need to know basis or as otherwise required by law. Executive further agrees that all documents, records, techniques, business secrets and other information relating to the business of the Company that have come into his possession from time to time during his affiliation with the Company shall be deemed to be confidential and proprietary to the Company and shall be its sole and exclusive property. Executive agrees to

keep confidential and not use or divulge to any other individual or harm or destroy any of the Company’s confidential information and business secrets, except as required by law. Both Parties agree that this Agreement may be used as evidence in a lawsuit in which either party alleges a breach of the promises contained herein. In the event Executive has in his possession or under his control any materials in any form or medium relating to the Company’s confidential and proprietary information or the Company’s business, Executive will return immediately to the Company any and all such confidential and proprietary information, as well as all property, equipmen