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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) September 30, 1996
MICHAELS STORES, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-11822 75-1943604
(State of (Commission (IRS Employer
incorporation) File Number) Identification No.)
8000 Bent Branch Drive
Irving, Texas 75063-6041
P.O. Box 619566
DFW, Texas 75261-9566
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (972) 409-1300
5931 Campus Circle Drive, Irving, Texas 75063
----------------------------------------------
(Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
Effective October 1, 1996, Michaels Stores, Inc. (the "Company") adopted
the amended and restated Michaels Stores, Inc. Employees 401(K) Plan (the
"Amended 401(K) Plan"). A copy of the Amended 401(K) Plan is attached hereto
as Exhibit 99.2. The Company is also filing herewith (i) as Exhibit 99.1, a
copy of the Michaels Stores, Inc. Employees 401(K) Plan effective as of
February 1, 1994 (the "Prior 401(K) Plan"), which is in the form approved by
the Internal Revenue Service by determination letter dated September 17, 1996
and (ii) as Exhibit 99.3, a copy of the Company's Trust Agreement by and
between the Company and Wachovia Bank of North Carolina, N.A. (the "Trust
Agreement"). Each of the Amended 401(K) Plan, the Prior 401(K) Plan and the
Trust Agreement are hereby incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a)-(b) Not applicable.
(c) Exhibits Required by Item 601 of Regulation S-K.
EXHIBIT NO. DESCRIPTION
----------- -----------
99.1 Michaels Stores, Inc. Employees 401(k) Plan (As
Amended and Restated Effective February 1, 1994).
99.2 Michaels Stores, Inc. Employees 401(k) Plan (As
Amended and Restated Effective October 1, 1996).
99.3 Michaels Stores, Inc. Employees 401(k) Trust.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
MICHAELS STORES, INC.
By: /s/ R. DON MORRIS
------------------------------------
Name: R. Don Morris
Title: Executive Vice President and
Chief Financial Officer
Date: September 30, 1996
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
99.1 Michaels Stores, Inc. Employees 401(k) Plan (As
Amended and Restated Effective February 1, 1994).
99.2 Michaels Stores, Inc. Employees 401(k) Plan (As
Amended and Restated Effective October 1, 1996).
99.3 Michaels Stores, Inc. Employees 401(k) Trust.
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MICHAELS STORES, INC.
EMPLOYEES 401(K) PLAN
(AS AMENDED AND RESTATED EFFECTIVE FEBRUARY 1, 1994)
<PAGE>
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MICHAELS STORES, INC.
EMPLOYEES 401(K) PLAN
(AS AMENDED AND RESTATED EFFECTIVE FEBRUARY 1, 1994)
TABLE OF CONTENTS
PAGE
----
P R E A M B L E
ARTICLE 1
DEFINITIONS
1.01 ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 ACCOUNT BALANCE . . . . . . . . . . . . . . . . . . . . . . . 1
1.03 ACTUAL DEFERRAL PERCENTAGE. . . . . . . . . . . . . . . . . . 1
1.04 ADJUSTMENT FACTOR . . . . . . . . . . . . . . . . . . . . . . 1
1.05 ADMINISTRATION COMMITTEE. . . . . . . . . . . . . . . . . . . 2
1.06 AVERAGE ACTUAL DEFERRAL PERCENTAGE. . . . . . . . . . . . . . 2
1.07 AVERAGE CONTRIBUTION PERCENTAGE . . . . . . . . . . . . . . . 2
1.08 BENEFICIARY . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.09 BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 CODE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 CONTRIBUTION PERCENTAGE . . . . . . . . . . . . . . . . . . . 3
1.14 EFFECTIVE DATE. . . . . . . . . . . . . . . . . . . . . . . . 3
1.15 ELIGIBILITY QUALIFICATION PERIOD. . . . . . . . . . . . . . . 3
1.16 EMPLOYEE. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.17 EMPLOYEE CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . 5
1.18 EMPLOYEE CONTRIBUTION ACCOUNT . . . . . . . . . . . . . . . . 5
1.19 EMPLOYER. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.20 EMPLOYER MATCHING CONTRIBUTIONS . . . . . . . . . . . . . . . 5
1.21 EMPLOYER MATCHING CONTRIBUTION ACCOUNT. . . . . . . . . . . . 5
1.22 EMPLOYMENT COMMENCEMENT DATE. . . . . . . . . . . . . . . . . 5
1.23 ENTRY DATE. . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.24 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.25 EXCESS AGGREGATE CONTRIBUTIONS. . . . . . . . . . . . . . . . 5
1.26 EXCESS CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . 5
1.27 EXCESS DEFERRALS. . . . . . . . . . . . . . . . . . . . . . . 5
1.28 FAMILY MEMBER . . . . . . . . . . . . . . . . . . . . . . . . 5
1.29 HIGHLY COMPENSATED EMPLOYEE . . . . . . . . . . . . . . . . . 5
1.30 HOUR OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . 6
1.31 INVESTMENT COMMITTEE. . . . . . . . . . . . . . . . . . . . . 7
1.32 LEAVE OF ABSENCE. . . . . . . . . . . . . . . . . . . . . . . 7
1.33 LIMITATION YEAR . . . . . . . . . . . . . . . . . . . . . . . 8
1.34 NORMAL RETIREMENT DATE. . . . . . . . . . . . . . . . . . . . 8
1.35 NONHIGHLY COMPENSATED EMPLOYEE. . . . . . . . . . . . . . . . 8
1.36 ONE-YEAR BREAK IN SERVICE . . . . . . . . . . . . . . . . . . 8
1.37 PARTICIPANT . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.38 PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.39 PLAN YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.40 PRIOR PLAN ACCOUNT. . . . . . . . . . . . . . . . . . . . . . 8
1.41 ROLLOVER CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . 8
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE i
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1.42 ROLLOVER CONTRIBUTION ACCOUNT . . . . . . . . . . . . . . . . 8
1.43 SALARY REDUCTION CONTRIBUTION ELECTION. . . . . . . . . . . . 8
1.44 SALARY REDUCTION CONTRIBUTION ACCOUNT . . . . . . . . . . . . 8
1.45 SALARY REDUCTION CONTRIBUTION . . . . . . . . . . . . . . . . 8
1.46 TRUST OR TRUST FUND . . . . . . . . . . . . . . . . . . . . . 8
1.47 TRUST AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 8
1.48 TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.49 VALUATION DATE. . . . . . . . . . . . . . . . . . . . . . . . 9
1.50 VESTING COMPUTATION PERIOD. . . . . . . . . . . . . . . . . . 9
1.51 YEAR OF ELIGIBILITY SERVICE . . . . . . . . . . . . . . . . . 9
1.52 YEAR OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . 9
1.53 YEAR OF VESTING SERVICE . . . . . . . . . . . . . . . . . . . 9
ARTICLE 2
ELIGIBILITY AND PARTICIPATION
2.01 PLAN ENTRY DATE . . . . . . . . . . . . . . . . . . . . . . . 10
2.02 PARTICIPATION REQUIREMENTS. . . . . . . . . . . . . . . . . . 10
2.03 TERMINATION OF EMPLOYMENT . . . . . . . . . . . . . . . . . . 10
2.04 REHIRED EMPLOYEE. . . . . . . . . . . . . . . . . . . . . . . 10
2.05 LOSS OF PARTICIPANT STATUS. . . . . . . . . . . . . . . . . . 10
2.06 SUSPENSION OF PARTICIPATION . . . . . . . . . . . . . . . . . 10
2.07 REEMPLOYMENT; VESTING SERVICE . . . . . . . . . . . . . . . . 10
2.08 NOTICE OF PARTICIPATION . . . . . . . . . . . . . . . . . . . 10
ARTICLE 3
SALARY REDUCTION CONTRIBUTIONS
3.01 SALARY REDUCTION CONTRIBUTIONS. . . . . . . . . . . . . . . . 11
3.02 SALARY REDUCTION CONTRIBUTION ELECTION. . . . . . . . . . . . 12
3.03 SUSPENSION OF, OR CHANGE IN, SALARY REDUCTION CONTRIBUTION
ELECTION . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.04 DEFERRAL PERCENTAGE LIMITATION. . . . . . . . . . . . . . . . 12
3.05 SPECIAL RULES ON DEFERRAL PERCENTAGE LIMITATIONS. . . . . . . 13
3.06 ADJUSTMENT OF SALARY REDUCTION CONTRIBUTIONS. . . . . . . . . 13
3.07 AGGREGATE LIMIT . . . . . . . . . . . . . . . . . . . . . . . 14
3.08 RETURN OF CONTRIBUTIONS ABOVE THE AGGREGATE LIMIT . . . . . . 15
ARTICLE 4
EMPLOYER MATCHING CONTRIBUTIONS AND EMPLOYEE CONTRIBUTIONS
4.01 EMPLOYER MATCHING CONTRIBUTIONS . . . . . . . . . . . . . . . 16
4.02 TIMING OF EMPLOYER MATCHING CONTRIBUTIONS . . . . . . . . . . 16
4.03 EMPLOYEE CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . 16
4.04 PERCENTAGE LIMITATION ON EMPLOYER MATCHING CONTRIBUTIONS. . . 17
4.05 SPECIAL RULES FOR CONTRIBUTION PERCENTAGE LIMIT TESTING . . . 17
4.06 ADJUSTMENTS TO CONTRIBUTIONS. . . . . . . . . . . . . . . . . 17
4.07 OVERALL LIMITATION ON ANNUAL ADDITIONS. . . . . . . . . . . . 18
4.08 SPECIAL RULES . . . . . . . . . . . . . . . . . . . . . . . . 18
4.09 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.10 REVERSION OF EMPLOYER MATCHING CONTRIBUTIONS. . . . . . . . . 20
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE ii
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ARTICLE 5
PARTICIPANTS' ACCOUNTS
5.01 SEPARATE SUBACCOUNTS . . . . . . . . . . . . . . . . . . . . 21
5.02 VALUATION OF TRUST FUND. . . . . . . . . . . . . . . . . . . 21
5.03 STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 6
INVESTMENTS
6.01 TRUST FUND . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.02 AUTHORIZED INVESTMENTS AND INVESTMENT CONTROL. . . . . . . . 22
6.03 ASSUMPTION OF RISK BY PARTICIPANTS . . . . . . . . . . . . . 23
6.04 GENERAL PROVISIONS REGARDING INVESTMENT DIRECTION. . . . . . 23
6.05 INDEPENDENT QUALIFIED PUBLIC ACCOUNTANT. . . . . . . . . . . 24
ARTICLE 7
DEATH BENEFITS AND BENEFICIARY DESIGNATIONS
7.01 DISTRIBUTION DUE TO DEATH. . . . . . . . . . . . . . . . . . 25
7.02 BENEFICIARY DESIGNATION. . . . . . . . . . . . . . . . . . . 25
ARTICLE 8
VESTING AND TERMINATION OF EMPLOYMENT
8.01 VESTING IN SALARY REDUCTION, EMPLOYEE AND ROLLOVER
CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . 27
8.02 VESTING IN EMPLOYER MATCHING CONTRIBUTIONS . . . . . . . . . 27
8.03 FORFEITURES. . . . . . . . . . . . . . . . . . . . . . . . . 27
8.04 DISTRIBUTION OF VESTED BENEFITS. . . . . . . . . . . . . . . 28
ARTICLE 9
DISTRIBUTION OF BENEFITS
9.01 NORMAL FORM OF BENEFIT . . . . . . . . . . . . . . . . . . . 29
9.02 TIME OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . 29
9.03 INVESTMENT OF ACCOUNT BALANCE OF TERMINATED PARTICIPANT. . . 29
9.04 LATEST DISTRIBUTION DATE . . . . . . . . . . . . . . . . . . 30
9.05 MANDATED COMMENCEMENT OF BENEFITS. . . . . . . . . . . . . . 30
9.06 DIRECT ROLLOVERS . . . . . . . . . . . . . . . . . . . . . . 30
9.07 WAIVER OF 30 DAY NOTICE. . . . . . . . . . . . . . . . . . . 30
ARTICLE 10
WITHDRAWALS WHILE EMPLOYED
10.01 WITHDRAWALS. . . . . . . . . . . . . . . . . . . . . . . . . 31
10.02 HARDSHIP WITHDRAWALS . . . . . . . . . . . . . . . . . . . . 31
10.03 IN-SERVICE WITHDRAWALS FOR FORMER LEEWARDS PLAN
PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . 32
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE iii
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ARTICLE 11
LOANS
11.01 OVERALL LIMITATIONS. . . . . . . . . . . . . . . . . . . 33
11.02 TERMS OF LOAN. . . . . . . . . . . . . . . . . . . . . . 33
11.03 SOURCE OF LOANS. . . . . . . . . . . . . . . . . . . . . 33
11.04 WITHHOLDING AND APPLICATION OF LOAN PAYMENTS . . . . . . 34
11.05 DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 12
PLAN FIDUCIARIES
12.01 FIDUCIARIES. . . . . . . . . . . . . . . . . . . . . . . 35
12.02 ALLOCATION OF RESPONSIBILITIES . . . . . . . . . . . . . 35
12.03 PROCEDURES FOR DELEGATION AND ALLOCATION OF
RESPONSIBILITIES . . . . . . . . . . . . . . . . . . . . 35
12.04 GENERAL FIDUCIARY STANDARDS. . . . . . . . . . . . . . . 36
12.05 LIABILITY AMONG CO-FIDUCIARIES . . . . . . . . . . . . . 36
ARTICLE 13
COMPANY AND EMPLOYER ADMINISTRATION PROVISIONS
13.01 INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 38
13.02 NO LIABILITY . . . . . . . . . . . . . . . . . . . . . . 38
13.03 COMPANY AND EMPLOYER ACTION. . . . . . . . . . . . . . . 38
13.04 INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . 38
13.05 AMENDMENT TO VESTING SCHEDULE. . . . . . . . . . . . . . 38
ARTICLE 14
COMMITTEE ADMINISTRATION PROVISIONS
14.01 APPOINTMENT OF COMMITTEES. . . . . . . . . . . . . . . . 39
14.02 TERM . . . . . . . . . . . . . . . . . . . . . . . . . . 39
14.03 COMPENSATION . . . . . . . . . . . . . . . . . . . . . . 39
14.04 POWER OF ADMINISTRATION COMMITTEE. . . . . . . . . . . . 39
14.05 POWER OF INVESTMENT COMMITTEE. . . . . . . . . . . . . . 40
14.06 MANNER OF ACTION . . . . . . . . . . . . . . . . . . . . 40
14.07 AUTHORIZED REPRESENTATIVE. . . . . . . . . . . . . . . . 40
14.08 NONDISCRIMINATION. . . . . . . . . . . . . . . . . . . . 40
14.09 INTERESTED MEMBER. . . . . . . . . . . . . . . . . . . . 40
14.10 BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . 41
ARTICLE 15
THE TRUST
15.01 PURPOSE OF THE TRUST FUND. . . . . . . . . . . . . . . . 42
15.02 APPOINTMENT OF TRUSTEE . . . . . . . . . . . . . . . . . 42
15.03 EXCLUSIVE BENEFIT OF PARTICIPANTS. . . . . . . . . . . . 42
15.04 BENEFITS LIMITED TO THE TRUST FUND . . . . . . . . . . . 42
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE iv
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ARTICLE 16
PARTICIPANT ADMINISTRATION PROVISIONS
16.01 PERSONAL DATA TO ADMINISTRATION COMMITTEE. . . . . . . . 43
16.02 ADDRESS FOR NOTIFICATION . . . . . . . . . . . . . . . . 43
16.03 INFORMATION AVAILABLE. . . . . . . . . . . . . . . . . . 43
16.04 CLAIMS PROCEDURE . . . . . . . . . . . . . . . . . . . . 43
16.05 APPEAL PROCEDURE FOR DENIAL OF BENEFITS. . . . . . . . . 43
ARTICLE 17
AMENDMENT OR TERMINATION
17.01 RIGHT TO AMEND . . . . . . . . . . . . . . . . . . . . . 45
17.02 RIGHT TO TERMINATE PLAN. . . . . . . . . . . . . . . . . 45
17.03 OBLIGATIONS UPON MERGER, CONSOLIDATION OR TRANSFER . . . 45
17.04 OBLIGATIONS UPON TERMINATION, PARTIAL TERMINATION OR
DISCONTINUANCE . . . . . . . . . . . . . . . . . . . . . 45
17.05 CONTINUED FUNDING AFTER PLAN TERMINATION . . . . . . . . 45
17.06 DISTRIBUTION UPON DISPOSITION OF ASSETS OR SUBSIDIARY. . 46
ARTICLE 18
GENERAL PROVISIONS
18.01 NO CONTRACT OF EMPLOYMENT; NO RIGHTS IMPLIED . . . . . . 47
18.02 NONALIENATION. . . . . . . . . . . . . . . . . . . . . . 47
18.03 INCAPACITY . . . . . . . . . . . . . . . . . . . . . . . 47
18.04 SERVICE IN MORE THAN ONE CAPACITY. . . . . . . . . . . . 47
18.05 INTENT TO QUALIFY. . . . . . . . . . . . . . . . . . . . 47
ARTICLE 19
ROLLOVER CONTRIBUTIONS AND TRANSFERS
19.01 ROLLOVER FROM OTHER PLANS. . . . . . . . . . . . . . . . 48
19.02 ROLLOVER FROM CONDUIT INDIVIDUAL RETIREMENT
ARRANGEMENT. . . . . . . . . . . . . . . . . . . . . . . 48
19.03 TRANSFERS DIRECTLY FROM OTHER PLANS. . . . . . . . . . . 48
19.04 MISTAKEN ROLLOVER. . . . . . . . . . . . . . . . . . . . 48
ARTICLE 20
TOP-HEAVY PROVISIONS
20.01 TOP-HEAVY PLAN DEFINED . . . . . . . . . . . . . . . . . 50
20.02 OTHER DEFINITIONS. . . . . . . . . . . . . . . . . . . . 50
20.03 TOP-HEAVY CONTRIBUTIONS. . . . . . . . . . . . . . . . . 51
20.04 ADJUSTMENT TO LIMITATION ON ANNUAL ADDITIONS . . . . . . 51
ARTICLE 21
QUALIFIED DOMESTIC RELATIONS ORDERS
21.01 TERMS OF QDRO. . . . . . . . . . . . . . . . . . . . . . 53
21.02 QDRO DEFINITIONS . . . . . . . . . . . . . . . . . . . . 53
21.03 DISTRIBUTION BEFORE TERMINATION OF EMPLOYMENT. . . . . . 53
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE v
<PAGE>
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21.04 TREATMENT OF FORMER SPOUSE . . . . . . . . . . . . . . . 54
21.05 NOTIFICATION OF RECEIPT OF ORDER . . . . . . . . . . . . 54
21.06 SEPARATE ACCOUNTING. . . . . . . . . . . . . . . . . . . 54
ARTICLE 22
EMPLOYER PARTICIPATION
22.01 ADOPTION BY EMPLOYERS. . . . . . . . . . . . . . . . . . 55
22.02 WITHDRAWAL BY EMPLOYER . . . . . . . . . . . . . . . . . 55
22.03 ADOPTION CONTINGENT UPON INITIAL AND CONTINUED
QUALIFICATION. . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 23
MISCELLANEOUS
23.01 RECEIPTS . . . . . . . . . . . . . . . . . . . . . . . . 56
23.02 NO GUARANTEE OF INTEREST . . . . . . . . . . . . . . . . 56
23.03 PAYMENT OF EXPENSES. . . . . . . . . . . . . . . . . . . 56
23.04 RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . 56
23.05 INTERPRETATIONS AND ADJUSTMENTS. . . . . . . . . . . . . 56
23.06 EVIDENCE . . . . . . . . . . . . . . . . . . . . . . . . 56
23.07 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . 56
23.08 NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 56
23.09 SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . 56
23.10 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . 56
23.11 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . 56
APPENDIX I
APPENDIX II
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE vi
<PAGE>
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MICHAELS STORES, INC.
EMPLOYEES 401(K) PLAN
(AS AMENDED AND RESTATED EFFECTIVE FEBRUARY 1, 1994)
P R E A M B L E
The Michaels Stores, Inc. Employees 401(k) Plan (As Amended and Restated
Effective February 1, 1994) (the "PLAN") is designed to provide Eligible
Employees and Beneficiaries with the opportunity to accumulate capital for their
future economic security, to encourage Eligible Employees to remain in the
service of the Employers and to provide additional incentives for Employee
performance on behalf of the Employer. The Plan was originally adopted
effective as of February 1, 1987 and was most recently amended and restated
effective May 1, 1992. The Plan was again amended and restated by an instrument
signed on April 18, 1994.
In connection with the Company's application to the Internal Revenue Service
(filed on March 31, 1995) for a favorable determination letter on the tax
qualification of the Plan, the Internal Revenue Service requested that certain
amendments be made to the Plan documents. This instrument contains all
amendments to the Plan through the date of execution hereof and has been
approved by the Internal Revenue Service pursuant to a favorable determination
letter dated September 17, 1996.
The Plan is intended to be a profit sharing plan qualifying under Code Section
401(a) with a cash or deferred arrangement qualifying under Code Section 401(k).
The Plan is intended to comply with the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and the regulations
promulgated thereunder; the provisions of the Internal Revenue Code of 1986, as
amended (the "CODE"), and the Treasury Regulations promulgated thereunder; and
other applicable Federal laws and regulations.
ARTICLE 1
DEFINITIONS
The following words and phrases when used with an initial capital letter shall
have the meanings set out in this Article 1; the masculine, feminine and neuter
gender shall include the others unless a different meaning is plainly required
by the context; and words importing the singular shall include the plural and
the plural the singular whenever the context requires.
1.01 ACCOUNT shall mean the record of each Participant's and Beneficiary's Plan
interest and changes thereto as reflected in the Plan's books and records. The
Administration Committee may cause subaccounts to be maintained for each
Participant as necessary to reflect different types of Plan contributions
allocated on behalf of each Participant.
1.02 ACCOUNT BALANCE shall mean the sum of the amounts credited to a
Participant's Account as of any Valuation Date.
1.03 ACTUAL DEFERRAL PERCENTAGE shall mean the ratio (expressed as a percentage)
of the Salary Reduction Contributions made on behalf of each Eligible Employee
for the Plan Year to the Eligible Employee's Compensation for the Plan Year. If
an Eligible Employee makes no Salary Reduction Contributions, the Actual
Deferral Percentage with respect to such person shall be zero. The Actual
Deferral Percentage of each Eligible Employee shall be calculated to the nearest
hundredth of a percentage point.
1.04 ADJUSTMENT FACTOR shall mean the cost of living adjustment factor
prescribed by the Secretary of the Treasury of the Treasury under Code
Section 415(d) as applied to such items and in such manner as the Secretary
shall provide.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 1
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1.05 ADMINISTRATION COMMITTEE shall mean the persons appointed pursuant to
Article 14 who are responsible for Plan administration.
1.06 AVERAGE ACTUAL DEFERRAL PERCENTAGE shall mean the average of the Actual
Deferral Percentages of the Eligible Employees in a group.
1.07 AVERAGE CONTRIBUTION PERCENTAGE shall mean the average of the Contribution
Percentages of the Eligible Employees in a group.
1.08 BENEFICIARY shall mean the person or entity designated in writing by a
Participant, or otherwise determined in accordance with Section 7.02, to receive
a Participant's Account Balance in the event of the Participant's death.
1.09 BOARD shall mean the Board of Directors of the Company, as constituted from
time to time.
1.10 CODE shall mean the Internal Revenue Code of 1986, as amended from time to
time.
1.11 COMPANY shall mean Michaels Stores, Inc., a Delaware corporation.
1.12 COMPENSATION shall have the following meanings for specific purposes of the
Plan:
a. For purposes of the limitations imposed by Code Section 415 and the
Top-Heavy plan minimum contribution requirements of Code Section 416,
"COMPENSATION" shall mean the total compensation received by an Eligible
Employee from all Employers for personal services rendered to the Employers
during the Plan Year as reported on the Participant's Federal Income Tax
Withholding Statement (Form W-2; Box 10, or substantially similar
equivalent form) including base salary, bonuses, commissions, incentive pay
and overtime. For purposes of this Section 1.12a, the term "COMPENSATION"
shall also include severance allowances, prizes or awards, amounts
representing reimbursement for travel or other expense or mileage
allowances, moving expense reimbursement, gift certificates, the imputed
fair market value of an Employer provided automobile and excess group term
life insurance coverage. In addition, the term "COMPENSATION" shall not
include any amounts realized from the exercise of nonqualified stock
options or any amounts included in taxable income when restricted stock (or
other property) held by an Employee either becomes freely transferable or
is no longer subject to a substantial risk of forfeiture. The term
"COMPENSATION" shall be interpreted and construed in accordance with
Treasury Regulation Section 1.415-2(d)(2), exclusive of amounts listed in
Treasury Regulation Section 1.415-2(d)(3).
b. For purposes of determining the amount of Salary Reduction
Contributions and Employer Matching Contributions, the term "COMPENSATION"
shall have the same meaning as in Section 1.12a; provided that any amounts
attributable to an election by an Eligible Employee to reduce such person's
Compensation pursuant to the Plan or any other plan under Code Sections 125
or 401(k) sponsored by an Employer shall be disregarded. For purposes of
this Section 1.12b, the term "COMPENSATION" shall not include severance
allowances, prizes, awards, amounts representing reimbursement for travel
or other expense or mileage allowances, moving expense reimbursement, gift
certificates, the imputed fair market value of an Employer provided
automobile or excess group term life insurance coverage. In addition, the
term "COMPENSATION" shall not include any amounts realized from the
exercise of nonqualified stock options or any amounts included in taxable
income when restricted stock (or other property) held by an Employee either
becomes freely transferable or is no longer subject to a substantial risk
of forfeiture. Any Compensation paid or payable by reason of services
performed before the date an Employee is eligible to participate in the
Plan shall also be disregarded. Notwithstanding any Plan provision to the
contrary, the term "COMPENSATION" shall be interpreted and construed in a
manner consistent with the safe harbor definition contained in Treasury
Regulation Section 1.414(s)-1(c)(3).
c. For purposes of identifying a "KEY EMPLOYEE" under Code Section 416,
the term "COMPENSATION" shall have the same meaning as in Section 1.12a,
determined without regard to elections under Code Sections 125 and 401(k).
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 2
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d. The annual Compensation taken into account under the Plan for any Plan
Year shall not exceed $150,000 as adjusted by the Adjustment Factor for
Plan Years beginning on or after February 1, 1994. For Plan Years
beginning on or after February 1, 1989 and ending on or before January 31,
1994, the annual Compensation taken into account under the Plan shall not
exceed $200,000 as adjusted by the Adjustment Factor. The Compensation of
a Participant who is a five percent owner (as defined in Code Section
416(i)(1)) or one of the ten Highly Compensated Employees paid the greatest
amount of Compensation during the Plan Year shall be aggregated with the
Compensation of such Participant's spouse or lineal descendants under the
age of 19 as of the close of the Plan Year to the extent required by Code
Section 401(a)(17). In addition, and only to the extent required by Code
Section 414(q)(6), if an individual is a Family Member of a Participant who
is a five percent owner (as defined in Code Section 416(i)(1)) or one of
the ten Highly Compensated Employees paid the greatest amount of
Compensation, then:
1. such Family Member shall not be considered a separate Employee,
and
2. any Compensation paid to such Family Member and any benefit on
behalf of such Family Member shall be treated as if paid to or on
behalf of the five percent owner or Highly Compensated Employee.
If, as a result of the foregoing rules, the adjusted $200,000 limitation is
exceeded, then the limitation shall be applied in a pro rata manner among
the affected individuals in proportion to each such individual's
Compensation as determined under this Section prior to the application of
this limitation. This Section 1.12d shall be construed and applied in a
manner consistent with Code Sections 401(a)(17) and 414(q)(6).
1.13 CONTRIBUTION PERCENTAGE shall mean the ratio of the Employer Matching
Contributions on behalf of each Eligible Employee and the Employee Contributions
made by the Eligible Employee for the Plan Year to such person's Compensation
for the Plan Year. If an Eligible Employee does not receive an allocation of
Employer Matching Contributions and makes no Employee Contributions, the Actual
Contribution Percentage with respect to such person shall be zero. The Actual
Contribution Percentage of each Eligible Employee shall be calculated to the
nearest hundredth of a percentage point.
1.14 EFFECTIVE DATE shall mean February 1, 1994, the effective date of this
amendment and restatement, except as provided below in this Section 1.14 or as
otherwise provided in the Plan:
a. The following provisions shall be effective for Plan Years beginning
on or after December 31, 1986: Article 3, Article 4, Article 11 and
Section 1.16.
b. The following Section shall be effective for Plan Years beginning
after December 31, 1987: Section 3.07.
c. The following Sections shall be effective for Plan Years beginning
after December 31, 1988: Sections 1.12.
d. The following provisions shall be effective after April 30, 1992:
Article 6 and Section 8.02.
e. The following Section shall be effective for Plan Years beginning
after December 31, 1992: Section 9.06.
1.15 ELIGIBILITY QUALIFICATION PERIOD shall mean a 12 consecutive month period
during which the Employee completes not less than 1,000 Hours of Service,
measuring the beginning of the first 12 month period from the Employee's
Employment Commencement Date. If the Employee does not complete 1,000 Hours of
Service during the 12 month period commencing with the Employment Commencement
Date, the Plan shall measure the 12 month period from the first day of the Plan
Year that includes the first anniversary of the Employment Commencement Date.
The Plan shall measure any subsequent 12 month period necessary for a
determination of a Year of Service for participation by reference to succeeding
Plan Years.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 3
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Notwithstanding the foregoing, during the period from February 1, 1994 through
January 31, 1997, the term "Eligibility Qualification Period" shall also mean
the 12 consecutive month period beginning with the Employee's Employment
Commencement Date and each the anniversary thereof but only if the use of such
definition would allow an Employee to satisfy the eligibility requirements of
the Plan sooner than under the provisions of the preceding paragraph.
1.16 EMPLOYEE shall mean any person who is receiving remuneration for personal
services rendered in the employment of an Employer (or in the employment of any
other entity required to be aggregated with an Employer under Code Section
414(b), (c), (m) or (o)) including any officer or director of the Company so
employed, including any leased employee deemed to be an employee of an Employer
as provided in Code Section 414(n) or (o), except as provided below in this
Section 1.16; and including any person who would be receiving such remuneration
except for an authorized Leave of Absence. Notwithstanding the foregoing, the
term "EMPLOYEE" shall not include any person not classified by an Employer as an
Employee, notwithstanding a final determination by any governmental agency that
such person, in fact, is (or was) an Employee; provided that this exclusion
shall not apply prospectively from the date of such determination with respect
to any person who remains in the employment of an Employer after the date of
such determination.
Every Employee shall be an "ELIGIBLE EMPLOYEE" for purposes of the Plan, except
the following:
a. Employees included in a unit of Employees covered by a collective
bargaining agreement between an Employer and employee representatives if
retirement benefits were the subject of good faith bargaining and if two
percent or fewer of the Employees who are covered pursuant to that
agreement are professionals as defined in Treasury Regulation Section
1.410(b)-9. The term "EMPLOYEE REPRESENTATIVES" does not include any
organization more than half of whose members are Employees who are owners,
officers or executives of an Employer,
b. Employees who are nonresident aliens (within the meaning of Code
Section 7701(b)(1)(B)) and who receive no earned income (within the meaning
of Code Section 911(d)(2)) from an Employer that constitutes income from
sources within the United States (within the meaning of Code Section
861(a)(3)),
c. any person receiving payments as a consultant, independent contractor
or other arrangement excluded from the common law definition of the term
"EMPLOYEE",
d. all leased employees as defined below in this Section 1.16, and
e. Employees of any employer that has not adopted the Plan.
Notwithstanding any Plan provision to the contrary, service performed by
Employees excluded from eligibility for participation pursuant to Sections 1.16a
and 1.16e shall be considered for purposes of crediting Years of Vesting
Service.
SPECIAL PROVISIONS FOR LEASED EMPLOYEES
The term "LEASED EMPLOYEE" shall mean any person (other than an Employee)
who pursuant to an agreement between an Employer and any other person (a
"LEASING ORGANIZATION") has performed services for an Employer (or for an
Employer and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one
year and such services are of a type historically performed by employees in
the business field of the Employers. Contributions or benefits provided to
Leased Employees by the leasing organization that are attributable to
services performed for an Employer shall be treated as provided by the
Employer.
Leased Employees shall not be considered as Employees if: (i) such person
is covered by a money purchase pension plan providing: (1) a nonintegrated
employer contribution rate of at least ten percent of compensation (as
defined in Code Section 415(c)(3)) but including amounts contributed
pursuant to a salary reduction agreement that are excludable from such
person's gross income under Code Sections 125, 402(e)(3), 402(h)(1)(B) or
403(b); (2) immediate participation; and (3) full and immediate vesting;
and (ii)
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 4
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Leased Employees do not constitute more than 20% of the Nonhighly
Compensated Employees of all Employers.
1.17 EMPLOYEE CONTRIBUTIONS shall mean the amounts contributed by an Eligible
Employee pursuant to Section 4.03.
1.18 EMPLOYEE CONTRIBUTION ACCOUNT shall mean the subaccount into which Employee
Contributions and investment earnings on those contributions shall be credited.
1.19 EMPLOYER shall mean the Company and any subsidiary or other affiliate of
the Company that adopts the Plan in a manner satisfactory to the Board.
1.20 EMPLOYER MATCHING CONTRIBUTIONS shall mean the amounts contributed pursuant
to Article 4.
1.21 EMPLOYER MATCHING CONTRIBUTION ACCOUNT shall mean the subaccount into which
Employer Matching Contributions and investment earnings on those contributions
shall be credited.
1.22 EMPLOYMENT COMMENCEMENT DATE shall mean the date on which an Employee is
first credited with an Hour of Service for the performance of duties for an
Employer. For eligibility and vesting purposes, the Employment Commencement
Date of an Employee who was employed immediately prior to commencing the
performance of services with an Employer by one of the entities listed in
Appendix I (as from time to time amended or supplemented by the Administration
Committee) on or before the Divestiture Date for such entity, shall be the first
day of such Employee's performance of service for such entity; except that, if
such Employee's service for such entity was interrupted by a One-Year Break in
Service or more, the Employment Commencement Date for such Employee shall be the
first day of the Employee's performance of service for such entity after the
One-Year Break in Service. The term "DIVESTITURE DATE" shall mean, for an
entity listed on Appendix I, the date shown on Appendix I after which Hours of
Service performed for the entity do not count for eligibility or vesting
purposes of the Plan.
1.23 ENTRY DATE shall mean February 1 and August 1 of each Plan Year or such
other dates as may be approved by the Administration Committee.
1.24 ERISA shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.25 EXCESS AGGREGATE CONTRIBUTIONS shall mean Employer Matching Contributions
in excess of the Contribution Percentage limit as described in Code Section
401(m)(6)(B).
1.26 EXCESS CONTRIBUTIONS shall mean Salary Reduction Contributions in excess of
the Actual Deferral Percentage limit as described in Code Section 401(k)(8)(B).
1.27 EXCESS DEFERRALS shall mean Salary Reduction Contributions in excess of the
limits imposed by Code Section 402(g).
1.28 FAMILY MEMBER shall mean an Employee, such Employee's spouse, lineal
ascendants and descendants and the spouses of such lineal ascendants and
descendants as described in Code Section 414(q)(6).
1.29 HIGHLY COMPENSATED EMPLOYEE shall mean any Employee who performs services
for an Employer during the determination year and who, during the look-back
year:
a. received Compensation from an Employer in excess of $75,000 multiplied
by the Adjustment Factor,
b. received Compensation from an Employer in excess of $50,000 multiplied
by the Adjustment Factor and was a member of the top-paid group for such
year, or
c. was an officer of an Employer and received Compensation during such
year that is greater than 50% of the dollar limitation in effect under Code
Section 415(b)(1)(A).
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 5
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The term "HIGHLY COMPENSATED EMPLOYEE" also includes:
d. Employees who are both described in the preceding sentence if the term
"DETERMINATION YEAR" is substituted for the term "LOOK-BACK YEAR" and the
Employee is one of the 100 Employees who received the most Compensation
from an Employer during the determination year, and
e. Employees who are five percent owners at any time during the look-back
year or determination year.
If no officer has satisfied the Compensation requirement of Section 1.29c.
during either a determination year or look-back year, the highest paid officer
for such year shall be treated as a Highly Compensated Employee. No more than
50 Employees (or if lesser, the greater of three Employees or ten percent of the
Employees) shall be treated as officers.
The determination year shall be the Plan Year. The look-back year shall be the
12 month period immediately preceding the determination year.
If an Employee is, during a determination year or look-back year, a Family
Member of either a five percent owner who is an active or former Employee or a
Highly Compensated Employee who is one of the ten most Highly Compensated
Employees ranked on the basis of Compensation paid by an Employer during such
year, then the Family Member and the five percent owner or top ten Highly
Compensated Employee shall be aggregated. In such case, the Family Member and
five percent owner or top ten Highly Compensated Employee shall be treated as a
single Employee receiving Compensation and contributions or benefits of the
Family Member and five percent owner or top ten Highly Compensated Employee.
The determination of who is a Highly Compensated Employee, including the
determination of the number and identity of Employees in the top-paid group, the
top 100 Employees, the number of Employees treated as officers and the
Compensation that is considered shall be made in accordance with Code Section
414(q) and the Treasury Regulations promulgated thereunder.
1.30 HOUR OF SERVICE shall mean:
a. each hour for which an Employee is directly or indirectly paid or
entitled to payment for the performance of duties for an Employer; such
hours shall be credited to the computation period in which the duties are
performed, and
b. each hour for which an Employee is directly or indirectly entitled to
payment on account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity, disability, layoff, jury duty,
military duty or leave of absence; except that
1. not more than 501 Hours of Service shall be credited in each
single computation period during which the Employee performs no
duties, and
2. Hours of Service shall not be counted where such payment is made
or is due:
A. under a plan maintained solely for the purpose of complying
with applicable worker's compensation, unemployment or disability
insurance laws, or
B. solely to reimburse an Employee for medical or medically
related expenses,
Hours credited under this Section 1.30b shall be credited to the
computation period in which the period during which no duties were
performed occurred, and
c. each hour for which back pay, irrespective of payment due to
mitigation of damages, is either awarded or agreed to by an Employer. Such
hours shall be credited to the computation period to which
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 6
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the award or agreement for back pay pertains rather than to the computation
period in which the award, agreement or payment is made; provided, that the
limits under Section 1.30b are applicable and that an Employee shall not be
entitled to additional Hours of Service under this Section 1.30c for the
same Hours of Service credited under Section 1.30a or Section 1.30b.
Hours of Service shall be calculated and credited in a manner consistent with
Department of Labor Regulation Sections 2530.200b-2(b) and (c), which are
incorporated by reference in the Plan.
If records of actual hours rendered are not maintained or are not available, the
Administration Committee may adopt equivalency hours counting procedures
consistently applied in a uniform manner as follows: (1) an Employee who is
paid on a daily basis shall be credited with 10 Hours of Service for each day he
performs an Hour of Service for the Employer; (2) an Employee who is paid on a
weekly basis shall be credited with 45 Hours of Service for each week he
performs an Hour of Service for the Employer; (3) an Employee who is paid on a
semi-monthly basis shall be credited with 95 Hours of Service for each semi-
monthly period in which he performs an Hour of Service for the Employer; and (4)
an Employee who is paid on a monthly basis shall be credited with 190 Hours of
Service for each month he performs an Hour of Service for the Employer.
In determining Hours of Service for the purpose of determining whether an
Employee has incurred a One-Year Break In Service, if such Employee is absent
from employment because of the Employee's pregnancy, the birth of the Employee's
child, the placement of a child with the Employee in connection with the
adoption of such child by such Employee or the need to care for such Employee's
child during the period immediately after such child's birth or placement, then
the following hours shall be considered as Hours of Service:
d. the Hours of Service that otherwise would normally have been credited
to such Employee but for such absence, or
e. in any case in which the Administration Committee is unable to
determine the number of hours described in Section 1.30d, eight Hours of
Service per day of absence,
provided that no more than 501 Hours of Service need be credited to an Employee
because of such pregnancy or placement.
The Hours of Service described in the preceding paragraph shall be treated as
Hours of Service only in the Eligibility Qualification Period in which the
absence from employment begins if an Employee would be prevented from incurring
a One-Year Break in Service in such year solely because the period of absence is
considered as Hours of Service under Sections 1.30d or 1.30e. In any other
case, such Hours of Service shall be considered as Hours of Service in the
immediately succeeding Eligibility Qualification Period.
Hours of Service shall not be credited to an Employee on account of pregnancy or
placement of a child for adoption as described above unless such Employee
furnishes to the Administration Committee such timely information as the
Administration Committee may require to establish that the absence from
employment is for the reasons described above and to establish the number of
days for which there was such an absence.
1.31 INVESTMENT COMMITTEE shall mean the persons appointed pursuant to Article
14 who are responsible for Plan investments, except as otherwise provided in the
Plan.
1.32 LEAVE OF ABSENCE shall mean an absence authorized by an Employer under its
personnel practices provided that the Employee resumes service with an Employer
within the period specified in the authorization for the Leave of Absence.
For purposes of determining an Employee's termination of employment date, a
Leave of Absence shall not exceed a period of 12 consecutive months.
Notwithstanding the foregoing, service in the United States Armed Forces shall
constitute an authorized Leave of Absence and shall be credited as employment
for purposes of determining a Participant's Years of Service provided that:
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 7
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a. the Employee leaves the employ of an Employer to enter the service of
the Armed Forces through the operation of any law, and
b. the Employee returns to the employ of an Employer within the period
provided by law for the protection of the Employee's reemployment rights.
1.33 LIMITATION YEAR shall mean the Plan Year.
1.34 NORMAL RETIREMENT DATE shall mean the date that a Participant attains age
65.
1.35 NONHIGHLY COMPENSATED EMPLOYEE shall mean an Employee who is neither a
Highly Compensated Employee nor a Family Member.
1.36 ONE-YEAR BREAK IN SERVICE shall mean a 12 consecutive month period
beginning with or after an Employee's Employment Commencement Date in which the
Employee is credited with fewer than 501 Hours of Service.
1.37 PARTICIPANT shall mean any Employee or former Employee who has an Account
Balance.
1.38 PLAN shall mean the Michaels Stores, Inc. Employees 401(k) Plan (As Amended
and Restated Effective February 1, 1994).
1.39 PLAN YEAR shall mean the 12 consecutive month period beginning on February
1st and ending on the immediately succeeding January 31.
1.40 PRIOR PLAN ACCOUNT shall mean the subaccounts, other than Participants'
Rollover Contribution Accounts, resulting from a merger into the Plan of any
tax-qualified plan previously sponsored by the Company or one of its
subsidiaries or other affiliates. The Administration Committee may establish
one or more Prior Plan Accounts, and each Prior Plan Account may be subdivided
into such subaccounts as the Administration Committee determines is necessary in
connection with the Plan administration.
1.41 ROLLOVER CONTRIBUTIONS shall mean the amounts transferred to the Plan by a
Participant pursuant to Article 19. Rollover Contributions may include amounts
transferred to the Plan by Participants from a plan previously sponsored by the
Company or one of its subsidiaries or other affiliates or any of their
predecessors; provided, however, that Rollover Contributions shall not include
any amounts merged into the Plan by action of the Company or any other Employer.
1.42 ROLLOVER CONTRIBUTION ACCOUNT shall mean the subaccount into which Rollover
Contributions and investment earnings on those contributions shall be credited.
1.43 SALARY REDUCTION CONTRIBUTION ELECTION shall mean the form by which an
Eligible Employee authorizes and elects the percentage of such person's
Compensation to be withheld and contributed to the such person's Salary
Reduction Contribution Account.
1.44 SALARY REDUCTION CONTRIBUTION ACCOUNT shall mean the subaccount into which
Salary Reduction Contributions and investment earnings on those contributions
shall be credited.
1.45 SALARY REDUCTION CONTRIBUTIONS shall mean the amounts withheld from an
Eligible Employee's Compensation and contributed to the Plan by an Employer
pursuant to Section 3.01.
1.46 TRUST OR TRUST FUND shall mean the legal entity created by agreement
between the Company and Trustee for the purpose of managing and investing assets
accumulated pursuant to the Plan.
1.47 TRUST AGREEMENT shall mean the agreement entered into between the Company
and the Trustees that governs the management and administration of the Trust.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 8
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1.48 TRUSTEE shall mean the person appointed under the Trust Agreement to serve
as the trustee of the Trust.
1.49 VALUATION DATE shall mean the last day of January, April, July and October
of each Plan Year or such other dates as the Administration Committee may from
time to time determine. At such time as the Administration Committee deems
appropriate in its sole discretion, the term "VALUATION DATE" shall mean the
last day of each calendar month in the Plan Year, or such other dates (including
without limitation daily Valuation Dates) as the Administration Committee may
from time to time determine.
1.50 VESTING COMPUTATION PERIOD shall mean any Plan Year during which an
Employee completes not less than 1,000 Hours of Service with the Employer.
Notwithstanding the foregoing, for an Employee who was eligible to participate
in the Plan at any time during the period from February 1, 1994 through January
31, 1997 inclusive, the term "Vesting Computation Period" shall also mean the 12
consecutive month period beginning with the Employee's Employment Commencement
Date and each anniversary thereof ending on or before January 31, 1997, but only
if the use of such definition would allow an Employee to have more total Years
of Vesting Service than under the definition contained in the preceding
paragraph.
1.51 YEAR OF ELIGIBILITY SERVICE shall mean an Eligibility Qualification Period
in which an Employee is credited with at least 1,000 Hours of Service.
1.52 YEAR OF SERVICE shall mean each 12 month period beginning on an Employee's
Employment Commencement Date during which an Employee completes 1,000 or more
Hours of Service.
1.53 YEAR OF VESTING SERVICE shall mean a Vesting Computation Period in which an
Employee is credited with at least 1,000 Hours of Service.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 9
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ARTICLE 2
ELIGIBILITY AND PARTICIPATION
2.01 PLAN ENTRY DATE. Each Eligible Employee who has satisfied the requirements
of Section 2.02 prior to or on the Effective Date may participate in the Plan on
the Effective Date. Each other Employee who satisfies the requirements of
Section 2.02 after the Effective Date may participate in the Plan on the Entry
Date coincident with or next following the date on which such person satisfies
such requirements. An Eligible Employee must agree to make Salary Reduction
Contributions to become a Participant.
2.02 PARTICIPATION REQUIREMENTS. An Eligible Employee must complete a Year of
Eligibility Service and attain age 21 to be eligible to become a Participant.
2.03 TERMINATION OF EMPLOYMENT. A Participant's employment for purposes of the
Plan shall terminate upon the Participant's death, retirement or other cessation
of employment with all Employers under the Plan.
2.04 REHIRED EMPLOYEE. A Participant who ceases to be an Eligible Employee and
who is reemployed in a class of Eligible Employees shall be eligible to again
become a Participant as of the first day that he performs an Hour of Service.
Salary Reduction Contributions on behalf of such an individual shall begin as
soon as administratively feasible after the Participant files a new Salary
Reduction Contribution election with the Administration Committee. Each other
Eligible Employee who is reemployed shall be eligible to become a Participant on
a date determined in accordance with Sections 2.01 and 2.02.
2.05 LOSS OF PARTICIPANT STATUS. An Eligible Employee who becomes a Participant
shall continue to be a Participant, whether or not he continues to make Salary
Reduction Contributions, until such person's Account Balance has been fully
distributed from the Plan.
2.06 SUSPENSION OF PARTICIPATION. A person who for any reason ceases to be an
Eligible Employee but remains an Employee shall not be permitted to have Salary
Reduction Contributions and Employer Matching Contributions allocated on such
person's behalf. During the period of such suspension, such person's service
with the Employers shall continue to be considered for vesting purposes, and
such person's Account shall continue to be adjusted for investment gains and
losses. The suspension shall be removed and such person may have Salary
Reduction Contributions and Employer Matching Contributions allocated on such
person's behalf when such person becomes an Eligible Employee and files a new
Salary Reduction Contribution Election with the Administration Committee.
2.07 REEMPLOYMENT; VESTING SERVICE. If an Employee incurs a One-Year Break in
Service, such Employee's pre-break Years of Vesting Service shall be disregarded
after such person's termination and subsequent reemployment until such person
completes a Year of Vesting Service after reemployment. In the case of an
Employee who has five consecutive One-Year Breaks in Service, all Years of
Vesting Service after such One-Year Breaks in Service shall be disregarded for
the purpose of vesting such person's Employer Matching Contributions that were
made to the Plan before such breaks, but both pre-break and post-break service
shall count for the purposes of vesting contributions to such person's Employer
Matching Contribution Account that would be made after such breaks. In the case
of an Employee who does not have five consecutive One-Year Breaks in Service,
both the pre-break and post-break service shall count in vesting both the pre-
break and post-break Employer Matching Contributions for such person.
2.08 NOTICE OF PARTICIPATION. Within a reasonable time after the date upon
which an Eligible Employee may become a Participant, but prior to the Entry
Date, the Administration Committee shall give such Eligible Employee reasonable
notice of eligibility to commence participation, including without limitation
such forms and other documentation that the Administration Committee determines
to be necessary or appropriate for the administration of the Plan.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 10
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ARTICLE 3
SALARY REDUCTION CONTRIBUTIONS
3.01 SALARY REDUCTION CONTRIBUTIONS.
a. Each Eligible Employee may elect to have a percentage of Compensation
(in whole amounts of not less than 1% but not more than 15%) during each
pay period contributed by such person's Employer directly into the Plan
instead of paid as cash Compensation. Once each Plan Year, each Eligible
Employee may elect to have a percentage of such person's annual bonus, if
any, that would otherwise become payable contributed by such person's
Employer directly into the Plan instead of paid in cash to such person.
Unless the Eligible Employee elects otherwise by written notice delivered
to the Administration Committee on or before 30 days immediately preceding
payment of the bonus, the amount of the bonus that will be contributed to
the Plan shall be an amount equal to the total bonus multiplied by a
fraction equal to the fraction of the Participant's Compensation that is
deferred pursuant to the first sentence of this Section 3.01a.
b. For Federal tax purposes (and wherever permitted, for state tax
purposes), Salary Reduction Contributions shall be deemed to be Employer
contributions and are intended to qualify as elective contributions made
pursuant to Code Section 401(k).
c. All Salary Reduction Contributions shall be forwarded by the Employer
to the Trustee as soon as administratively feasible after the contributions
have been withheld from the Eligible Employee's Compensation.
d. No Eligible Employee shall be permitted to make Salary Reduction
Contributions during any calendar year in excess of $7,000 as adjusted by
the Adjustment Factor. The limitation described in this Section 3.01d
applies on an individual basis to all elective deferrals (within the
meaning of Code Section 401(k)) made by each Eligible Employee during a
calendar year under this or any other similar tax-qualified plan of the
Employers.
e. Each Eligible Employee must coordinate such person's Salary Reduction
Contributions as needed to meet the limitation described above in
connection with any other plan or plans not sponsored by the Employers.
The Employers shall not take account of elective deferrals made to any
other plan not sponsored by the Employers. Notwithstanding any Plan
provision to the contrary, the Eligible Employee may state a claim for the
return of Excess Deferrals and such Excess Deferrals and the income
allocable thereto shall be distributed if administratively feasible no
later than April 15 after the calendar year for which such allocable Excess
Deferrals are made. The Eligible Employee's claim shall be in writing;
shall be submitted to the Administration Committee no later than March 1;
shall specify the Eligible Employee's Excess Deferrals for the preceding
calendar year; and shall be accompanied by the Eligible Employee's written
statement that if such amounts are not distributed, such Excess Deferrals,
when added to amounts deferred under other plans or arrangements described
in Code Sections 401(k), 408(k) or 403(b), exceed the limit imposed on the
Eligible Employee by Code Section 402(g) for the year in which the deferral
occurred.
The Excess Deferrals shall be adjusted for income or loss. The income or
loss allocable to Excess Deferrals for the Plan Year shall be determined by
multiplying the income or loss allocable to the Eligible Employee's Salary
Reduction Contributions for the Plan Year by a fraction, the numerator of
which is the Excess Deferrals on behalf of the Eligible Employee for the
Plan Year and the denominator of which is the Eligible Employee's Account
Balance attributable to Salary Reduction Contributions on the last day of
the Plan Year reduced by the gain allocable to such total amount for the
Plan Year and increased by the loss allocable to such total amount for the
Plan Year.
The Administration Committee may determine that the income allocable to
Excess Deferrals for the period between the end of the Plan Year and the
date of the corrective distribution may be disregarded or
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 11
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calculated under any method permissible in accordance with the Treasury
Regulations and other official pronouncements of the Secretary of the
Treasury.
f. The Administration Committee may review Salary Reduction Contributions
from time to time. If the Administration Committee determines that an
Eligible Employee's Salary Reduction Contributions are likely to exceed the
limitations imposed by any Plan provision, the Administration Committee may
require such Eligible Employee to reduce the amount of any such Salary
Reduction Contributions or may require the suspension of any future Salary
Reduction Contributions. In the event that the Administration Committee
requires that an Eligible Employee's Salary Reduction Contributions be
reduced or suspended, the Administration Committee shall notify the
affected Eligible Employee and such person's Employer as soon as
administratively feasible.
3.02 SALARY REDUCTION CONTRIBUTION ELECTION. Each Eligible Employee who is (or
has agreed to become) a Participant may deliver to the Administration Committee
a Salary Reduction Contribution Election that shall be effective after receipt
by the Administration Committee in accordance with procedures established by the
Administration Committee.
3.03 SUSPENSION OF, OR CHANGE IN, SALARY REDUCTION CONTRIBUTION ELECTION.
a. SUSPENSION: A Participant may elect to suspend all Salary Reduction
Contributions at any time by giving written notice to the Administration
Committee on a form acceptable to the Administration Committee for that
purpose. Any such notice shall be effective as soon as administratively
feasible after the date such notice is received by the Administration
Committee. A Participant who has suspended all Salary Reduction
Contributions may resume such contributions as soon as administratively
feasible after receipt of such notice by the Administration Committee.
b. CHANGE IN SALARY REDUCTION CONTRIBUTIONS: A Participant may elect to
change the amount of the Participant's Salary Reduction Contributions
effective February 1, May 1, August 1 or November 1 of each Plan Year, or
at such other time that may be established by the Administration Committee,
by giving the Administration Committee reasonable advance notice of such
change. Any such change shall be effective as soon as administratively
feasible after the date such change is received by the Administration
Committee.
c. SPECIAL RULE: Notwithstanding the foregoing provisions of Sections
3.03a and 3.03b, the provisions of this Section 3.03c apply to suspension
and change elections in the circumstances specified below if the
Participant is subject to the requirements of Section 16(b) of the
Securities Exchange Act of 1934. If, at the time of the suspension or
change, the Participant's investment election provides for the investment
of all or any portion of the Participant's Salary Reduction Contributions
in the Company common stock investment fund and if the Participant suspends
or reduces to a nominal amount the Participant's Salary Reduction
Contributions, then the Participant may not resume Salary Reduction
Contributions or Employee Contributions for a period of six months from the
date of the suspension or change or until such time as no portion of the
Participant's Salary Reduction Contributions are allocated to the Company
common stock investment fund, if earlier.
3.04 DEFERRAL PERCENTAGE LIMITATION. At such intervals as it shall deem
appropriate, the Administration Committee shall review all Salary Reduction
Contributions to determine that all Salary Reduction Contributions satisfy one
of the tests below:
a. the Average Actual Deferral Percentage for Highly Compensated
Employees for the Plan Year shall not exceed the Average Actual Deferral
Percentage for Nonhighly Compensated Employees for the Plan Year multiplied
by 1.25, or
b. the Average Actual Deferral Percentage for Highly Compensated
Employees for the Plan Year shall not exceed the Average Actual Deferral
Percentage for Nonhighly Compensated Employees for the Plan Year multiplied
by two, provided that the Average Actual Deferral Percentage for Highly
Compensated Employees does not exceed the Average Actual Deferral
Percentage for Nonhighly
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 12
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Compensated Employees by more than two percentage points. Notwithstanding
the foregoing, the limit set forth in this Section 3.04b. shall be adjusted
in accordance with Section 3.07.
3.05 SPECIAL RULES ON DEFERRAL PERCENTAGE LIMITATIONS.
a. The Actual Deferral Percentage for any Highly Compensated Employee for
the Plan Year and who is eligible to have Salary Reduction Contributions
allocated to such person's account under two or more plans or arrangements
described in Code Section 401(k) that are maintained by an Employer shall
be determined as if all such Salary Reduction Contributions were made under
a single arrangement. If a Highly Compensated Employee participates in two
or more plans or arrangements described in Code Section 401(k) that have
different plan years, all such arrangements ending with or within the same
calendar year shall be treated as a single arrangement.
b. For purposes of determining the Actual Deferral Percentage of an
Eligible Employee who is a five percent owner or one of the ten most highly
paid Highly Compensated Employees, the Salary Reduction Contributions and
Compensation of such person shall include Salary Reduction Contributions
and Compensation of the Family Members for the Plan Year. Family Members
with respect to such Highly Compensated Employees shall be disregarded as
separate Employees in determining the Average Actual Deferral Percentage
both for Nonhighly Compensated Employees and Highly Compensated Employees.
c. In the event that the Plan satisfies the requirements of Code Sections
401(k), 401(a)(4) or 410(b) only if aggregated with one or more other plans
or if one or more plans satisfy the requirements of such sections of the
Code only if aggregated with the Plan, then this Section shall be applied
by determining the Actual Deferral Percentage as if all such plans were a
single plan. Plans may be aggregated in order to satisfy Code Section
401(k) only if they have the same plan year.
d. In determining the Actual Deferral Percentage, Salary Reduction
Contributions must be made before the last day of the 12 month period
immediately after the Plan Year to which those contributions relate.
e. The determination and treatment of the Actual Deferral Percentage
shall satisfy such other requirements as may be prescribed by the Secretary
of the Treasury.
f. Salary Reduction Contributions shall be taken into account under the
Actual Deferral Percentage test for a Plan Year only if such contributions
relate to Compensation that either would have been received by the Eligible
Employee in the Plan Year (but for the Salary Reduction Contribution
election) or is attributable to services performed by the Eligible Employee
in the Plan Year and would have been received by the Eligible Employee
within 2-1/2 months after the close of the Plan Year.
g. For purposes of determining whether the Plan satisfies the
requirements of Section 3.04, Salary Reduction Contributions shall be taken
into account only if such contributions are allocated as of a date within
that Plan Year. For this purpose, Salary Reduction Contributions are
considered allocated as of a date within a Plan Year if the allocations are
not contingent on participation or performance of services after such date
and the Salary Reduction Contributions are actually paid to the Trust as
provided in Section 3.05d.
3.06 ADJUSTMENT OF SALARY REDUCTION CONTRIBUTIONS.
a. In the event the Administration Committee determines that one of the
tests in Section 3.04 is not satisfied at the time of its review, the
Administration Committee may require that one or more Participants adjust
their Salary Reduction Contribution Election as of the first pay period in
the month next after receipt of the test results in order that one of the
tests in Section 3.04 will be satisfied, or, to the extent permitted by
law, the Administration Committee shall have the power and authority to
return all or any part of the Salary Reduction Contributions of one or more
Participants in cash within 2-1/2 months after the end of the Plan Year but
in no instance later than the last day of the Plan Year after the Plan Year
for which the Excess Contributions were made, solely to the extent
necessary to satisfy one of the tests in Section 3.04.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 13
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b. The Excess Contributions shall be adjusted for income or loss. The
income or loss allocable to Excess Contributions for the Plan Year shall be
determined by multiplying the income or loss allocable to the Participant's
Salary Reduction Contributions for the Plan Year by a fraction, the
numerator of which is the Excess Contributions on behalf of the Participant
for the Plan Year and the denominator of which is the Participant's Account
Balance attributable to Salary Reduction Contributions on the last day of
the Plan Year reduced by the gain allocable to such total amount for the
Plan Year and increased by the loss allocable to such total amount for the
Plan Year. The Administration Committee may determine that the income
allocable to Excess Contributions for the period between the end of the
Plan Year and the date of the corrective distribution may be disregarded or
calculated under any method permissible in accordance with the Treasury
Regulations and other official pronouncements from the Secretary of the
Treasury.
c. Excess Contributions shall be returned in accordance with the
procedure in this Section 3.06c. The Actual Deferral Percentage of the
Highly Compensated Employee with the highest Actual Deferral Percentage
shall be reduced to the extent required to (i) enable the arrangement to
satisfy the test in Section 3.04, or (ii) cause such Highly Compensated
Employee's Actual Deferral Percentage to equal the ratio of the Highly
Compensated Employee with the next highest Actual Deferral Percentage and
the excess is allocated among Family Members in proportion to the Salary
Reduction Contributions of each Family Member that are combined to
determine the Actual Deferral Percentage. The foregoing procedure shall be
repeated until the Plan satisfies the test in Section 3.04. Excess
Contributions for Family Members shall be reduced according to procedures
described in Code Section 401(k)(8) and the Treasury Regulations
promulgated thereunder.
d. The amount of Excess Contributions to be distributed or
recharacterized shall be reduced by the amount of Excess Deferrals
previously distributed for the taxable year ending in the same Plan Year,
and Excess Deferrals to be distributed for a taxable year shall be reduced
by Excess Contributions previously distributed or recharacterized for the
Plan Year beginning in such taxable year.
3.07 AGGREGATE LIMIT. Notwithstanding the foregoing, if the Plan does not
satisfy the tests in Sections 3.04a and 4.04a, then the sum of the Average
Actual Deferral Percentage for Highly Compensated Employees for the Plan Year
plus the Average Contribution Percentage for Highly Compensated Employees for
the Plan Year shall be adjusted, if necessary, in accordance with Section 3.08
so that the Aggregate Limit is not exceeded. The term "AGGREGATE LIMIT" shall
mean the greater of:
a. the sum of:
1. 1.25 times the greater of the Average Actual Deferral Percentage
or the Average Contribution Percentage for Nonhighly Compensated
Employees for the Plan Year, plus
2. two percentage points plus the lesser of the Average Actual
Deferral Percentage or the Average Contribution Percentage for
Nonhighly Compensated Employees for the Plan Year. In no event,
however, shall the amount calculated pursuant to this Section 3.07a2
exceed the product of two times the lesser of the Average Actual
Deferral Percentage or the Average Contribution Percentage for
Nonhighly Compensated Employees for the Plan Year, or
b. the sum of:
1. 1.25 times the lesser of the Average Actual Deferral Percentage
or the Average Contribution Percentage or the Average Contribution
Percentage for Nonhighly Compensated Employees for the Plan Year, plus
2. two percentage points plus the greater of the Average Actual
Deferral Percentage or the Average Contribution Percentage for
Nonhighly Compensated Employees for the Plan Year. In no event,
however, shall the amount calculated pursuant to this Section 3.07b2
exceed the product of two times the greater of the Average Actual
Deferral Percentage or the Average Contribution Percentage for
Nonhighly Compensated Employees for the Plan Year.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 14
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The Average Actual Deferral Percentage and the Average Contribution Percentage
for Highly Compensated Employees shall be determined after any corrective
distribution of Excess Deferrals pursuant to Section 3.01e, Excess Contributions
pursuant to Section 3.06c and Excess Aggregate Contributions pursuant to Section
4.06.
3.08 RETURN OF CONTRIBUTIONS ABOVE THE AGGREGATE LIMIT. If the Aggregate Limit
is exceeded, the Average Actual Deferral Percentage and the Average Contribution
Percentage for Highly Compensated Employees shall be reduced in accordance with
the following procedures:
a. by first returning Excess Contributions in the same manner as
described in Section 3.06 until the Actual Deferral Percentage of a Highly
Compensated Employee is reduced to six percent or until the arrangement
satisfies the Aggregate Limit, whichever first occurs, and then
6 b. by returning Excess Contributions in the same manner as described in
Section 3.06 and by simultaneously forfeiting Attributable Employer
Matching Contributions to the extent necessary to enable the arrangement to
satisfy the Aggregate Limit. The term "ATTRIBUTABLE EMPLOYER MATCHING
CONTRIBUTIONS" shall mean those Employer Matching Contributions that were
made pursuant to Section 4.01 to match the Excess Contributions returned
pursuant to this Section 3.08b.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 15
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ARTICLE 4
EMPLOYER MATCHING CONTRIBUTIONS AND EMPLOYEE CONTRIBUTIONS
4.01 EMPLOYER MATCHING CONTRIBUTIONS.
a. For each three month period ending on April 30, July 31, October 31
and January 31 in a Plan Year, each Employer shall make an Employer
Matching Contribution on behalf of Participants who made Salary Reduction
Contributions and who are employed by an Employer on the last day of such
three month period. The aggregate amount of the Employer Matching
Contribution shall be equal to 50% of each Participant's Salary Reduction
Contributions that do not exceed six percent of the Participant's
Compensation in the calendar quarter. Compensation earned by a Participant
prior to the Participant's eligibility for Plan participation shall be
disregarded.
b. Employer Matching Contributions shall be allocated as of the last day
of each such three month period to the Employer Matching Contribution
Accounts of each Participant who made Salary Reduction Contributions during
the period since the last such allocation; provided that no such allocation
shall be made to the Employer Matching Contribution Accounts of
Participants who are not employed by an Employer as of such allocation
date.
4.02 TIMING OF EMPLOYER MATCHING CONTRIBUTIONS. Each Employer shall forward
Employer Matching Contributions to the Trustee for investment in the Trust Fund
at such times as the Employer shall determine but not later than the due date
(including extensions) for filing the Company's Federal income tax return for
the year to which such Employer Matching Contributions relate.
4.03 EMPLOYEE CONTRIBUTIONS. Subject to the Plan provisions relating to
Participants who are subject to the requirements of Section 16(b) of the
Securities Exchange Act of 1934, each Eligible Employee may elect to make
voluntary, after-tax contributions to the Participant's Employee Contribution
Account for each pay period prior to the Participant's termination of employment
under the Plan, subject to the provisions and limitations below:
a. no Eligible Employee shall be required to make Employee Contributions,
b. Employee Contributions shall be subject to the limitations of Section
4.04,
c. an Eligible Employee may not make Employee Contributions in an amount
less than one percent nor more than ten percent of such person's
Compensation during each pay period, and all Employee Contributions shall
be fully vested at all times,
d. Employee Contributions may be made by either payroll deduction or by a
lump sum deposit with the Administration Committee within the month
preceding the end of the Plan Year. An Eligible Employee may elect to
commence or cease making Employee Contributions at any time,
e. an Eligible Employee may not make Employee Contributions during any
period in which such person is not accruing Hours of Service with an
Employer, and
f. from time to time, the Administration Committee may review the
Employee Contributions made by Participants. If the Administration
Committee determines that the Employee Contributions of any Participant are
likely to exceed the limitations imposed by any provision of the Plan, the
Administration Committee may require such Participant to reduce the amount
of any such Employee Contributions or may require the suspension of any
future Employee Contributions. In the event that the Administration
Committee requires that a Participant's Employee Contributions be reduced
or suspended, the Administration Committee shall notify the affected
Participant and his Employer as soon as administratively feasible.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 16
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4.04 PERCENTAGE LIMITATION ON EMPLOYER MATCHING CONTRIBUTIONS. At such
intervals as it shall deem proper, the Administration Committee shall review
Employer Matching Contributions and Employee Contributions in order to
determine that such contributions satisfy one of the tests below:
a. the Average Contribution Percentage for Highly Compensated Employees
for the Plan Year shall not exceed the Average Contribution Percentage for
Nonhighly Compensated Employees for the Plan Year multiplied by 1.25, or
b. the Average Contribution Percentage for Highly Compensated Employees
for the Plan Year shall not exceed the Average Contribution Percentage for
Nonhighly Compensated Employees for the Plan Year multiplied by two,
provided that the Average Contribution Percentage for Highly Compensated
Employees does not exceed the Average Contribution Percentage for Nonhighly
Compensated Employees by more than two percentage points. Notwithstanding
the foregoing, the limit set forth in Section 4.04b shall be adjusted in
accordance with Section 3.07.
4.05 SPECIAL RULES FOR CONTRIBUTION PERCENTAGE LIMIT TESTING.
a. The Average Contribution Percentage for any Highly Compensated
Employee for the Plan Year and who is eligible to receive Employer Matching
Contributions or to make Employee Contributions under two or more plans
described in Code Section 401(a) that are maintained by an Employer shall
be determined as if all such contributions were made under a single plan.
b. In the event that the Plan satisfies the requirements of Code Sections
401(m), 401(a)(4) and 410(b) only if aggregated with one or more other
plans or if one or more other plans satisfy the requirements of such Code
sections only if aggregated with the Plan, then this Section 4.05b shall be
applied by determining the Average Contribution Percentages as if all such
plans were a single plan.
c. For purposes of determining the Contribution Percentage of an Eligible
Employee who is a five percent owner or one of the ten most highly paid
Highly Compensated Employees, Employer Matching Contributions, Employee
Contributions and Compensation of such person shall include the Employer
Matching Contributions, Employee Contributions and Compensation of Family
Members for the Plan Year. Family Members with respect to Highly
Compensated Employees shall be disregarded as separate Employees in
determining the Average Contribution Percentage both for Nonhighly
Compensated Employees and Highly Compensated Employees.
d. For purposes of determining the test described in Section 4.04,
Employer Matching Contributions and Employee Contributions must be made
before the last day of the 12 month period immediately after the Plan Year
to which those contributions relate.
e. The determination and treatment of the Average Contribution Percentage
shall satisfy such other requirements as may be prescribed by the Secretary
of the Treasury.
4.06 ADJUSTMENTS TO CONTRIBUTIONS.
a. Excess Aggregate Contributions plus any income and minus any loss
allocable thereto until the date of distribution shall be forfeited if
forfeitable or if not forfeitable shall be distributed in cash to Highly
Compensated Employees within 2-1/2 months after the end of the Plan Year
but in no instance later than the last day of the Plan Year after the Plan
Year for which the Excess Aggregate Contributions were made.
b. The Excess Aggregate Contributions shall be adjusted for income or
loss. The income or loss allocable to Excess Aggregate Contributions for
the Plan Year shall be determined by multiplying the income or loss
allocable to the Participant's Employer Matching Contributions and Employee
Contributions for the Plan Year by a fraction, the numerator of which is
the Excess Aggregate Contributions on behalf of the Participant for the
Plan Year and the denominator of which is the sum of the Participant's
Account Balance attributable to Employer Matching Contributions and
Employee Contributions on the last day of the Plan Year reduced by the gain
allocable to such amount for the Plan Year and increased by the loss
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 17
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allocable to such amount for the Plan Year. The Administration Committee
may determine that the income allocable to Excess Aggregate Contributions
for the period between the end of the Plan Year and the date of the
corrective distribution may be disregarded or calculated under any method
permissible in accordance with the Treasury Regulations and other official
pronouncements from the Secretary of the Treasury.
c. Excess Aggregate Contributions shall be returned in accordance with
the procedure in this Section 4.06c. The Contribution Percentage of the
Highly Compensated Employee with the highest Contribution Percentage shall
be reduced to the extent required to enable the arrangement to satisfy the
test described in Section 4.04 or cause such Highly Compensated Employee's
Contribution Percentage to equal the ratio of the Highly Compensated
Employee with the next highest Contribution Percentage and the excess shall
be allocated among Family Members in proportion to the Employer Matching
Contributions and Employee Contributions made on behalf of each Family
Member that are combined to determine the Contribution Percentage. The
foregoing procedure shall be repeated until the Plan satisfies the test
described in Section 4.04. Excess Aggregate Contributions for Family
Members shall be reduced according to procedures established by Code
Section 401(m)(6) and the Treasury Regulations promulgated thereunder.
4.07 OVERALL LIMITATION ON ANNUAL ADDITIONS. Notwithstanding any Plan provision
to the contrary, in no event shall the annual additions allocated to a
Participant's Account for any Limitation Year exceed the lesser of:
a. 25% of the Participant's Compensation for the Limitation Year, or
b. $30,000 (or, if greater, 1/4 of the amount in effect under Code
Section 415(b)(1)(A)) for such Limitation Year.
The Compensation limitation referred to in Section 4.07a shall not apply to:
c. any contribution for medical benefits (within the meaning of Code
Section 419A(f)(2)) after separation from service that is otherwise treated
as an annual addition, or
d. any amount otherwise treated as an annual addition under Code Section
415(1)(1).
If, as of the last day of the Plan Year, a Participant's annual additions would
exceed the amount provided for in this Section as a result of a reasonable error
in estimating the Participant's Compensation or under other limited facts and
circumstances that the Commissioner of the Internal Revenue Service determines
to be appropriate, the excess amount shall be computed and administered in
accordance with the following procedures:
a. the excess shall be refunded to the Participant from the Participant's
Salary Reduction Contribution Account adjusted for earnings and losses
thereon to the extent the excess results from a mistaken application of the
limitations of Section 3.01a,
b. next, the excess shall be refunded to the Participant from the
Participant's Employee Contribution Account adjusted for earnings and
losses thereon,
c. next, the excess shall be forfeited from the Participant's Employer
Matching Contribution Account adjusted for earnings and losses thereon and
the total amount of such forfeitures for all Participants shall be held in
a suspense account the balance of which shall be used to offset the amount
of additional Employer Matching Contributions, and
d. finally, any remaining excess shall be refunded to the Participant
from the Participant's Salary Reduction Contribution Account adjusted for
earnings and losses thereon.
4.08 SPECIAL RULES.
a. PARTICIPATION IN ANOTHER DEFINED CONTRIBUTION PLAN. The limitations
in Section 4.07 with respect to any Participant who at any time has
participated in any other tax-qualified defined contribution plan
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 18
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maintained by an Employer shall apply as if the total contributions
allocated under all such defined contribution plans in which the
Participant has participated were allocated under one plan.
b. PARTICIPATION IN ANOTHER DEFINED BENEFIT PLAN. If a Participant has
at any time been a participant in a tax-qualified defined benefit plan
maintained by an Employer, the sum of the Participant's Defined Benefit
Plan Fraction and Defined Contribution Plan Fraction (as those terms are
defined below) for any year shall not exceed one. In the event the sum of
the Defined Benefit Plan Fraction and Defined Contribution Plan Fraction
would otherwise exceed one for any Plan Year, the projected annual
retirement income benefit under an Employer sponsored defined benefit plan
shall be limited to the extent necessary to reduce the Defined Benefit Plan
Fraction so that the sum of the two fractions does not exceed one.
1. The "DEFINED BENEFIT PLAN FRACTION" for any Limitation Year is a
fraction the numerator of which is the Participant's projected annual
retirement income benefit under all defined benefit plans maintained
by the Employers determined as of the end of the Limitation Year and
the denominator of which is the lesser of:
A. the product of 1.25 multiplied by $90,000 adjusted by the
Adjustment Factor, and
B. the product of 1.4 multiplied by 100% of the Participant's
average annual Compensation for the three consecutive calendar
years during which the Participant's Compensation was the
highest.
2. The "DEFINED CONTRIBUTION PLAN FRACTION" for any Limitation Year
is a fraction the numerator of which is the sum of the annual
additions to the accounts of the Participant in all defined
contribution plans maintained by the Employer as of the end of the
Limitation Year for that Limitation Year and all preceding Limitation
Years and the denominator of which is the sum of the lesser of the
amounts below determined for such Limitation Year and for each prior
Limitation Year of service with the Employer:
A. the product of 1.25 multiplied by $30,000 adjusted by the
Adjustment Factor, and
B. the product of 1.4 multiplied by 25% of the Participant's
Compensation for such Limitation Year.
c. ADJUSTMENT OF LIMITATION FOR YEARS OF SERVICE OR PARTICIPATION.
1. In the case of a Participant who has completed less than ten
years of participation in the Plan, the limitation set forth in
Section 4.08b1A above shall be adjusted by multiplying such amount by
a fraction the numerator of which is the Participant's number of years
(or part thereof) of participation in the Plan and the denominator of
which is ten.
2. If a Participant has completed less than ten years of service
with the Employers, the limitation set forth in Section 4.08b1B shall
be adjusted by multiplying such amount by a fraction the numerator of
which is the Participant's number of years of service (or part
thereof) and the denominator of which is ten.
d. Notwithstanding any Plan provision to the contrary, Sections 4.07,
4.08 and 4.09 shall be construed in a manner that is consistent with Code
Section 415 and the Treasury Regulations and other rulings promulgated
thereunder, all of which to the extent necessary are incorporated by this
reference and made a part of the Plan.
4.09 DEFINITIONS. As used in Sections 4.07 and 4.08, the term "ANNUAL ADDITION"
shall mean the amount allocated to a Participant's Account during the Limitation
Year attributable to:
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 19
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a. Salary Reduction Contributions,
b. Employer Matching Contributions,
c. Employee Contributions,
d. forfeitures, and
e. amounts described in Code Sections 415(1)(1) and 419A(d)(2).
4.10 REVERSION OF EMPLOYER MATCHING CONTRIBUTIONS. Except as provided in this
Section 4.10 and in Section 15.03, Plan assets shall never be returned to the
Employers.
a. In the case of an Employer Matching Contribution that is made as a
result of a mistake of fact, such contribution may be returned to the
Employer within one year after the payment of the contribution.
b. If an Employer Matching Contribution is conditioned upon initial
qualification of the Plan under Code Section 401(a) and if the Plan
receives an adverse determination with respect to its initial
qualification, then such contribution may be returned to the Employers
within one year after such determination if application for determination
is made by the time prescribed by law for filing the Company's Federal tax
return for the taxable year in which the Plan was adopted or such later
date as the Secretary of the Treasury may prescribe.
c. In the case of an Employer Matching Contribution that is determined to
be not deductible under Code Section 404, then such contribution shall be
returned to the Employers within one year after such disallowance of the
deduction.
With respect to Sections 4.10a and 4.10c, investment earnings attributable to
such returned amounts shall not be returned to the Employers, and investment
losses attributable to such returned amounts shall reduce the amount eligible to
be returned.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 20
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ARTICLE 5
PARTICIPANTS' ACCOUNTS
5.01 SEPARATE SUBACCOUNTS. The Administration Committee shall maintain or cause
to be maintained a separate Account for each Participant that shall consist of
the Participant's Salary Reduction Contribution Account, Employer Matching
Contribution Account, Employee Contribution Account, Rollover Contribution
Account and Prior Plan Account.
5.02 VALUATION OF TRUST FUND. The fair market value of all assets comprising
the Trust Fund shall be determined as of each Valuation Date. Such valuation
shall be determined in accordance with ERISA Section 3(26) and the regulations
promulgated thereunder and shall give effect to brokerage fees, transfer taxes,
contributions, earnings, gains and losses, forfeitures, expenses, disbursements
and all other transactions during the valuation period since the preceding
Valuation Date. In making such determinations and in crediting net appreciation
or depreciation to the Participant's Account, the Administration Committee may
employ such accounting methods as the Administration Committee may deem
appropriate in order to fairly reflect the fair market value of each
Participants' Account. For the foregoing purpose, the Administration Committee
may rely upon information provided by the Trustee, any investment manager
appointed in accordance with the Plan or other person or firm engaged by the
Administration Committee.
5.03 STATEMENTS. From time to time the Administration Committee shall cause to
be furnished to each Participant and Beneficiary of deceased Participants a
statement showing the value of such persons' Accounts.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 21
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ARTICLE 6
INVESTMENTS
6.01 TRUST FUND. All Plan contributions shall be paid into the Trust Fund. All
such amounts shall be held and disbursed in accordance with the provisions of
the Plan and Trust Agreement. No person shall have any interest in or right to
any part of the Trust Fund except as expressly provided in the Plan or Trust
Agreement.
6.02 AUTHORIZED INVESTMENTS AND INVESTMENT CONTROL. The Investment Committee
and Trustee shall be subject to the following requirements in connection with
the management and investment of Plan assets:
a. EMPLOYER MATCHING CONTRIBUTIONS--INVESTMENT IN COMPANY COMMON STOCK.
The Employer Matching Contribution shall be invested in the Company common
stock investment fund which shall be an investment fund maintained in
connection with the Plan that is designed to invest primarily in the common
stock of the Company.
The Company common stock to be held by the Trustee may be contributed to
the Plan by the Company or may be acquired by the Trustee after the cash
contribution of the Employer Matching Contribution amount determined under
Section 4.01. Each Employer Matching Contribution that is allocated to
Company common stock shall be invested in the Company common stock
investment fund and shall remain invested in the Company common stock
investment fund as long as the Plan remains in existence, except as it
shall be necessary to convert any shares of such Company common stock into
cash to meet any Plan liquidity requirements. The acquisition, investment
and holding of Plan assets in the Company common stock investment fund is
expressly authorized by the Plan and shall not be subject to any other
limitations or restrictions to the fullest extent permitted by ERISA.
b. OTHER INVESTMENTS. Except as provided in Section 6.02a, Participants
and Beneficiaries may direct the Trustee with respect to the investment of
their Account Balances. Such investments shall be made among various
pooled investment fund alternatives that represent varying degrees of risk
and potential investment return. The Investment Committee shall be
responsible for the selection and retention of the various investment funds
available in the Trust. The Investment Committee may add to or replace any
investment fund at anytime and for any reason; provided that the
Administration Committee shall provide reasonable advance notice to
affected Participants and Beneficiaries of the addition or discontinuation
of a specific investment fund. The Investment Committee reserves the
right to terminate all investment funds and invest all assets of the Trust
Fund for the general benefit of Participants and Beneficiaries.
If a Participant or Beneficiary does not indicate such person's investment
fund election in writing on a form acceptable to the Administration
Committee, then the Administration Committee shall cause the amounts held
in such Participant's or Beneficiary's Account to be invested in the
currently available intermediate investment fund available in the Trust
until such time as the Participant's or Beneficiary's written instructions
are received by the Administration Committee. The Administration Committee
shall establish such rules as it deems necessary or appropriate respecting
investment elections.
Notwithstanding the foregoing, a changed investment election for a
Participant who is subject to the requirements of Section 16(b) of the
Securities Exchange Act of 1934 must be delivered to the Administration
Committee at least six months prior to the effective date of such election
if the change will affect the amount of the Participant's Account or future
contributions that are allocated to the Company common stock investment
fund. During the six month period in which the election is on file with
the Administration Committee prior to the effective date of the changed
investment election, such election shall be irrevocable. In addition, if a
Participant changes the investment election to decrease the amount of the
Participant's Account Balance invested in the Company common stock
investment fund, then no portion of the future additions to the
Participant's Account (other than Employer Matching Contributions) may be
allocated to the Company common stock investment fund for a period of six
months after the date of such change.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 22
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6.03 ASSUMPTION OF RISK BY PARTICIPANTS. Each Participant and Beneficiary
assumes the investment risk in connection with the investment of such person's
Account Balance, and neither the Company, any Employer, any Administration
Committee member, any Investment Committee member nor the Trustees shall have
any liability to any person with respect to any such investment allocation
decision.
6.04 GENERAL PROVISIONS REGARDING INVESTMENT DIRECTION. Participant investment
directions are subject to the following provisions:
a. The Administration Committee shall be responsible for providing
information to and responding to requests from Participants concerning
investment directions.
b. The Administration Committee shall provide Participants with the
information listed below which may be contained in the Plan's summary plan
description or in other Plan related materials:
1. an explanation that the Plan is intended to constitute a plan
described in ERISA Section 404(c) and the Department of Labor
regulations promulgated thereunder,
2. a statement that the Plan fiduciaries may be relieved of
liability for any losses that are the direct and necessary result of
investment directions given by Participants or Beneficiaries,
3. a description of the investment funds available under the Trust
and with respect to each designated investment fund a general
description of the investment objective including information relating
to the type and diversification of assets comprising the portfolio of
the designated investment fund,
4. an explanation of the circumstances under which Participants and
Beneficiaries may give investment directions and an explanation of any
specific Plan limitations on such directions including any
restrictions on transfers to or from a designated investment fund,
5. a description of any transaction fees and expenses that affect
the Participant's or Beneficiary's Account Balance in connection with
purchases or sales of interests in the investments funds (for example,
commissions, sales loads, deferred sales charges and redemption or
exchanges fees), and
6. in the case of an investment fund that is subject to the
Securities Act of 1933 and in which the Participant or Beneficiary has
no assets invested immediately after the Participant's or
Beneficiary's initial investment a copy of the most recent prospectus
provided to the Plan.
c. The Administration Committee shall provide the information listed
below upon request by a Participant or Beneficiary:
1. a description of the annual operating expenses of each designated
investment fund (for example, investment management fees,
administrative fees and transaction costs) that reduce the rate of
return to Participants and Beneficiaries and the aggregate amount of
such expenses expressed as a percentage of average net assets of the
designated investment fund,
2. copies of any prospectuses, financial statements, reports and of
any other materials relating to the investment funds available under
the Trust to the extent such information is provided to the Plan,
3. information concerning the value of shares or units in the
designated investment funds in the Trust as well as the past and
current investment performance of such alternatives determined net of
expenses on a reasonable and consistent basis, and
4. information concerning the value of shares or units in the
designated investment funds in which the Accounts of Participants and
Beneficiaries are invested.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 23
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6.05 INDEPENDENT QUALIFIED PUBLIC ACCOUNTANT. The Company shall engage an
independent qualified public accountant to conduct such examinations and to
render such opinions as may be required by ERISA. The Company may replace the
person or firm so engaged at anytime and for any reason.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 24
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ARTICLE 7
DEATH BENEFITS AND BENEFICIARY DESIGNATIONS
7.01 DISTRIBUTION DUE TO DEATH. If a Participant dies while employed under the
Plan, all amounts in such deceased Participant's Account shall be fully vested.
In such case, the deceased Participant's Account Balance, determined as soon as
administratively feasible after the Participant's death, shall be paid in a lump
sum in cash or in kind to the deceased Participant's Beneficiary.
7.02 BENEFICIARY DESIGNATION.
a. Each Participant may designate one or more persons as Beneficiary of
the Participant's Account not otherwise to be distributed to the
Participant's surviving spouse in the event of the Participant's death. If
more than one Beneficiary is designated, the Participant may specify the
sequence and/or proportion in which distributions shall be made to each
Beneficiary. The designation shall be made on a form acceptable to the
Administration Committee and shall become effective when filed with the
Administration Committee. Each Participant may change the Beneficiary
designation from time to time by filing a new designation form with the
Administration Committee. Prior to the death of the Participant, no
designated Beneficiary shall have any interest in any amounts held in the
Participant's Account. Participants may not designate the Company, any
Employer or a Plan fiduciary in their respective capacities as such as
Beneficiary.
b. If a married Participant designates a person other than or in addition
to the Participant's spouse as Beneficiary, then such designation shall not
be effective unless the Participant's spouse executes a written consent to
such designation. The consent of the spouse must be in writing, must
acknowledge the effect of the consent, must acknowledge the designation of
a specific Beneficiary and must be witnessed by a notary public or, if
permitted by the Administration Committee, a Plan representative.
Notwithstanding the spousal consent requirement, such consent shall not be
required if it is established to the satisfaction of the Administration
Committee that the consent cannot be obtained because there is no spouse,
the spouse cannot be located or such other circumstances as may be
prescribed by applicable Treasury Regulations. Any consent under this
Section 7.02b shall be valid only with respect to the spouse who signs the
consent. A designation made by a Participant and consented to by the
Participant's spouse may be revoked by the Participant in writing without
the consent of the spouse anytime prior to the commencement of
distributions from the Participant's Account. Any new designation of a
nonspousal Beneficiary must comply with the requirements of this Section
7.02b.
c. If a married Participant designates a person other than or in addition
to the married Participant's spouse as Beneficiary and does not obtain the
spousal consent to such designation as required by Section 7.02b, then all
of the Participant's remaining Account Balance shall be paid to the
Participant's surviving spouse in the event of the Participant's death.
d. If no designated Beneficiary exists upon the death of a Participant,
then the deceased Participant's Account Balance shall be paid to the
deceased Participant's estate. If, however, a married Participant fails to
designate a Beneficiary, the deceased Participant's surviving spouse shall
be the Beneficiary of the deceased Participant's entire Account Balance.
e. If any doubt exists as to the right of any person to receive any
distribution from the Plan with respect to a deceased Participant, the
Trustee on instructions from the Administration Committee may retain the
deceased Participant's entire Account Balance until the rights thereto are
determined or the Administration Committee may direct the Trustee to pay
such Account Balance into any court of competent jurisdiction. In either
of such events, neither the Company, any of the Employers, nor any Plan
fiduciary shall have any obligations to any claimant of the deceased
Participant's Account Balance.
f. The Administration Committee may adopt such rules and develop such
forms as it determines are necessary or appropriate for the administration
of the Plan's Beneficiary designation provisions.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 25
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g. A Participant's Beneficiary designation shall be void in the event of
the Participant's marriage, and the newly married Participant must comply
with the foregoing provisions to designate a Beneficiary other than the
Participant's spouse.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 26
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ARTICLE 8
VESTING AND TERMINATION OF EMPLOYMENT
8.01 VESTING IN SALARY REDUCTION, EMPLOYEE AND ROLLOVER CONTRIBUTIONS. Each
Participant's Salary Reduction Contribution Account, Employee Contribution
Account and Rollover Contribution Account shall be fully vested at all times.
8.02 VESTING IN EMPLOYER MATCHING CONTRIBUTIONS. A Participant whose employment
under the Plan is terminated prior to the Participant's Normal Retirement Date
for any reason other than death shall have a vested interest in the
Participant's Employer Matching Contribution Account and any earnings or losses
attributable thereto determined as follows:
YEARS OF VESTING SERVICE PERCENTAGE VESTED
------------------------ -----------------
less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
Notwithstanding the foregoing, Participants employed by an Employer before May
1, 1992, shall have a fully vested interest upon the completion of five Years of
Vesting Service rather than six Years of Vesting Service. For all such
Participants, vesting for service of less than five years shall be in accordance
with the foregoing vesting schedule.
8.03 FORFEITURES.
a. If a Participant terminates employment under the Plan and the value of
the Participant's vested Account Balance derived from Employer Matching
Contributions and Employee Contributions is not greater than $3,500, the
Participant shall receive a distribution of the value of the entire vested
Account Balance and the nonvested portion shall be treated as a forfeiture.
For purposes of this Section 8.03a, if the value of a Participant's vested
Account Balance is zero, the Participant shall be deemed to have received a
distribution of such vested Account Balance at the time of such termination
of employment.
b. If a Participant terminates employment under the Plan and elects in
accordance with the requirements of Section 9.02 to receive a distribution
of the value of the Participant's vested Account Balance, the nonvested
portion shall be treated as a forfeiture as of the last day of the calendar
quarter in which the distribution is paid. A Participant may not elect to
take less than the entire portion of such Participant's vested Account
Balance as a distribution from the Plan.
c. If a Participant receives or is deemed to receive a distribution
pursuant to this Section and the Participant resumes employment covered
under the Plan, the Participant's previously forfeited Account Balance
shall be restored to the amount on the date of distribution if the
Participant is reemployed before the date the Participant incurs five
consecutive One-Year Breaks in Service following the date of the
distribution. A reemployed Participant shall have no obligation to repay a
previous distribution from the Plan as a condition to restoration of his
previously forfeited Account Balance.
d. If a Participant does not receive or is not deemed to receive a
distribution pursuant to this Section and the Participant does not resume
covered employment under the Plan, the nonvested portion of the
Participant's Account Balance shall become a forfeiture as of the last day
of the calendar quarter in which the Participant incurs five consecutive
One-Year Breaks in Service.
e. Forfeitures resulting from the operation of this Section shall be
applied as of the last business day of the calendar quarter for such
purpose as determined by the Administration Committee.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 27
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8.04 DISTRIBUTION OF VESTED BENEFITS. Benefits payable in the case of a
Participant whose employment is terminated shall be paid in accordance with
Article 7 in the case of death or Article 9 in the case of a Participant who
retires or otherwise terminates employment under the Plan with a vested Account
Balance.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 28
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ARTICLE 9
DISTRIBUTION OF BENEFITS
9.01 NORMAL FORM OF BENEFIT. Subject to the limitations of Article 8, all Plan
distributions shall be paid in a single sum in cash in an amount equal to the
Participant's vested Account Balance as of the Valuation Date coincident with or
next following the Participant's Normal Retirement Date or date of the
Participant's termination of employment under the Plan, as appropriate.
Effective October 1, 1995, notwithstanding any Plan provision to the contrary,
whenever a distribution is payable from the Plan to a Participant or
Beneficiary, the distributee may elect to receive such distribution in cash, in
Company common stock or part in each. The Administration Committee may adopt
such rules as it deems appropriate for the implementation and administration of
the foregoing provision.
9.02 TIME OF DISTRIBUTION. Distribution of a Participant's vested Account
Balance shall be made in accordance with the following provisions:
a. If a Participant's vested Account Balance is greater than $3,500, but
the Participant and the Participant's spouse do not consent to an immediate
distribution, the Participant's Account Balance shall be retained until:
1. distributed as soon as administratively feasible after the
Valuation Date coincident with or next following the occurrence of the
earlier of the Participant's request for distribution after the
Participant's Normal Retirement Date or the date the Participant and
the Participant's spouse consent to an immediate distribution, or
2. distributed pursuant to Section 9.02c prior to the Participant's
Normal Retirement Date as of a Valuation Date after a written request
by the Participant and consent of the Participant's spouse if
necessary.
b. If on termination of a Participant's employment under the Plan the
value of the Participant's vested Account Balance determined as of the
Valuation Date immediately preceding the date of termination is not greater
than $3,500, the entire Account Balance may be distributed as soon as
administratively feasible to the Participant in a single sum distribution.
c. If on termination of a Participant's employment under the Plan the
value of the Participant's vested Account Balance determined as of the
Valuation Date immediately preceding the date of termination is greater
than $3,500, then the Participant may elect to receive the Participant's
Account Balance in substantially equal monthly installments payable on the
first day of each month over a period of 60, 120 or 180 consecutive months
in lieu of a single sum distribution. Any such election must be in writing
on a form acceptable to the Administration Committee. In no event,
however, shall the period of distribution exceed the Participant's life
expectancy. If the Participant dies after the distribution commencement
date but before the number of certain payments has been made, the monthly
payments shall continue to be made to the deceased Participant's
Beneficiary until the total number of payments has been made unless the
deceased Participant's Beneficiary elects in accordance with the provisions
of Article 7 to receive the remaining Account Balance in a single sum
distribution.
If a distribution is made in installments, the Participant's undistributed
Account Balance shall be held in the Trust until the last installment is paid.
The aggregate of such installment payments of such Participant may be more or
less than the value of the Participant's Account Balance at the Participant's
retirement or death depending on the investment performance of, and expenses
allocated to, the Trust Fund during the period over which such installments are
paid from the Trust Fund.
9.03 INVESTMENT OF ACCOUNT BALANCE OF TERMINATED PARTICIPANT. In the event a
Participant's employment under the Plan is terminated and the Participant does
not consent to an immediate distribution of the Participant's Account Balance,
such Account Balance shall continue to be invested as if the terminated
Participant's employment under the Plan continued.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 29
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9.04 LATEST DISTRIBUTION DATE. Nothing in the Plan shall be construed to permit
distribution of a Participant's Account Balance to begin later than the 60th day
after the close of the Plan Year in which occurs (a) the date on which the
Participant reaches the Normal Retirement Date, (b) the tenth anniversary of the
year in which the Participant commenced Plan participation, or (c) the date the
Participant terminates employment under the Plan, whichever is latest.
9.05 MANDATED COMMENCEMENT OF BENEFITS. Notwithstanding any Plan provision to
the contrary, distribution of a Participant's Account Balance shall commence not
later than April 1 of the calendar year after the calendar year in which the
Participant attains age 70-1/2, and Plan distributions shall be made in
accordance with Code Section 401(a)(9) and the Treasury Regulations and other
rulings promulgated thereunder, all of which to the extent necessary are
incorporated by this reference and made a part of the Plan.
9.06 DIRECT ROLLOVERS. A distributee may elect at the time and in the manner
prescribed by the Administration Committee to have any portion of an eligible
rollover distribution paid directly to an eligible retirement plan specified by
the distributee in a direct rollover.
a. The term "ELIGIBLE ROLLOVER DISTRIBUTION" shall mean any distribution
of all or any portion of the balance to the credit of the distributee
except that an eligible rollover distribution shall not include any
distribution that is one of a series of substantially equal periodic
payments not less frequently than annually made for the life or life
expectancy of the distributee or the joint lives or joint life expectancies
of the distributee and the distributee's designated beneficiary or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under Code Section 401(a)(9); or the portion of
any distribution that is not includible in gross income determined without
regard to the exclusion for net unrealized appreciation with respect to
employer securities.
b. The term "ELIGIBLE RETIREMENT PLAN" shall mean an individual
retirement account described in Code Section 408(a), an individual
retirement annuity described in Code Section 408(b), an annuity plan
described in Code Section 403(a) or an exempt trust described in Code
Section 401(a) that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to
the Participant's surviving spouse, the term "ELIGIBLE RETIREMENT PLAN"
shall mean an individual retirement account or individual retirement
annuity.
c. The term "DISTRIBUTEE" shall include an Employee or former Employee.
In addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the
Alternate Payee under a Qualified Domestic Relations Order (as defined in
Section 21.02) are distributees with regard to the interest of the spouse
or former spouse.
d. The term "DIRECT ROLLOVER" shall mean a payment by the Plan to the
eligible retirement plan specified by the distributee.
9.07 WAIVER OF 30 DAY NOTICE. If a distribution is one to which Code Sections
401(a)(11) and 417 do not apply, such distribution may commence less than 30
days after the notice required under Treasury Regulation Section 1.411(a)-11(c)
is given provided that:
a. the Administration Committee clearly informs the Participant that the
Participant has a right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect a distribution
and the available distribution options, and
b. the Participant after receiving the notice affirmatively elects to
receive a distribution and waives the remainder of the 30 day period.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 30
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ARTICLE 10
WITHDRAWALS WHILE EMPLOYED
10.01 WITHDRAWALS.
a. A Participant may withdraw all or any part of the funds in the
Participant's Salary Reduction Contribution Account, Employee
Contribution Account and Rollover Contribution Account. Notwithstanding
the foregoing, withdrawals from a Participant's Salary Reduction
Contribution Account shall be subject to the requirements of Section
10.02. Except as provided in Section 10.03, a Participant may not
receive any withdrawal from the Participant's Employer Matching
Contribution Account or Prior Plan Account. Participants may apply for
withdrawals by filing a written application with the Administration
Committee on a form provided for that purpose.
b. Notwithstanding the foregoing, a Participant who is subject to
Section 16(b) of the Securities Exchange Act of 1934 must comply with the
provisions of this Section 10.01b with respect to any withdrawals from
the Plan. Unless specifically designated in writing by the Participant,
the amount of any withdrawal shall be paid from the Participant's Account
invested in funds other than the Company common stock investment fund. If
all or any portion of the withdrawal is paid from the Participant's
Account invested in the Company common stock investment fund, the
Participant must suspend future Salary Reduction Contributions and
Employee Contributions to the extent invested in the Company common stock
investment fund for a period of six months from the date the withdrawal
is paid or until such time as no portion of the Participant's future
Salary Reduction Contributions are allocated to the Company common stock
investment fund if earlier.
10.02 HARDSHIP WITHDRAWALS. A Participant may withdraw all or any part of the
funds exclusive of earnings thereon in the Participant's Salary Reduction
Contribution Account only on account of a hardship. A withdrawal shall be on
account of hardship only if the withdrawal:
a. is made on account of an immediate and heavy financial need of the
Participant limited to:
1. medical expenses (as described in Code Section 213(d)) incurred
by the Participant, the Participant's spouse or any dependent of the
Participant,
2. purchase excluding mortgage payments of a principal residence
for the Participant,
3. payment of tuition for the next 12 months of post-secondary
education for the Participant or the Participant's spouse, children
or dependents,
4. the need to prevent eviction of the Participant from the
Participant's principal residence or foreclosure on the mortgage of
the Participant's principal residence, or
5. such other immediate and heavy financial needs as determined by
the Commissioner of the Internal Revenue Service and announced by
publication of revenue rulings, notices and other documents of
general applicability,
b. is necessary to satisfy such immediate and heavy financial need and
does not exceed the amount required to relieve such need and is not
reasonably available from other resources of the Participant. A
withdrawal will be necessary to satisfy the immediate and heavy financial
need of the Participant if the Administration Committee reasonably relies
upon the Participant's representation that the need cannot be relieved:
1. through reimbursement or compensation by insurance or
otherwise,
2. by reasonable liquidation of the Participant's assets to the
extent such liquidation would not itself cause an immediate and
heavy financial need,
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 31
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3. by cessation of Salary Reduction Contributions, or
4. by other distributions or nontaxable (determined at the time of
the loan) loans from plans maintained by the Employers or by any
other employer or by borrowing from commercial sources on reasonable
commercial terms.
The Participant's resources shall be deemed to include those assets of
the Participant's spouse and minor children that are reasonably available
to the Participant.
The Administration Committee may require the submission of such evidence as it
may reasonably deem necessary to confirm the existence of such a hardship. An
application for a hardship withdrawal shall be acted upon by the Administration
Committee as soon as administratively feasible after the date the Participant's
application is filed with the Administration Committee. If the Administration
Committee approves the Participant's application, the withdrawal shall be paid
as soon as administratively feasible thereafter from the Participant's Salary
Reduction Contribution Account; provided, that under no circumstance shall
earnings on the Participant's Salary Reduction Contributions be withdrawn at any
time. If the Administration Committee denies the Participant's application, the
Administration Committee shall promptly notify the Participant of the reason for
the denial.
10.03 IN-SERVICE WITHDRAWALS FOR FORMER LEEWARDS PLAN PARTICIPANTS. This
Section 10.03 applies only to Participants who were participants in the Leewards
Profit Sharing and 401(k) Plan (the "LEEWARDS PLAN") as of December 31, 1994,
and whose account balances attributable to elective deferrals (as defined in
Code Section 402(g)(3)) were transferred to the Plan and as of the date of any
application under this Section 10.03 continue to be held in the Trust. The term
"TRANSFERRED BALANCE" shall mean the Participant's balance in the Leewards Plan
as of December 31, 1994, adjusted for earnings and losses on such amount in
accordance with the Plan after December 31, 1994. With respect to any such
transferred balance, a Participant who has attained age 59-1/2 may apply to the
Administration Committee for a withdrawal of all or a part of such transferred
balance without regard to the Participant's continued employment under the Plan
and without regard to the existence or not of a hardship as defined in Section
10.02 above. An application for withdrawal shall be acted upon by the
Administration Committee as soon as administratively feasible after the date the
Participant's application is filed with the Administration Committee. If the
Administration Committee approves the Participant's application, the withdrawal
shall be paid as soon as administratively feasible thereafter. If the
Administration Committee denies the Participant's application, the
Administration Committee shall promptly notify the Participant of the reason for
the denial.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 32
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ARTICLE 11
LOANS
11.01 OVERALL LIMITATIONS. The Trustee may make loans from the Trust Fund to
any Participant who is an Eligible Employee at the time such loan is made. Each
loan shall be made upon written application of the Participant and shall be
subject to the approval of the Administration Committee in accordance with
standards adopted by the Administration Committee. A Participant shall not be
allowed to have more than one outstanding loan at any time. A Participant who
is not accruing Hours of Service shall not be permitted to obtain a Plan loan.
No loan shall be granted to the extent it would cause the aggregate balance of
all loans that a Participant has outstanding from the Plan and from any other
tax-qualified plan maintained by the Employers (an "OTHER PLAN") to exceed an
amount equal to the lesser of:
a. $50,000 reduced by the excess if any of:
1. the highest outstanding balance of all loans from the Plan and
all Other Plans during the one year period ending on the Loan
Determination Date, over
2. the outstanding balance of all loans from the Plan and all
Other Plans on the date the loan is made, or
b. one-half of the Participant's vested Account Balance.
The "LOAN DETERMINATION DATE" for purposes of determining a Participant's
maximum loan hereunder and the outstanding balance of any loan shall be the
first Valuation Date preceding the date as of which the loan would be granted.
A Participant must consent on the loan application form to the payment of any
outstanding loan balance from the Participant's Account Balance in the event of
a default as determined in accordance with Section 11.05 at the time when the
Participant is first eligible to receive a distribution of the Participant's
Account Balance.
11.02 TERMS OF LOAN. All loans shall be on such terms and conditions as the
Administration Committee may determine provided that all loans shall:
a. be made pursuant to a promissory note that is subject to default
rules that are not inconsistent with those described in Section 11.05
and that is secured by the Participant's Account Balance as provided by
ERISA,
b. be amortized on a substantially level basis with payments to be
made from payroll deductions except as otherwise permitted by the
Administration Committee,
c. bear a reasonable rate of interest that may be a fluctuating rate
that shall be based on the prime rate as of the date the loan is made,
d. provide for repayment in full on or before the earlier of five years
after the date on which the loan is made (ten years after the date the
loan is made if the loan if the loan proceeds will be used to acquire a
dwelling that within a reasonable period of time is to be used as the
principal residence of the Participant) or the date of distribution of
the Participant's Account Balance, and
e. be in an amount not less than $1,000 or such other amount determined
from time to time by the Administration Committee.
11.03 SOURCE OF LOANS. A loan account shall be established for each
Participant who receives a Plan loan. The Administration Committee shall
develop such rules as may be necessary to govern the transfer from the
Participant's Account to the Participant's loan account.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 33
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Participants who are subject to Section 16(b) of the Securities Exchange Act of
1934 are subject to the following requirements with respect to Plan loans: if
all or any portion of the loan is funded from the Participant's Account Balance
that is invested in the Company common stock investment fund, the Participant
must suspend future Salary Reduction Contributions and Employee Contributions to
the extent invested in the Company common stock investment fund for a period of
six months from the date of the loan or until such time as no portion of the
Participant's future Salary Reduction Contributions are allocated to the Company
common stock investment fund if earlier.
11.04 WITHHOLDING AND APPLICATION OF LOAN PAYMENTS. Principal and interest
payments shall be made through periodic payroll deduction. Principal and
interest payments first shall be credited to the Participant's loan account and
any loss caused by nonpayment of such loan shall be borne solely by such
Participant's loan account and shall then be transferred to the Participant's
Account in the ratio in which such Account provided funding for the original
loan proceeds to be invested in accordance with the Participant's investment
instructions in effect at the time of such repayment.
11.05 DEFAULT. A Participant's promissory note shall be considered in default
in the event the Participant terminates Plan participation, a payment is not
made when due, the Participant files for relief under the United States
Bankruptcy Code or the Plan is terminated. In the event a default occurs and is
not cured within any grace period set forth in the promissory note or otherwise
allowed by the Administration Committee, the full amount due under the
promissory note shall become immediately due and payable. In such event, the
Administration Committee may instruct the Trustee to take such actions as the
Administration Committee deems necessary or appropriate to protect the Plan,
including without limitation repayment of the promissory note by offset against
any distribution or withdrawal to which the Participant is or may become
entitled to receive from the Plan. Until a Participant's promissory note is
repaid in fact or by offset, the balance of such promissory note shall be
included in the Participant's Account Balance regardless of the Federal income
tax requirements otherwise applicable under Code Section 72(p).
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 34
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ARTICLE 12
PLAN FIDUCIARIES
12.01 FIDUCIARIES. The Plan's named fiduciaries are as follows:
a. the Company,
b. the Administration Committee,
c. the Investment Committee,
d. the Trustee and
e. such other persons that are designated to carry out Plan fiduciary
responsibilities in accordance with Section 12.03b.
Any person may serve in more than one fiduciary capacity with respect to the
Plan. A fiduciary may employ one or more persons to render advice with regard
to any responsibility such fiduciary has under the Plan.
12.02 ALLOCATION OF RESPONSIBILITIES. The powers and responsibilities of the
Plan fiduciaries are allocated in the following manner:
a. COMPANY. The Company shall be responsible for all functions
assigned or reserved to it in the Plan and Trust Agreement. Any authority
assigned or reserved to the Company in the Plan and Trust Agreement shall
be exercised by the Board.
b. ADMINISTRATION COMMITTEE. The Administration Committee shall have
the responsibility and authority to control the operation and
administration of the Plan in accordance with the terms of the Plan and
Trust except with respect to duties and responsibilities specifically
allocated to other fiduciaries. The Administration Committee shall have
the authority to issue written directions to the Trustee to the extent
provided in the Trust Agreement. The Trustee shall follow the
Administration Committee's directions unless the actions to be taken in
furtherance of such directions would violate ERISA fiduciary standards or
would be contrary to the terms of the Plan or Trust Agreement.
c. INVESTMENT COMMITTEE. The Investment Committee shall have the
responsibility and authority to control the investment of the Trust Fund
in accordance with the terms of the Plan and Trust except with respect to
duties and responsibilities specifically allocated to other Plan
fiduciaries or to Participants and Beneficiaries. The Investment
Committee shall have the authority to issue written directions to the
Trustee to the extent provided in the Trust Agreement. The Trustee shall
follow the Investment Committee's directions unless the actions to be
taken in furtherance of such directions would violate ERISA fiduciary
standards or would be contrary to the terms of the Plan or Trust
Agreement.
d. TRUSTEE. The Trustee shall have the duty and responsibility
provided in the Trust Agreement subject to direction by the
Administration Committee or Investment Committees as also provided in the
Trust Agreement.
Powers and responsibilities of Plan fiduciaries may be allocated to other Plan
fiduciaries in accordance with Section 12.03 or as otherwise provided in the
Plan or Trust Agreement. Article 12 allocates to each named fiduciary the
individual responsibility for the prudent execution of the functions assigned to
it, and none of such responsibilities or any other responsibility shall be
shared by more than one of such named fiduciaries unless such sharing shall be
provided by a specified provision of the Plan or Trust Agreement.
12.03 PROCEDURES FOR DELEGATION AND ALLOCATION OF RESPONSIBILITIES. Fiduciary
responsibilities may be allocated as follows:
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 35
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a. The Administration Committee and/or the Investment Committee may
specifically allocate responsibilities to a specified member of each such
committee.
b. The Administration Committee and/or the Investment Committee may
designate a person other than a fiduciary to carry out Plan fiduciary
responsibilities; provided that such authority shall not cause any person
employed to perform ministerial acts and services for the Plan to be
deemed a Plan fiduciaries.
c. The Administration Committee or the Investment Committee may appoint
an investment manager to manage the Plan's assets or a portion thereof.
d. If at any time there are multiple Trustees serving under the Trust
Agreement, such Trustees may allocate specific responsibilities,
obligations or duties among themselves in such manner as they shall
agree.
Any allocation of responsibilities shall be made by filing a written notice
thereof with such committee or the Trustee (as applicable) specifically
designating the person to whom such responsibilities or duties are allocated and
specifically setting out the particular duties and responsibilities with respect
to which the allocation or designation is made.
12.04 GENERAL FIDUCIARY STANDARDS. Subject to Section 12.05 hereof, a Plan
fiduciary shall discharge such person's Plan duties solely in the interest of
Participants and Beneficiaries and
a. for the exclusive purpose of providing benefits to Participants and
Beneficiaries and defraying reasonable expenses of Plan administration,
b. with the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent man acting in a like capacity and familiar
with such matters would use in the conduct of an enterprise of a like
character and with like aims,
c. by diversifying the Plan's investments so as to minimize the risk of
large losses unless under the circumstances it would be clearly prudent
not to do so, and
d. in accordance with the documents and instruments governing the Plan
insofar as such documents and instruments are consistent with the
provisions of Title I of ERISA.
12.05 LIABILITY AMONG CO-FIDUCIARIES.
a. GENERAL. Except for any liability that a person may have under
ERISA, a Plan fiduciary shall not be liable for the breach of a fiduciary
duty by another Plan fiduciary except in the following circumstances:
1. the Plan fiduciary participates knowingly in or knowingly
undertakes to conceal an act or omission of such other Plan fiduciary
knowing such act or omission is a breach,
2. by the Plan fiduciary's failure to comply with the general
fiduciary standards set out in Section 12.04 in the administration of
such fiduciary's specific responsibilities that give rise to such
person's status as a Plan fiduciary, the Plan fiduciary has enabled
such other fiduciary to commit a breach, or
3. the Plan fiduciary has knowledge of a breach by such other Plan
fiduciary and the Plan fiduciary does not undertake reasonable
efforts under the circumstances to remedy the breach.
b. CO-TRUSTEES. In the event that there are multiple co-Trustees
serving under the Trust Agreement, each co-Trustee shall use reasonable
care to prevent a co-Trustee from committing a breach of fiduciary
responsibility, and all co-Trustees shall jointly manage and control Plan
assets, except that in the event of an allocation of responsibilities,
obligations or duties, a co-Trustee to whom such responsibilities,
obligations or duties have not been allocated shall not be liable to any
person by reason of this Section 12.05, either individually or as a co-
Trustee, for any loss resulting to the Plan arising from the acts or
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 36
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omissions on the part of the co-Trustee to whom such responsibilities,
obligations or duties have been allocated.
c. LIABILITY WHERE ALLOCATION IS IN EFFECT. To the extent that fiduciary
responsibilities are specifically allocated by a fiduciary or pursuant to
the express terms of the Plan to any person, then such Plan fiduciary
shall not be liable for any act or omission of such person in carrying
out such responsibility except to the extent that the Plan fiduciary
violated Section 12.04:
1. with respect to such allocation or designation,
2. with respect to the establishment or implementation of the
procedure for making such an allocation or designation,
3. in continuing the allocation or designation, or
4. the Plan fiduciary would otherwise be liable in accordance with
this Section 12.05.
d. LIABILITY OF TRUSTEE FOLLOWING COMMITTEE DIRECTIONS. No Trustee shall
be liable for following directions of the Administration Committee given
pursuant to Section 12.02b and the Investment Committee given pursuant to
Section 12.02c.
e. NO RESPONSIBILITY FOR EMPLOYER ACTION. Neither the Trustee,
Administration Committee nor Investment Committee shall have any
obligation or responsibility with respect to any act or omission of the
Employers or any other person; neither the Trustee, Administration
Committee nor Investment Committee shall have any obligation or
responsibility with respect to the collection of any contributions
required by the Plan or with respect to the determination of the
correctness of the amount of any Employer contribution.
f. NO DUTY TO INQUIRE. Neither the Trustee, the Administration Committee
nor the Investment Committee shall have any obligation to inquire into or
be responsible for any act or failure to act on the part of the others.
g. LIABILITY WHERE INVESTMENT MANAGER APPOINTED. If an investment
manager has been appointed pursuant to Section 12.03c, then neither the
Trustee nor the Investment Committee shall be liable for the acts or
omissions of such investment manager or be under any obligation to invest
or otherwise manage any Plan assets that are subject to the management of
such investment manager.
h. SUCCESSOR FIDUCIARY. No Plan fiduciary shall be liable with respect
to any breach of an ERISA fiduciary duty if such breach was committed
before such person became a Plan fiduciary or after such person ceased to
be a Plan fiduciary.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 37
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ARTICLE 13
COMPANY AND EMPLOYER ADMINISTRATION PROVISIONS
13.01 INFORMATION. The Employers shall upon request or as may be specifically
required in the Plan furnish or cause to be furnished all of the information or
documentation that is necessary or required by the Administration Committee,
Investment Committee and Trustee to perform their respective Plan duties and
functions.
13.02 NO LIABILITY. Subject to Article 16, neither the Company nor any
Employer assumes any obligation or responsibility to any Employees, Participants
or Beneficiaries for any act of, or failure to act, on the part of the
Administration Committee, Investment Committee or Trustee.
13.03 COMPANY AND EMPLOYER ACTION. Any action required by the Company or any
Employer shall be by resolution of its respective board of directors or by a
person duly authorized to act on behalf of such board of directors.
13.04 INDEMNITY. The Company and each Employer indemnify and hold harmless the
members of their respective boards of directors, individual Plan Trustees,
Administration Committee members and Investment Committee members from and
against any and all loss resulting from liability to which any such persons may
be subjected by reason of any act or conduct except willful or reckless
misconduct in their official capacities in the administration of the Plan or the
Trust or both including all expenses reasonably incurred in their legal defense
in case the Company or the Employers fail to provide such legal defense. The
foregoing indemnification provisions shall not relieve such persons from any
liability that they may incur individually or collectively under ERISA for
breach of a fiduciary duty imposed by ERISA.
13.05 AMENDMENT TO VESTING SCHEDULE. Although the Company reserves the right
to amend the vesting schedule in Section 8.02 at any time, the Company shall not
amend the vesting schedule and no amendment shall be effective if the amendment
would reduce the vested percentage of any Participant's Account derived from
Employer Matching Contributions determined as of the later of the date the
amendment is adopted or the date the amendment becomes effective to a percentage
less than the vested percentage determined without regard to the amendment.
In the event the vesting schedule is amended, any Participant who has completed
at least three Years of Vesting Service may elect to have the vesting of such
Participant's Account determined without regard to such amendment by notifying
the Administration Committee in writing during the election period described
below. The election period shall begin on the date such amendment is adopted
and shall end no earlier than the latest of the date that is 60 days after the
date (a) such amendment is adopted; (b) such amendment becomes effective; or (c)
the Participant is given written notice of such amendment by the Administration
Committee. Any election made pursuant to the foregoing shall be irrevocable.
The Administration Committee shall forward a copy of any vesting schedule
amendment as soon as administratively feasible to each affected Participant
together with an explanation of the effect of the amendment, the appropriate
form upon which the Participant may make an election to remain under the vesting
schedule provided in the Plan prior to the amendment and notice of the time
within which the Participant must make an election to remain under the prior
vesting schedule.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 38
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ARTICLE 14
COMMITTEE ADMINISTRATION PROVISIONS
14.01 APPOINTMENT OF COMMITTEES. The Board shall appoint an Administration
Committee to administer the Plan and an Investment Committee to be responsible
for the investment of Plan assets. The individuals selected to serve on such
committees may or may not be Participants.
14.02 TERM. Each committee member shall serve until such person's successor
is appointed by the Board. Any committee member may be removed by the Board
with or without cause, and the Board shall have the power to fill any vacancy
that may occur. A committee member may resign upon written notice to the Board.
A committee member who is an Employee shall cease to be a committee member upon
such person's termination of employment under the Plan unless expressly provided
to the contrary in writing at the time of such termination.
14.03 COMPENSATION. The committee members shall serve without compensation
for services as such, but the Employers shall pay all expenses of the committees
including the expenses for any bond required by ERISA. To the extent such
expenses are not paid by the Employers, such expenses shall be paid from the
Trust Fund.
14.04 POWER OF ADMINISTRATION COMMITTEE. The Administration Committee shall
have the powers and duties set out below:
a. to direct all aspects of the administration of the Plan,
b. to adopt rules of procedure and regulations necessary for the
administration of the Plan provided that such rules are not inconsistent
with the Plan's terms,
c. to determine all questions with regard to rights of Employees,
Participants and Beneficiaries including but not limited to rights of
eligibility of an Employee to participate in the Plan, the computation of
the value of a Participant's Account Balance and the computation of the
vesting of a Participant's Account Balance,
d. to enforce the Plan document and the rules and regulations adopted
by the Administration Committee,
e. to direct the Trustee as respects the Trust and all other matters
within its discretion as provided in the Trust Agreement,
f. to review and render decisions respecting a claim for or denial of a
claim for any benefit or the exercise of any right in the Plan,
g. to furnish the Employers with information that the Employers may
require for tax or other purposes,
h. to engage the service of legal counsel, who may be legal counsel for
an Employer, and agents that it deems advisable to assist it with the
performance of its duties,
i. to prescribe procedures to be followed by Participants and
Beneficiaries in obtaining benefits,
j. to receive from the Employers and Employees such information as
shall be necessary for the Plan's administration,
k. to receive and review reports of the financial condition and of the
receipts and disbursements of the Trust Fund from the Trustee,
l. to maintain or cause to be maintained separate accounts in the name
of each Participant and Beneficiary to reflect such person's Account
Balance,
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 39
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m. to select a secretary who need not be an Administration Committee
member, and
n. to interpret and construe the Plan and to determine any and all
other questions arising under the Plan.
14.05 POWER OF INVESTMENT COMMITTEE. The Investment Committee shall have
the powers and duties set out below:
a. to direct the Trustee in the investment, reinvestment and
disposition of the Trust Fund as provided in the Trust Agreement,
b. to furnish the Employers with information that the Employers may
require for tax or other purposes,
c. to engage the service of legal counsel, who may be legal counsel for
an Employer, and agents that it deems advisable to assist with the
performance of its duties,
d. to receive and review reports of the financial condition and of the
receipts and disbursements of the Trust Fund from the Trustee,
e. to engage the services of an investment manager who shall have full
power and authority to manage, acquire or dispose (or direct the Trustee
with respect to acquisition or disposition) of any asset under its
control,
f. to select a secretary who need not be an Investment Committee
member,
g. to exercise the voting rights with respect to the Company common
stock held in the Trust as a result of Employer Matching Contributions
except in shareholder decisions involving corporate takeovers, mergers or
dissolutions of the Company or at any other time determined by the
Investment Committee to be in the best interests of Plan Participants and
Beneficiaries. Such voting rights shall be exercised by proxy
individually issued to Participants or Beneficiaries who have shares of
the Company common stock allocated to their Employer Matching
Contribution Accounts. The Investment Committee may adopt such rules as
it deems necessary or appropriate to implement the pass through voting
procedures previously described, and
h. to interpret and construe the Plan and Trust with respect to the
investment, reinvestment and disposition of Plan assets.
14.06 MANNER OF ACTION. With respect to each committee, the decision of a
majority of the committee members appointed and qualified to serve shall
control. In case of a vacancy in the committee membership, the remaining
members of each respective committee may exercise any and all of the powers,
authorities, duties and rights conferred upon such committee pending the filling
of such vacancy by the Board. The committees may but need not call or hold
formal meetings. Any decisions made or action taken pursuant to written
approval of a majority of the then serving committee members shall be
sufficient. Each committee shall maintain adequate records of its decisions.
14.07 AUTHORIZED REPRESENTATIVE. Each committee may authorize any one of its
members or its secretary to sign on its behalf any notices, directions,
applications, certificates, consents, approvals, waivers, letters or other
documents. Each committee must evidence such authority by an instrument signed
by all its respective members and filed with the Trustee.
14.08 NONDISCRIMINATION. The Administration Committee shall administer the
Plan in a uniform and nondiscriminatory manner for the exclusive benefit of
Participants and Beneficiaries.
14.09 INTERESTED MEMBER. No Administration Committee member may decide or
determine any matter concerning the distribution, nature or method of settlement
of such person's own Plan benefits.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 40
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14.10 BOOKS AND RECORDS. The Administration Committee shall maintain or cause
to be maintained records that adequately disclose at all times the financial
condition of the Trust Fund and of each Participant's and Beneficiary's interest
therein. The books, forms and methods of accounting for the Plan and Trust
shall be the responsibility of the Administration Committee.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 41
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ARTICLE 15
THE TRUST
15.01 PURPOSE OF THE TRUST FUND. A Trust Fund, including various subfunds
(as determined by the Investment Committee) shall be maintained for the purposes
of the Plan, and the assets of the Trust Fund shall be invested in accordance
with the terms of the Trust Agreement. All contributions shall be paid into the
Trust Fund, and all benefits shall be paid from the Trust Fund.
15.02 APPOINTMENT OF TRUSTEE. The Trustees shall be appointed by the Board.
The Trustees' obligations, duties and responsibilities shall be governed solely
by the terms of the Trust Agreement.
15.03 EXCLUSIVE BENEFIT OF PARTICIPANTS. Except as expressly provided to the
contrary in the Plan, the Trust Fund shall be used and applied in accordance
with the Plan's provisions to provide benefits to Participants and
Beneficiaries; no part of the corpus or income of the Trust Fund shall be used
for or diverted to purposes other than for the exclusive benefit of Participants
and Beneficiaries and for the payment of the Plan's administration expenses.
The Company expressly reserves the right to recover any amounts held in a
suspense account upon the Plan's termination but only to the extent of such
amount that cannot be allocated to the Accounts of Participants in the year of
the Plan's termination due to the limitations of Code Section 415.
15.04 BENEFITS LIMITED TO THE TRUST FUND. A Participant's or Beneficiary's
interest in the Plan shall be limited to the amount of such person's Account
Balance as adjusted from time to time.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 42
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ARTICLE 16
PARTICIPANT ADMINISTRATION PROVISIONS
16.01 PERSONAL DATA TO ADMINISTRATION COMMITTEE. Each Participant and
Beneficiary must furnish to the Administration Committee such information as the
Administration Committee considers necessary or desirable for the Plan's
administration.
16.02 ADDRESS FOR NOTIFICATION. Each Participant and each Beneficiary of a
deceased Participant shall file with the Administration Committee in writing
notice of such person's post office address and each subsequent change of such
post office address. Any Plan payment or distribution and any communication
addressed to a distributee at the last address filed with the Administration
Committee (or if no such address has been filed, then the last address indicated
on the records of the Employers) shall be deemed to have been delivered to the
distributee on the date that such distribution or communication is deposited in
the United States mail.
If a distribution or payment, including without limitation a distributee's
entire Account Balance, cannot be made because the location of the distributee
is unknown, such distribution and all subsequent distributions otherwise due to
such distributee shall be forfeited 24 months after the date such distribution
first became due; provided, that such distribution and any subsequent
distributions shall be reinstated retroactively, no later than 60 days after the
Participant is located. The Administration Committee shall have no obligation
to locate a missing distributee other than by attempting delivery of a
communication to the missing distributee's last known address via United States
mail, return receipt requested.
16.03 INFORMATION AVAILABLE. All Participants and Beneficiaries of deceased
Participants may examine copies of the Plan, summary plan description, Trust
Agreement and latest annual report of the Plan. The Administration Committee
shall maintain all of such items in its office or in such other places as it may
designate for examination during reasonable business hours. Upon the written
request of a Participant or Beneficiary, the Administration Committee shall
furnish copies of any such document described in this Section 16.03. The
Administration Committee may assess a reasonable charge to the requesting person
for the copies so furnished.
16.04 CLAIMS PROCEDURE. Prior to or upon becoming entitled to receive a Plan
benefit, a Participant or Beneficiary (a "CLAIMANT") shall file a claim for such
benefit with the Administration Committee at the time and in the manner
prescribed by the Administration Committee. In addition, a claimant shall file
a claim with the Administration Committee in the event that such person has been
denied any right that such person claims to have under the Plan or Trust
Agreement. The Administration Committee shall act upon such claims in
accordance with the provisions of this Section 16.
16.05 APPEAL PROCEDURE FOR DENIAL OF BENEFITS. The Administration Committee
shall provide adequate notice in writing to any claimant whose claim under the
Plan has been denied. Such notice must be sent within 90 days after the date
the claim is received by the Administration Committee unless special
circumstances require an extension of time for processing the claim. Such
extension shall not exceed 90 days, and no extension shall be allowed unless,
within the initial 90 day period, the claimant is sent an extension notice
indicating the special circumstances requiring the extension and specifying a
date by which the Administration Committee expects to render its final decision.
The Administration Committee's notice of denial to the claimant shall set forth:
a. the specific reason for the denial,
b. specific references to pertinent Plan provision on which the denial
is based,
c. a description of any additional material and information needed for
the claimant to perfect the claim and an explanation of why the material
or information is needed,
d. a statement that the claimant may:
1. request a review upon written application to the Administration
Committee,
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 43
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2. review pertinent Plan documents, and
3. submit issues and comments in writing, and
e. that any appeal the claimant wishes to make of the adverse
determination must be made in writing to the Administration Committee
within 60 days after receipt of the Administration Committee's notice of
denial. The Administration Committee's notice must further advise the
claimant that a failure to appeal the action to the Administration
Committee in writing within the 60 day period shall render the
Administration Committee's determination final, binding and conclusive.
If the claimant appeals to the Administration Committee, the claimant or the
claimant's duly authorized representative may submit in writing issues and
comments that such person determines to be pertinent. The Administration
Committee shall reexamine all facts related to the appeal and make a final
determination as to whether the denial was justified under the circumstances.
The Administration Committee shall advise the claimant in writing of its
decision on the appeal, the specific reasons for the decision and the specific
Plan provisions on which the decision is based. The notice of the decision
shall be given within 60 days after the claimant's written request for review,
unless special circumstances (such as a hearing) would make the rendering of a
decision within the 60 day period infeasible, but in no event shall the
Administration Committee render a decision on appeal later than 120 days after
its receipt of an appeal request. If an extension of time for review on appeal
is required because of special circumstances, written notice of the extension
shall be furnished to the claimant prior to the date the extension period
commences. The Administration Committee's notice of denial shall identify the
name of the Administration Committee representative and address to which the
claimant may forward the appeal.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 44
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ARTICLE 17
AMENDMENT OR TERMINATION
17.01 RIGHT TO AMEND.
a. The Board reserves the right at any time and from time to time (and
retroactively if deemed necessary or appropriate to meet the requirements
of ERISA and Code Section 401(a)) to modify or amend, in whole or in
part, any or all of the Plan's provisions.
b. No such modification or amendment shall make it possible for any
part of the corpus or income of the Trust Fund to be used for or diverted
to purposes other than for the exclusive benefit of Participants and
Beneficiaries prior to the satisfaction of all liabilities with respect
thereto. Moreover, no modification or amendment shall make it possible
to deprive any Participant of a previously accrued benefit (including an
optional form of benefit) within the meaning of Code Section 411(d)(6).
c. The Administration Committee may adopt amendments that do not
significantly affect the cost of the Plan and that may be necessary or
appropriate to qualify or maintain the Plan and Trust as a plan and trust
meeting the requirements of ERISA and of Code Sections 401(a) and 501(a).
17.02 RIGHT TO TERMINATE PLAN. The Board reserves the right to terminate the
Plan at any time with respect to any or all Employers. Unless the Plan is
sooner terminated, a successor to the business or any portion thereof of an
Employer, by whatever form or manner resulting, with the written consent of the
Company, may continue the Plan and become a party to the Trust Agreement by
executing appropriate supplemental agreements and other documents, and such
successor shall succeed to all applicable rights, powers and duties of such
Employer with respect thereto. Any Participant's employment who is continued in
the employ of such successor shall not be deemed to have been terminated or
severed for any purpose of the Plan.
17.03 OBLIGATIONS UPON MERGER, CONSOLIDATION OR TRANSFER. In the event of
any merger or consolidation with, or transfer of assets and liabilities to, any
other plan, each Participant shall be entitled to receive a benefit if the Plan
were to terminate immediately after the merger, consolidation or transfer, that
is not less than the benefit that such person would have been entitled to
receive if the Plan had terminated immediately before the merger, consolidation
or transfer.
17.04 OBLIGATIONS UPON TERMINATION, PARTIAL TERMINATION OR DISCONTINUANCE.
While the Company intends to continue the Plan indefinitely, nevertheless the
Company assumes no contractual obligation as to the Plan's continuance. Upon
termination or partial termination of the Plan and Trust Agreement by formal
action or for any other reason, or if Plan contributions by the Employers are
permanently discontinued for any reason, the Account Balances of all
Participants directly affected by such action shall be fully vested and
distribution to such Participants shall be made in cash or in kind as soon as
administratively feasible after liquidation of the assets of the Trust.
Notwithstanding the foregoing, an amount may only be distributed if the
Employers do not maintain or establish another defined contribution plan at the
time the Plan is terminated or within the 12 month period ending after
distribution of all assets from the Plan, other than an employee stock ownership
plan (as defined in Code Section 4975(e) or Code Section 409), a simplified
employee pension plan (as defined in Code Section 408(k)) or a defined
contribution plan if fewer than two percent of the Employees who are eligible
under the Plan at the time of termination are or were eligible under such other
defined contribution plan at any time during the 24 month period beginning 12
months before the Plan's termination. In addition, distributions made after
March 31, 1988, on account of the Plan's termination must be made in a lump sum
in accordance with Treasury Regulation Section 1.401(k)-1(d)(5).
17.05 CONTINUED FUNDING AFTER PLAN TERMINATION. Notwithstanding any Plan
provision to the contrary, no Employer upon any termination or partial
termination of the Plan shall have any obligation or liability whatsoever to
make any further contributions for the benefit of Participants (including all or
any part of any contributions payable prior to any Plan termination) to the
Trust Fund. No person, committee or board shall have any right to compel an
Employer to make any Plan contribution after the termination or partial
termination of the Plan.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 45
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17.06 DISTRIBUTION UPON DISPOSITION OF ASSETS OR SUBSIDIARY. Notwithstanding
any Plan provision to the contrary and in accordance with the provisions of Code
Section 401(k)(2)(B)(i)(II), a Participant's Account may be distributed to the
Participant as soon as administratively feasible after the sale or other
disposition of substantially all of the assets used by the Participant's
Employer in the trade or business in which the Participant is employed if the
Participant is no longer employed by the Company or one of its subsidiaries or
other affiliates that has adopted the Plan and the assets were not sold to a
related employer. The Account of a Participant employed by the Company or one
of its subsidiaries or other affiliates may be distributed to the Participant as
soon as administratively feasible after the sale or other disposition of the
Employer's interest in the subsidiary or other affiliate to an entity that is
not a related Employer as long as the Participant continues employment with such
other entity.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 46
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ARTICLE 18
GENERAL PROVISIONS
18.01 NO CONTRACT OF EMPLOYMENT; NO RIGHTS IMPLIED. The Plan shall not be
deemed to constitute a contract between the Company or any Employer and any
Employee. It is not a promise of continued employment by the Company or any
Employer or of continued benefits as an Employee. Employees are employed "at
will." Each Employer has and shall continue to have the absolute right and
authority to dismiss any Employee at any time, with or without cause, without
regard to the effect which such action may have upon an Employee as a
Participant. Nothing in the Plan or Trust Agreement shall give any Employee,
Participant, Beneficiary or any other person any legal or equitable right
against the Trustee or its agents or employees, except as expressly provided by
the Plan, the Trust or ERISA.
18.02 NONALIENATION. No portion of a Participant's or Beneficiary's Account
Balance, including without limitation a distribution or payment therefrom, shall
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, whether voluntary or involuntary, and
any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber
or charge the same shall be void; nor shall any such distribution or payment be
in any way liable for or subject to the debts, contracts, liabilities,
engagements or torts of any person entitled to such distribution or payment. If
any Participant or Beneficiary is adjudicated bankrupt or purports to
anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any
such distribution or payment voluntarily or involuntarily, the Administration
Committee in its sole discretion may hold or cause to be held or applied such
distribution or payment or any part thereof to or for the benefit of such
Participant or Beneficiary in such manner as the Administration Committee shall
direct. Notwithstanding the foregoing, the right to a benefit payable with
respect to a Participant pursuant to a Qualified Domestic Relations Order (as
defined Section 21.02) may be credited, assigned or recognized.
18.03 INCAPACITY. If any person entitled to receive any distribution or
payment from the Plan is a minor or is legally, physically or mentally incapable
of personally receiving and receipting for any such distribution or payment, the
Administration Committee may instruct the Trustee to make such distribution or
payment to such other person or institution then maintaining or in custody of
such person. As a condition to the issuance of such instruction for the
distribution or payment to such other person or institution, the Administration
Committee may require such person or institution to secure an order, decree or
judgment of a court of competent jurisdiction with respect to the incapacity of
the person who would otherwise be entitled to receive the distribution or
payment. Distributions and payments made pursuant to the foregoing shall
completely discharge the Company, all Employers and Plan fiduciaries of any
further liability with respect to such distribution or payment.
18.04 SERVICE IN MORE THAN ONE CAPACITY. Any person may serve in more than
one fiduciary capacity with respect to the Plan and Trust.
18.05 INTENT TO QUALIFY. The Company intends that the Plan shall be a tax-
qualified profit sharing plan and that the Trust shall be a tax-exempt trust
within the meaning of Code Sections 401(a) and 501(a), respectively, and the
Treasury Regulations promulgated thereunder. In the event that any question of
interpretation arises in connection with the administration of the Plan, such
question shall be resolved in a manner that will not jeopardize the continued
tax qualification of the Plan or the tax-exemption of the Trust.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 47
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ARTICLE 19
ROLLOVER CONTRIBUTIONS AND TRANSFERS
19.01 ROLLOVER FROM OTHER PLANS. In the event that an individual:
a. becomes an Employee eligible to participate in the Plan or not
eligible to participate in the Plan solely because such Employee has not
yet completed a Year of Eligibility Service or does not elect to make
Salary Reduction Contributions,
b. was a participant in another employer's tax-qualified plan,
c. received from such plan a distribution that qualifies for rollover
treatment in accordance with the Code, and
d. such distribution consists of money or other property, but only if
the other property has been sold and converted to money after the
distribution,
then, the Employee may transfer any portion of the distribution to the Plan on
or before the 60th day after the day on which the Employee received such
property, and upon receipt by the Plan, such amount shall be credited to the
Employee's Rollover Contribution Account. The Employee shall have a fully
vested interest in all amounts credited to such Employee's Rollover Contribution
Account as a result of such transfer.
19.02 ROLLOVER FROM CONDUIT INDIVIDUAL RETIREMENT ARRANGEMENT. In the event
that an individual:
a. becomes an Employee eligible to participate in the Plan or not
eligible to participate in the Plan solely because such Employee has not
yet completed a Year of Eligibility Service or does not elect to make
Salary Reduction Contributions,
b. established an individual retirement account or individual
retirement annuity (an "IRA") described in Code Sections 408(a) and
408(b), respectively, that is comprised solely of amounts constituting
a rollover contribution of a distribution from a previous employer's
tax-qualified plan, and
c. received from such IRA the entire amount of the account or the
entire value of the annuity, including any earnings on such account or
annuity, pursuant to Code Section 408(d)(3)(A)(ii),
then the Employee may transfer any portion of the distribution to the Plan on or
before the 60th day after the day on which the Employee received such
distribution, and upon receipt by the Plan, such amount shall be credited to the
Employee's Rollover Contribution Account. The Employee shall have a fully
vested interest in all amounts credited to such Employee's Rollover Contribution
Account as a result of such transfer.
19.03 TRANSFERS DIRECTLY FROM OTHER PLANS. An Employee who is not eligible to
participate in the Plan solely because such Employee has not yet completed a
Year of Eligibility Service or does not elect to make Salary Reduction
Contributions may arrange with the Administration Committee to transfer an
amount to the Plan directly from the trustee of any other tax-qualified plan;
provided that such transfer satisfies the requirements of Code Section
411(d)(6). A separate subaccount shall be established for the transferred
assets allocable to each Employee. Notwithstanding the foregoing, an Employee
may not transfer any amount to the Plan that if transferred would cause the Plan
to be a direct or indirect transferee plan (within the meaning of Code Section
401(a)(11)(B)(iii)(III) and the Treasury Regulations promulgated thereunder) of
a plan described in Code Section 401(a)(11)(B)(i) or (ii).
19.04 MISTAKEN ROLLOVER. If a Participant's Rollover Contribution fails to
qualify under the Code as a tax-free rollover, then as soon as administratively
feasible the balance in the Participant's Rollover Contribution Account shall
be:
a. segregated from all other Plan assets,
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 48
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b. treated as a nonqualified trust established by and for the benefit
of the Participant, and
c. distributed to the Participant.
Such a mistaken Rollover Contribution shall be deemed never to have been a part
of the Plan and shall not adversely affect the Plan's tax-qualification.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 49
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ARTICLE 20
TOP-HEAVY PROVISIONS
20.01 TOP-HEAVY PLAN DEFINED. This Article shall apply if the Plan is a
"TOP-HEAVY PLAN." The Plan shall be a Top-Heavy Plan in a Plan Year if, as of
the Determination Date, the present value of the cumulative accrued benefits (as
calculated below) of all Key Employees exceeds 60% of the present value of the
cumulative accrued benefits in the Plan of all Employees and Key Employees, but
excluding the value of the accrued benefits of former Key Employees. All plans
that are part of the Required Aggregation Group shall be treated as a single
plan.
Solely for the purpose of determining if the Plan, or any other plan included in
a Required Aggregation Group of which the Plan is a part, is a Top-Heavy Plan,
the accrued benefit of a Non-Key Employee shall be determined under (a) the
method, if any, that uniformly applies for accrual purposes under all plans
maintained by the Company and its subsidiaries and other affiliates, or (b) if
there is no such method, as if such benefit accrued not more rapidly than the
slowest accrual rate permitted under the fractional accrual rate of Code Section
411(b)(1)(C).
The present value of an Employee's accrued benefit shall be equal to the sum of
a. and b. below:
a. the sum of (i) the present value of an Employee's accrued retirement
income in each defined benefit plan that is included in the Required
Aggregation Group determined as of the most recent valuation date within
the 12 month period ending on the Determination Date and as if the
Employee had terminated employment with all Employers as of such
valuation date, and (ii) the aggregate distribution made with respect to
such Employee during the five year period ending on the Determination
Date from all defined benefit plans included in the Required Aggregation
Group and not reflected in the value of the Employee's accrued retirement
income as of the most recent valuation date. In determining present
value for all plans in the Required Aggregation Group, the actuarial
assumptions set forth for such purpose in the Employer's defined benefit
plan shall be utilized and the commencement date shall be determined
taking any nonproportional subsidy into account, and
b. the sum of (i) the aggregate balance of the Employee's accounts in
all defined contribution plans that are part of the Required Aggregation
Group as of the most recent valuation date within the 12 month period
ending on the Determination Date, (ii) any contributions allocated to
such an account after the valuation date and on or before the
Determination Date and (iii) the aggregate distributions made with
respect to such Employee during the five year period ending on the
Determination Date from all defined contribution plans that are part of
the Required Aggregation Group and not reflected in the value of such
Employee's account as of the most recent valuation date.
20.02 OTHER DEFINITIONS. Some of the terms used in Article 20 are defined as
follows:
a. "DETERMINATION DATE" shall mean the last day of the preceding Plan
Year.
b. "EMPLOYEE" shall mean a current Employee or a former Employee who
performed services for any of the Employers during the Plan Year
containing the Determination Date or any of the four preceding Plan
Years.
c. "KEY EMPLOYEE" shall mean an Employee, a former Employee or the
Beneficiary of a deceased Employee who, in the Plan Year containing the
Determination Date, or any of the four preceding Plan Years, is:
1. an officer of an Employer having an annual Compensation greater
than 50% of the amount in effect under Code Section 415(b)(1)(A) for
any such Plan Year. Not more than 50 Employees or, if lesser, the
greater of three Employees or ten percent of the Employees shall be
considered as officers.
2. one of the ten Employees owning (or considered as owning within
the meaning of Code Section 318) the largest interests in the
Employers, which is more than .5% ownership interest
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 50
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in value, and whose Compensation equals or exceeds the maximum
dollar limitation under Code Section 415(c)(1)(A) as in effect for
the calendar year in which the Determination Date falls.
3. a five percent owner of an Employer.
4. a one percent owner of an Employer having an annual
Compensation from the Employer of more than $150,000.
Whether an Employee is a five percent owner or a one percent owner shall
be determined in accordance with Code Section 416(i).
d. "NON-KEY EMPLOYEE" shall mean an Employee who is not a Key Employee.
e. "REQUIRED AGGREGATION GROUP" shall mean:
1. each stock bonus, pension or profit sharing plan of the
Employers in which a Key Employee participates and which is intended
to qualify under Code Section 401(a), and
2. each other such stock bonus, pension or profit sharing plan of
the Employers that enables any plan in which a Key Employee
participates to meet the requirements of Code Sections 401(a)(4) or
410.
20.03 TOP-HEAVY CONTRIBUTIONS. Solely in the event that a Non-Key Employee is
not covered by a defined benefit plan of an Employer that provides the minimum
benefit required by Code Section 416(c)(1) during a Plan Year in which the Plan
is a Top-Heavy Plan, the Employer contributions and forfeitures allocated to
each such Non-Key Employee who has not separated from service by the end of the
Plan Year shall be equal to not less than the lesser of:
a. three percent of such Participant's Compensation in the Plan Year,
or
b. the percentage of such Participant's Compensation in the Plan Year
that is equal to the percentage of which contributions and forfeitures
are made to the Key Employee for whom such percentage is the highest for
the year.
The percentage referred to in Section 20.03b shall be determined by dividing the
contributions and forfeitures allocated to the Key Employee by such Employee's
Compensation. The Employers shall make such additional contributions to the
Plan as shall be necessary to make the allocation described above. This Section
applies without regard to contributions or benefits under Social Security or any
other Federal or State law. An adjustment may be made to this Section, as
permitted under Treasury Regulations, in the event an Employee is also entitled
to an increased benefit in any other Top-Heavy Plan while such plan is in the
Aggregation Group with the Plan.
A Non-Key Employee who is otherwise entitled to a minimum contribution shall not
fail to receive the required minimum contribution because the Employee is
excluded from participation because the Employee failed to make Salary Reduction
Contributions or because the Employee failed to accrue 1,000 Hours of Service
during the Plan Year.
20.04 ADJUSTMENT TO LIMITATION ON ANNUAL ADDITIONS.
a. If an Employer also maintains a tax-qualified defined benefit plan
(as defined in Section 3(35) ERISA and Code Section 414(j)) and which is
not part of a floor-offset arrangement (as defined in Code Section
414(k)), then the denominator of both the Defined Benefit Plan Fraction
and Defined Contribution Plan Fraction, as set forth in Section 4.08, for
the Limitation Year ending in such Plan Year shall be adjusted by
substituting 1 for 1.25 in each place where such figure occurs.
b. The adjustments referred to in Section 20.04a are not required if:
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 51
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1. the Plan would not be a Top-Heavy Plan if 90% were substituted
for 60% in Section 20.01, and
2. Section 20.03a. is adjusted by substituting four percent for
three percent where such number appears.
c. The adjustments referred to in Section 20.04a do not apply to any
Participant as long as no Employer contributions, forfeitures, salary
deferrals or nondeductible voluntary contributions are allocated to such
Participant's Account, and the Participant does not accrue any benefits
under any defined benefit plan maintained by the Employer.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 52
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ARTICLE 21
QUALIFIED DOMESTIC RELATIONS ORDERS
21.01 TERMS OF QDRO. Section 18.02 shall not apply to a Qualified Domestic
Relations Order if such order:
a. creates or recognizes the existence of an Alternate Payee's right
to, or assigns to an Alternate Payee the right to, receive all or a
portion of a Participant's Account Balance,
b. clearly specifies:
1. the name and the last known mailing address if any of the
Participant and the name and mailing address of each Alternate Payee
covered by the order,
2. the amount or percentage of the Participant's Account Balance
to be distributed by the Plan to each Alternate Payee or the manner
in which such amount or percentage is to be determined,
3. the period to which such order applies, and the Valuation Date
on which the division shall be made, and
4. the name of the plan to which such order applies,
c. does not require the Plan to provide any type or form of
distribution or any optional form of payment not provided by the Plan,
d. does not require the Plan to provide increased benefits (other than
investment earnings of the Alternate Payee's separate account), and
e. does not require the distribution of any portion of an Account
Balance to an Alternate Payee that is required to be paid to another
Alternate Payee under another order previously determined to be a
Qualified Domestic Relations Order.
21.02 QDRO DEFINITIONS. Some of the terms used in Article 21 are defined as
follows:
a. "QUALIFIED DOMESTIC RELATIONS ORDER" shall mean any judgment, decree
or order (including approval of a property settlement agreement) that:
1. relates to the provision of child support, alimony payments or
marital property rights to a spouse, former spouse, child or other
dependent of a Participant,
2. is made pursuant to a state domestic relations law (including a
community property law), and
3. meets the requirements of the foregoing Section 21.01.
b. "ALTERNATE PAYEE" shall mean any spouse, former spouse, child or
other dependent of a Participant who is recognized by a Qualified
Domestic Relations Order as having a right to receive all or a portion
of the Account Balance payable from the Plan with respect to such
Participant.
21.03 DISTRIBUTION BEFORE TERMINATION OF EMPLOYMENT. In the case of any
distribution made before a Participant has terminated employment under the Plan,
a Qualified Domestic Relations Order shall not be considered as failing to meet
the requirements of Section 21.01 solely because such order requires that a
distribution be made to an Alternate Payee:
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 53
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a. on or after the date on which the Participant attains (or would have
attained) the Earliest Retirement Age (as defined below),
b. as if the Participant had retired on the date on which such
distribution is to be made under such order (but taking into account only
the Participant's Account Balance on such date), and
c. in any form in which such distribution may be paid from the Plan to
the Participant.
The term "EARLIEST RETIREMENT AGE" shall mean the earlier of (i) the date on
which the Participant would be entitled to a distribution from the Plan, or (ii)
the later of (1) the date the Participant attains age 50, or (2) the earliest
date on which the Participant could begin receiving benefits from the Plan if he
separated from service under the Plan.
Notwithstanding the foregoing, the Administration Committee shall comply with
any Qualified Domestic Relations Order that requires distribution to an
Alternate Payee at anytime after the Administration Committee accepts the
Qualified Domestic Relations Order, without regard to the continued employment
under the Plan or not of the Participant to whom the Qualified Domestic
Relations Order relates.
21.04 TREATMENT OF FORMER SPOUSE. To the extent provided in any Qualified
Domestic Relations Order:
a. the former spouse of a Participant shall be treated as a "SURVIVING
SPOUSE" of such Participant for purposes of Code Sections 401(a)(11) and
417, and any spouse of the Participant shall not be treated as a spouse
of the Participant for such purposes, and
b. if married for at least one year to the Participant, such former
spouse shall be treated as meeting the requirements of Code Section
417(d).
21.05 NOTIFICATION OF RECEIPT OF ORDER. The Administration Committee shall
promptly notify the Participant and Alternate Payee of the receipt of a proposed
Qualified Domestic Relations Order and of the Plan's procedure for determining
whether the proposed Qualified Domestic Relations Order meets the requirements
of a Qualified Domestic Relations Order. Within a reasonable time after receipt
of such proposed Qualified Domestic Relations Order, the Administration
Committee shall determine whether such proposed Qualified Domestic Relations
Order meets the requirements of a Qualified Domestic Relations Order. The
Administration Committee may act in accordance with such procedures as it shall
from time to time establish. The Administration Committee shall notify the
Participant and Alternate Payee of its determination.
21.06 SEPARATE ACCOUNTING. During any period in which the issue of whether
a proposed Qualified Domestic Relations Order meets the requirements stated
above is being determined, the Administration Committee shall separately account
for the amounts (the "SEGREGATED AMOUNTS") that would have been payable to the
Alternate Payee during such period if the proposed Qualified Domestic Relations
Order had been determined to be a Qualified Domestic Relations Order. If,
within 18 months, such proposed Qualified Domestic Relations Order is determined
to be a Qualified Domestic Relations Order, the Administration Committee shall
pay the segregated amounts (adjusted for investment earnings and losses thereon)
to the person or persons entitled thereto. If, within 18 months, such proposed
Qualified Domestic Relations Order is determined not to be a Qualified Domestic
Relations Order, or the issue as to whether such proposed Qualified Domestic
Relations Order so qualifies is not resolved, then the Administration Committee
shall pay the segregated amount (adjusted for investment earnings and losses
thereon) to the person or persons who would have been entitled to such amounts
if there had been no proposed Qualified Domestic Relations Order. Any
determination that a proposed Qualified Domestic Relations Order is a Qualified
Domestic Relations Order that is made after the end of the 18 month period shall
be applied prospectively only.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 54
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ARTICLE 22
EMPLOYER PARTICIPATION
22.01 ADOPTION BY EMPLOYERS. Any corporation with employees that is a
member of an affiliated group of corporations (as defined in Code Section
1504(a)) of which the Company is the common parent corporation and that is
otherwise legally eligible may with the consent and approval of the Board adopt
the Plan and the Trust by formal resolution and decision of its own board of
directors for all or any classification of its employees and thereby from and
after the specified effective date of the adoption become an Employer. Such
adoption shall be evidenced by a resolution of the Board authorizing, consenting
to, containing or incorporating by reference such resolution or decision of the
adopting corporation. The adoption resolution or decision shall become, as to
such adopting corporation and its employees, a part of the Plan as then or
subsequently amended. The adopting corporation shall not be required or
permitted to sign or execute the Plan document or any amendment thereto. The
Plan's effective date for any such adopting corporation shall be that stated in
the resolution or decision of adoption of the adopting corporation, and from and
after such effective date the adopting corporation shall assume all the rights,
obligations and liabilities of the Employer as to its employees. The
administrative powers and control granted to the Company, including the sole
right of amendment of the Plan and Trust and of appointment and removal of the
Administration Committee, the Investment Committee and their respective
successors, shall not be diminished by reason of the participation of any such
adopting employer in the Plan.
22.02 WITHDRAWAL BY EMPLOYER. Any Employer, by action of its board of
directors and upon notice to the Company and the Trustee, may withdraw from the
Plan and Trust at anytime without affecting the other Employers not withdrawing,
by complying with the Plan's provisions. Termination of the Plan as it relates
to any Employer upon its withdrawal shall be governed by the provisions of
Article 17. A withdrawing Employer may arrange for the continuation of the Plan
and Trust by itself or its successor in separate form for its own Employees,
with such amendments, if any, as it may deem proper or may arrange for
continuation of the Plan and Trust by merger with an existing tax-qualified plan
and transfer of such portion of the Trust assets as the Administration Committee
determines are allocable to the Employees of the withdrawing Employer. The
Company may, in its sole discretion and in any reasonable manner, terminate an
Employer's adoption of the Plan at any time when the Employer is no longer a
member of the group that entitles it to adopt the Plan pursuant to Section 22.01
or when in the Company's judgment the Employer fails or refuses to discharge its
obligations under the Plan after delivery of such notice and opportunity to cure
as may be appropriate under the circumstances.
22.03 ADOPTION CONTINGENT UPON INITIAL AND CONTINUED QUALIFICATION. The
adoption of the Plan and Trust by an Employer as provided in Section 22.01 shall
be contingent upon and subject to the condition that the adoption of the Plan
and Trust by the adopting Employer does not adversely affect the continued tax
qualification of the Plan and Trust as to all Employers. The Company may
request a determination letter from the Internal Revenue Service with respect to
the adopting Employer. In the event the Plan or the Trust become disqualified
for any reason as to an adopting Employer, the portion of the Trust Fund
allocable to the Employees of the adopting Employer shall be segregated as soon
as is administratively feasible pending the requalification of the Plan and
Trust as to the adopting Employer; the withdrawal of such adopting Employer from
the Plan and Trust; or the termination of the Plan and Trust as to the adopting
Employer and its Employees.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 55
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ARTICLE 23
MISCELLANEOUS
23.01 RECEIPTS. Any payment in accordance with the Plan provisions to any
Participant or to such person's legal representative or a Beneficiary of such
person's entire Account Balance as reflected in the Plan records shall be in
full satisfaction of all claims against the Plan and Trust and their respective
fiduciaries, agents and representatives. The Administration Committee may
require any payee, as a condition precedent to such payment, to execute a
receipt and release therefor in such form as the Administration Committee shall
specify.
23.02 NO GUARANTEE OF INTEREST. Neither the Trustee, the Administration
Committee, the Investment Committee, nor any Employer guarantees the Trust Fund
from loss or depreciation. No Employer guarantees the payment of any money or
other value that may be or become due to any person from the Trust Fund. The
liability of the Administration Committee, the Investment Committee and the
Trustee to make any payment from the Trust Fund is limited to the then available
assets of the Trust Fund.
23.03 PAYMENT OF EXPENSES. All expenses incident to the administration,
termination and protection of the Plan and Trust, including but not limited to
legal, accounting and Trustee fees, shall be paid by the Employers, except that
in case of the Employers' failure to pay such expenses, the expenses shall be
paid from the Trust Fund and until paid shall constitute a first and prior claim
and lien against the Trust Fund.
23.04 RECORDS. The Employers' records as to any employment data of any
person with respect to the Plan shall be conclusive against all persons and for
all purposes, unless such records are determined by the Administration Committee
to be erroneous.
23.05 INTERPRETATIONS AND ADJUSTMENTS. To the fullest extent permitted by
law, any Plan interpretation or decision on any matter made in good faith by the
Administration Committee within its discretion shall be final, conclusive and
binding on all persons for all purposes. The Administration Committee shall
correct any misstatement or other mistake in such manner as it determines to be
equitable and practicable.
23.06 EVIDENCE. Evidence required of any person in connection with the Plan
may be by certificate, affidavit, document or other form that the person acting
on it considers pertinent and reliable.
23.07 SEVERABILITY. In the event any Plan provision shall be held to be
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining Plan provisions but shall be fully severable, and the Plan shall
be construed and enforced as if the illegal or invalid provision had never been
included in the Plan.
23.08 NOTICE. Any notice required by the Plan shall be deemed delivered
when personally delivered or placed in the United States mail in an envelope
addressed to the last known address of the person to whom the notice is to be
given. Any person entitled to notice under the Plan may waive the notice.
23.09 SUCCESSORS. The Plan and Trust shall be binding upon all persons
entitled to any Plan benefits and upon all persons who have received Plan
benefits and their respective heirs and legal representatives; upon each
Employer and their respective successors and assigns; upon the Trustees and
their successors; and upon the committees and their successors.
23.10 HEADINGS. The titles and headings of Articles and Sections are included
for convenience and reference only and are not to be considered in the
construction of the Plan provisions.
23.11 GOVERNING LAW. All questions arising with respect to the Plan's
provisions shall be determined by application of the laws of the State of Texas
except to the extent Texas law is preempted by ERISA or other applicable Federal
law.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 56
<PAGE>
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IN WITNESS WHEREOF, MICHAELS STORES, INC. has caused this instrument to be
executed by its duly authorized officer on this 25th day of September, 1996,
but otherwise effective as stated herein.
MICHAELS STORES, INC.
By: /s/ R.D. Morris
-----------------------------------
Its: Executive Vice President &
Chief Financial Officer
-----------------------------------
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 57
<PAGE>
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APPENDIX I
Employment with any of the following entities immediately preceding
employment with an Employer will affect the Employment Commencement Date:
Answer Systems, Inc;
Central Staff, Inc. (formerly Executive Records)
Decision Systems, Inc. and its predecessors
Financial Marketing, Inc.
Fourth Generation Software Services, Inc.
GRI, Inc.
Informatics General Corporation and its predecessors
Informatics General Systems Corporation and its predecessors
Knowledge Systems Concepts, Inc.
Lakestone Systems, Inc.
Management Control Systems, Inc.
Metro-Mark Integrated Systems, Inc.
National Systems Corporation
Net America Corp.
Pacesetter Systems, Inc.
Peoples Restaurants, Inc.
Photomatrix
Restaurant Property Co.
SSI Midlantic Software Services, Inc.
SSI National Software Services, Inc.
SSI New England Software Services, Inc.
SSI Southwest Software Services, Inc.
SSI Western Software Services, Inc.
Sterling Check Liquidation, Inc. (formerly Check Consultants, Inc.)
and its predecessors
Sterling Distribution Services, Inc.
Sterling Legal Information Services, Inc.
Sterling Professional Services, Inc. and its predecessors
Sterling Software, Inc. and its predecessors
Sterling Software (America), Inc. (formerly Ordernet Services, Inc.)
Sterling Software (Midwest), Inc. (formerly Creative Data Systems, Inc.)
and its predecessors
Sterling Software (North America), Inc. (formerly Systems Center, Inc. and
Software Laboratories, Inc.--Communications Division) and their predecessors
Sterling Software (Northern America), Inc. (formerly Directions, Inc.)
and its predecessors
Sterling Software (U.S.), Inc. (formerly Sterling Federal Systems, Inc.)
Sterling Software (U.S.A.), Inc. (formerly Systems Software Marketing, Inc.
and Software Laboratories, Inc.) and their predecessors
Sterling Software (U.S. of America), Inc. (formerly Systems Center, Inc.--
Systems Management Division) and its predecessors
Sterling Software (United States), Inc. (formerly Dylakor, Inc. and Zanthe
Information, Inc.) and their predecessors
Sterling Software (United States of America), Inc. (formerly Systems Center,
Inc.--VM Software Division) and its predecessors
Sterling ZeroOne, Inc. and its predecessors
Texas Arkansas Petroleum
USA Cafe's Inc.
USA Cafe's Limited Partnership and its predecessors
WylyCollection
ZeroOne Systems, Inc. and its predecessors
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 58
<PAGE>
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DIVESTITURE DATES:
Pacesetter Systems, Inc. - August 13, 1984
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 59
<PAGE>
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APPENDIX II
The purpose of this Appendix II is to amend certain provisions of the Plan
document originally executed on February 26, 1987 (the "1987 PLAN DOCUMENT").
The amendments contained in this Appendix II relate only to the 1987 Plan
Document and, unless expressly provided to the contrary in this Appendix II, do
not affect any of the provisions of the Plan document to which this Appendix II
is attached. The amendments to the 1987 Plan Document as reflected in this
Appendix II were requested by the Internal Revenue Service as a condition to the
issuance of a favorable determination letter on the Plan documents, including
the 1987 Plan Document.
A. Section 3.02 of the 1987 Plan Document is amended by deleting the
following language at the end of the first sentence thereof: ", AND (ii)
REMAINS EMPLOYED DURING THAT ENTIRE TWELVE (12) MONTH PERIOD."
B. Section 7.01 of the 1987 Plan Document is amended by inserting
the following language at the end of the first sentence thereof:
"; PROVIDED, THAT IN NO EVENT SHALL A PARTICIPANT'S NORMAL RETIREMENT AGE
EXCEED AGE 65."
No other amendments are made by this Appendix II to the 1987 Plan Document.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(February 1994) PAGE 60
<PAGE>
MICHAELS STORES, INC.
EMPLOYEES 401(K) PLAN
(AS AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1996)
<PAGE>
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MICHAELS STORES, INC.
EMPLOYEES 401(K) PLAN
(AS AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1996)
TABLE OF CONTENTS
PAGE
----
P R E A M B L E
ARTICLE 1
DEFINITIONS
1.01 ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 ACCOUNT BALANCE . . . . . . . . . . . . . . . . . . . . . . . 1
1.03 ACTUAL DEFERRAL PERCENTAGE. . . . . . . . . . . . . . . . . . 1
1.04 ADJUSTMENT FACTOR . . . . . . . . . . . . . . . . . . . . . . 1
1.05 ADMINISTRATION COMMITTEE. . . . . . . . . . . . . . . . . . . 1
1.06 AVERAGE ACTUAL DEFERRAL PERCENTAGE. . . . . . . . . . . . . . 1
1.07 AVERAGE CONTRIBUTION PERCENTAGE . . . . . . . . . . . . . . . 1
1.08 BENEFICIARY . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.09 BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 CODE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 CONTRIBUTION PERCENTAGE . . . . . . . . . . . . . . . . . . . 3
1.14 EFFECTIVE DATE. . . . . . . . . . . . . . . . . . . . . . . . 3
1.15 EMPLOYEE. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.16 EMPLOYEE CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . 4
1.17 EMPLOYEE CONTRIBUTION ACCOUNT . . . . . . . . . . . . . . . . 4
1.18 EMPLOYER. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.19 EMPLOYER MATCHING CONTRIBUTIONS . . . . . . . . . . . . . . . 4
1.20 EMPLOYER MATCHING CONTRIBUTION ACCOUNT. . . . . . . . . . . . 4
1.21 EMPLOYMENT COMMENCEMENT DATE. . . . . . . . . . . . . . . . . 4
1.22 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.23 EXCESS AGGREGATE CONTRIBUTIONS. . . . . . . . . . . . . . . . 4
1.24 EXCESS CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . 4
1.25 EXCESS DEFERRALS. . . . . . . . . . . . . . . . . . . . . . . 4
1.26 FAMILY MEMBER . . . . . . . . . . . . . . . . . . . . . . . . 4
1.27 HIGHLY COMPENSATED EMPLOYEE . . . . . . . . . . . . . . . . . 5
1.28 HOUR OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . 5
1.29 INVESTMENT COMMITTEE. . . . . . . . . . . . . . . . . . . . . 6
1.30 LEAVE OF ABSENCE. . . . . . . . . . . . . . . . . . . . . . . 6
1.31 LIMITATION YEAR . . . . . . . . . . . . . . . . . . . . . . . 7
1.32 NORMAL RETIREMENT DATE. . . . . . . . . . . . . . . . . . . . 7
1.33 NONHIGHLY COMPENSATED EMPLOYEE. . . . . . . . . . . . . . . . 7
1.34 ONE-YEAR BREAK IN SERVICE . . . . . . . . . . . . . . . . . . 7
1.35 PARTICIPANT . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.36 PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.37 PLAN YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.38 PRIOR PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.39 PRIOR PLAN ACCOUNT. . . . . . . . . . . . . . . . . . . . . . 7
1.40 ROLLOVER CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . 7
1.41 ROLLOVER CONTRIBUTION ACCOUNT . . . . . . . . . . . . . . . . 7
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE i
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1.42 SALARY REDUCTION CONTRIBUTION ELECTION. . . . . . . . . . . . 7
1.43 SALARY REDUCTION CONTRIBUTION ACCOUNT . . . . . . . . . . . . 8
1.44 SALARY REDUCTION CONTRIBUTION . . . . . . . . . . . . . . . . 8
1.45 TRUST OR TRUST FUND . . . . . . . . . . . . . . . . . . . . . 8
1.46 TRUST AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 8
1.47 TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.48 VALUATION DATE. . . . . . . . . . . . . . . . . . . . . . . . 8
1.49 VESTING COMPUTATION PERIOD. . . . . . . . . . . . . . . . . . 8
1.50 YEAR OF VESTING SERVICE . . . . . . . . . . . . . . . . . . . 8
ARTICLE 2
ELIGIBILITY AND PARTICIPATION
2.01 COMMENCEMENT OF PLAN PARTICIPATION. . . . . . . . . . . . . . 8
2.02 PARTICIPATION REQUIREMENTS. . . . . . . . . . . . . . . . . . 8
2.03 TERMINATION OF EMPLOYMENT . . . . . . . . . . . . . . . . . . 8
2.04 REHIRED EMPLOYEE. . . . . . . . . . . . . . . . . . . . . . . 8
2.05 LOSS OF PARTICIPANT STATUS. . . . . . . . . . . . . . . . . . 9
2.06 SUSPENSION OF PARTICIPATION . . . . . . . . . . . . . . . . . 9
2.07 REEMPLOYMENT; VESTING SERVICE . . . . . . . . . . . . . . . . 9
2.08 NOTICE OF PARTICIPATION . . . . . . . . . . . . . . . . . . . 9
ARTICLE 3
SALARY REDUCTION CONTRIBUTIONS
3.01 SALARY REDUCTION CONTRIBUTIONS. . . . . . . . . . . . . . . . 9
3.02 SALARY REDUCTION CONTRIBUTION ELECTION. . . . . . . . . . . . 10
3.03 SUSPENSION OF, OR CHANGE IN, SALARY REDUCTION CONTRIBUTION
ELECTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.04 DEFERRAL PERCENTAGE LIMITATION. . . . . . . . . . . . . . . . 10
3.05 SPECIAL RULES ON DEFERRAL PERCENTAGE LIMITATIONS. . . . . . . 11
3.06 ADJUSTMENT OF SALARY REDUCTION CONTRIBUTIONS. . . . . . . . . 12
3.07 AGGREGATE LIMIT . . . . . . . . . . . . . . . . . . . . . . . 12
3.08 RETURN OF CONTRIBUTIONS ABOVE THE AGGREGATE LIMIT . . . . . . 13
ARTICLE 4
EMPLOYER MATCHING CONTRIBUTIONS AND EMPLOYEE CONTRIBUTIONS
4.01 EMPLOYER MATCHING CONTRIBUTIONS . . . . . . . . . . . . . . . 13
4.02 TIMING OF EMPLOYER MATCHING CONTRIBUTIONS . . . . . . . . . . 13
4.03 EMPLOYEE CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . 13
4.04 PERCENTAGE LIMITATION ON EMPLOYER MATCHING CONTRIBUTIONS. . . 14
4.05 SPECIAL RULES FOR CONTRIBUTION PERCENTAGE LIMIT TESTING . . . 14
4.06 ADJUSTMENTS TO CONTRIBUTIONS. . . . . . . . . . . . . . . . . 15
4.07 OVERALL LIMITATION ON ANNUAL ADDITIONS. . . . . . . . . . . . 15
4.08 SPECIAL RULES . . . . . . . . . . . . . . . . . . . . . . . . 16
4.09 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.10 REVERSION OF EMPLOYER MATCHING CONTRIBUTIONS. . . . . . . . . 17
ARTICLE 5
PARTICIPANT ACCOUNTS
5.01 SEPARATE SUBACCOUNTS. . . . . . . . . . . . . . . . . . . . . 18
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE ii
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5.02 VALUATION OF TRUST FUND . . . . . . . . . . . . . . . . . . . 18
5.03 STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 6
INVESTMENTS
6.01 TRUST FUND. . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.02 AUTHORIZED INVESTMENTS AND INVESTMENT CONTROL . . . . . . . . 18
6.03 ASSUMPTION OF RISK BY PARTICIPANTS. . . . . . . . . . . . . . 18
6.04 GENERAL PROVISIONS REGARDING INVESTMENT DIRECTION . . . . . . 19
ARTICLE 7
DEATH BENEFITS AND BENEFICIARY DESIGNATIONS
7.01 DISTRIBUTION DUE TO DEATH . . . . . . . . . . . . . . . . . . 20
7.02 BENEFICIARY DESIGNATION . . . . . . . . . . . . . . . . . . . 20
ARTICLE 8
VESTING AND TERMINATION OF EMPLOYMENT
8.01 VESTING IN SALARY REDUCTION, EMPLOYEE AND ROLLOVER
CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . 21
8.02 VESTING IN EMPLOYER MATCHING CONTRIBUTIONS. . . . . . . . . . 21
8.03 FORFEITURES . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.04 DISTRIBUTION OF VESTED BENEFITS . . . . . . . . . . . . . . . 22
ARTICLE 9
DISTRIBUTION OF BENEFITS
9.01 NORMAL FORM OF BENEFIT. . . . . . . . . . . . . . . . . . . . 22
9.02 TIME OF DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . 22
9.03 INVESTMENT OF ACCOUNT BALANCE OF TERMINATED PARTICIPANT . . . 22
9.04 LATEST DISTRIBUTION DATE. . . . . . . . . . . . . . . . . . . 23
9.05 MANDATED COMMENCEMENT OF BENEFITS . . . . . . . . . . . . . . 23
9.06 DIRECT ROLLOVERS. . . . . . . . . . . . . . . . . . . . . . . 23
9.07 WAIVER OF 30 DAY NOTICE . . . . . . . . . . . . . . . . . . . 23
ARTICLE 10
WITHDRAWALS WHILE EMPLOYED
10.01 WITHDRAWALS. . . . . . . . . . . . . . . . . . . . . . . . . 24
10.02 HARDSHIP WITHDRAWALS . . . . . . . . . . . . . . . . . . . . 24
10.03 IN-SERVICE WITHDRAWALS FOR FORMER LEEWARDS PLAN
PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 11
LOANS
11.01 OVERALL LIMITATIONS . . . . . . . . . . . . . . . . . . . . 25
11.02 TERMS OF LOAN . . . . . . . . . . . . . . . . . . . . . . . 25
11.03 SOURCE OF LOANS . . . . . . . . . . . . . . . . . . . . . . 26
11.04 WITHHOLDING AND APPLICATION OF LOAN PAYMENTS. . . . . . . . 26
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE iii
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11.05 DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 12
PLAN FIDUCIARIES
12.01 FIDUCIARIES. . . . . . . . . . . . . . . . . . . . . . . 26
12.02 ALLOCATION OF RESPONSIBILITIES . . . . . . . . . . . . . 27
12.03 PROCEDURES FOR DELEGATION AND ALLOCATION OF
RESPONSIBILITIES . . . . . . . . . . . . . . . . . . . . 27
12.04 GENERAL FIDUCIARY STANDARDS. . . . . . . . . . . . . . . 28
12.05 LIABILITY AMONG CO-FIDUCIARIES . . . . . . . . . . . . . 28
ARTICLE 13
COMPANY AND EMPLOYER ADMINISTRATION PROVISIONS
13.01 INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 29
13.02 NO LIABILITY . . . . . . . . . . . . . . . . . . . . . . 29
13.03 COMPANY AND EMPLOYER ACTION. . . . . . . . . . . . . . . 29
13.04 INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . 29
13.05 AMENDMENT TO VESTING SCHEDULE. . . . . . . . . . . . . . 30
ARTICLE 14
COMMITTEE ADMINISTRATION PROVISIONS
14.01 APPOINTMENT OF COMMITTEES. . . . . . . . . . . . . . . . 30
14.02 TERM . . . . . . . . . . . . . . . . . . . . . . . . . . 30
14.03 COMPENSATION . . . . . . . . . . . . . . . . . . . . . . 30
14.04 POWER OF ADMINISTRATION COMMITTEE. . . . . . . . . . . . 30
14.05 POWER OF INVESTMENT COMMITTEE. . . . . . . . . . . . . . 31
14.06 MANNER OF ACTION . . . . . . . . . . . . . . . . . . . . 32
14.07 AUTHORIZED REPRESENTATIVE. . . . . . . . . . . . . . . . 32
14.08 NONDISCRIMINATION. . . . . . . . . . . . . . . . . . . . 32
14.09 INTERESTED MEMBER. . . . . . . . . . . . . . . . . . . . 32
14.10 BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . 32
ARTICLE 15
THE TRUST
15.01 PURPOSE OF THE TRUST FUND. . . . . . . . . . . . . . . . 32
15.02 APPOINTMENT OF TRUSTEE . . . . . . . . . . . . . . . . . 32
15.03 EXCLUSIVE BENEFIT OF PARTICIPANTS. . . . . . . . . . . . 32
15.04 BENEFITS LIMITED TO THE TRUST FUND . . . . . . . . . . . 32
ARTICLE 16
PARTICIPANT ADMINISTRATION PROVISIONS
16.01 PERSONAL DATA TO ADMINISTRATION COMMITTEE. . . . . . . . 32
16.02 ADDRESS FOR NOTIFICATION . . . . . . . . . . . . . . . . 33
16.03 INFORMATION AVAILABLE. . . . . . . . . . . . . . . . . . 33
16.04 CLAIMS PROCEDURE . . . . . . . . . . . . . . . . . . . . 33
16.05 APPEAL PROCEDURE FOR DENIAL OF BENEFITS. . . . . . . . . 33
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE iv
<PAGE>
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ARTICLE 17
AMENDMENT OR TERMINATION
17.01 RIGHT TO AMEND . . . . . . . . . . . . . . . . . . . . . 34
17.02 RIGHT TO TERMINATE PLAN. . . . . . . . . . . . . . . . . 34
17.03 OBLIGATIONS UPON MERGER, CONSOLIDATION OR TRANSFER . . . 34
17.04 OBLIGATIONS UPON TERMINATION, PARTIAL TERMINATION OR
DISCONTINUANCE . . . . . . . . . . . . . . . . . . . . . 34
17.05 CONTINUED FUNDING AFTER PLAN TERMINATION . . . . . . . . 35
17.06 DISTRIBUTION UPON DISPOSITION OF ASSETS OR SUBSIDIARY. . 35
ARTICLE 18
GENERAL PROVISIONS
18.01 NO CONTRACT OF EMPLOYMENT; NO RIGHTS IMPLIED . . . . . . 35
18.02 NONALIENATION. . . . . . . . . . . . . . . . . . . . . . 35
18.03 INCAPACITY . . . . . . . . . . . . . . . . . . . . . . . 35
18.04 SERVICE IN MORE THAN ONE CAPACITY. . . . . . . . . . . . 36
18.05 INTENT TO QUALIFY. . . . . . . . . . . . . . . . . . . . 36
ARTICLE 19
ROLLOVER CONTRIBUTIONS AND TRANSFERS
19.01 ROLLOVER FROM OTHER PLANS. . . . . . . . . . . . . . . . 36
19.02 ROLLOVER FROM CONDUIT INDIVIDUAL RETIREMENT ARRANGEMENT. 36
19.03 TRANSFERS DIRECTLY FROM OTHER PLANS. . . . . . . . . . . 37
19.04 MISTAKEN ROLLOVER. . . . . . . . . . . . . . . . . . . . 37
ARTICLE 20
TOP-HEAVY PROVISIONS
20.01 TOP-HEAVY PLAN DEFINED . . . . . . . . . . . . . . . . . 37
20.02 OTHER DEFINITIONS. . . . . . . . . . . . . . . . . . . . 38
20.03 TOP-HEAVY CONTRIBUTIONS. . . . . . . . . . . . . . . . . 38
20.04 ADJUSTMENT TO LIMITATION ON ANNUAL ADDITIONS . . . . . . 39
ARTICLE 21
QUALIFIED DOMESTIC RELATIONS ORDERS
21.01 TERMS OF QDRO. . . . . . . . . . . . . . . . . . . . . . 39
21.02 QDRO DEFINITIONS . . . . . . . . . . . . . . . . . . . . 40
21.03 DISTRIBUTION BEFORE TERMINATION OF EMPLOYMENT. . . . . . 40
21.04 TREATMENT OF FORMER SPOUSE . . . . . . . . . . . . . . . 41
21.05 NOTIFICATION OF RECEIPT OF ORDER . . . . . . . . . . . . 41
21.06 SEPARATE ACCOUNTING. . . . . . . . . . . . . . . . . . . 41
ARTICLE 22
EMPLOYER PARTICIPATION
22.01 ADOPTION BY EMPLOYERS. . . . . . . . . . . . . . . . . . 41
22.02 WITHDRAWAL BY EMPLOYER . . . . . . . . . . . . . . . . . 41
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE v
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22.03 ADOPTION CONTINGENT UPON INITIAL AND CONTINUED
QUALIFICATION. . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 23
MISCELLANEOUS
23.01 RECEIPTS . . . . . . . . . . . . . . . . . . . . . . . . 42
23.02 NO GUARANTEE OF INTEREST . . . . . . . . . . . . . . . . 42
23.03 PAYMENT OF EXPENSES. . . . . . . . . . . . . . . . . . . 42
23.04 RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . 42
23.05 INTERPRETATIONS AND ADJUSTMENTS. . . . . . . . . . . . . 42
23.06 EVIDENCE . . . . . . . . . . . . . . . . . . . . . . . . 42
23.07 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . 43
23.08 NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 43
23.09 SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . 43
23.10 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . 43
23.11 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . 43
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE vi
<PAGE>
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MICHAELS STORES, INC.
EMPLOYEES 401(K) PLAN
(AS AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1996)
P R E A M B L E
The Michaels Stores, Inc. Employees 401(k) Plan (As Amended and Restated
Effective October 1, 1996) (the "PLAN") is designed to provide Eligible
Employees and Beneficiaries with the opportunity to accumulate capital for their
future economic security, to encourage Eligible Employees to remain in the
service of the Employers and to provide additional incentives for Employee
performance on behalf of the Employer. The Plan was originally adopted
effective as of February 1, 1987; amended and restated effective May 1, 1992;
and amended and restated effective February 1, 1994.
The Plan is intended to be a profit sharing plan qualifying under Code Section
401(a) with a cash or deferred arrangement qualifying under Code Section 401(k).
The Plan is intended to comply with the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and the regulations
promulgated thereunder; the provisions of the Internal Revenue Code of 1986, as
amended (the "CODE"), and the Treasury Regulations promulgated thereunder; and
other applicable Federal laws and regulations.
ARTICLE 1
DEFINITIONS
The following words and phrases when used with an initial capital letter shall
have the meanings set out in this Article 1; the masculine, feminine and neuter
gender shall include the others unless a different meaning is plainly required
by the context; and words importing the singular shall include the plural and
the plural the singular whenever the context requires.
1.01 ACCOUNT shall mean the record of each Participant's and Beneficiary's Plan
interest and changes thereto as reflected in the Plan's books and records. The
Administration Committee may cause subaccounts to be maintained for each
Participant as necessary to reflect different types of Plan contributions
allocated on behalf of each Participant.
1.02 ACCOUNT BALANCE shall mean the sum of the amounts credited to a
Participant's Account as of any Valuation Date.
1.03 ACTUAL DEFERRAL PERCENTAGE shall mean the ratio (expressed as a percentage)
of the Salary Reduction Contributions made on behalf of each Eligible Employee
for the Plan Year to the Eligible Employee's Compensation for the Plan Year. If
an Eligible Employee makes no Salary Reduction Contributions, the Actual
Deferral Percentage with respect to such person shall be zero. The Actual
Deferral Percentage of each Eligible Employee shall be calculated to the nearest
hundredth of a percentage point.
1.04 ADJUSTMENT FACTOR shall mean the cost of living adjustment factor
prescribed by the Secretary of the Treasury under Code Section 415(d) as applied
to such items and in such manner as the Secretary shall provide.
1.05 ADMINISTRATION COMMITTEE shall mean the persons appointed pursuant to
Article 14 who are responsible for Plan administration.
1.06 AVERAGE ACTUAL DEFERRAL PERCENTAGE shall mean the average of the Actual
Deferral Percentages of the Eligible Employees in a group.
1.07 AVERAGE CONTRIBUTION PERCENTAGE shall mean the average of the Contribution
Percentages of the Eligible Employees in a group.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 1
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1.08 BENEFICIARY shall mean the person or entity designated in writing by a
Participant, or otherwise determined in accordance with Section 7.02, to receive
a Participant's Account Balance in the event of the Participant's death.
1.09 BOARD shall mean the Board of Directors of the Company, as constituted from
time to time.
1.10 CODE shall mean the Internal Revenue Code of 1986, as amended from time to
time.
1.11 COMPANY shall mean Michaels Stores, Inc., a Delaware corporation.
1.12 COMPENSATION shall have the following meanings for specific purposes of the
Plan:
a. For purposes of the limitations imposed by Code Section 415 and the
Top-Heavy plan minimum contribution requirements of Code Section 416,
"COMPENSATION" shall mean the total compensation received by an Eligible
Employee from all Employers for personal services rendered to the Employers
during the Plan Year as reported on the Participant's Federal Income Tax
Withholding Statement (Form W-2; Box 10, or substantially similar
equivalent form) including base salary, bonuses, commissions, incentive pay
and overtime. For purposes of this subsection, the term "COMPENSATION"
shall also include severance allowances, prizes or awards, amounts
representing reimbursement for travel or other expense or mileage
allowances, moving expense reimbursement, gift certificates, the imputed
fair market value of an Employer provided automobile and excess group term
life insurance coverage. In addition, the term "COMPENSATION" shall not
include any amounts realized from the exercise of nonqualified stock
options or any amounts included in taxable income when restricted stock (or
other property) held by an Employee either becomes freely transferable or
is no longer subject to a substantial risk of forfeiture. The term
"COMPENSATION" shall be interpreted and construed in accordance with
Treasury Regulation Section 1.415-2(d)(2), exclusive of amounts listed in
Treasury Regulation Section 1.415-2(d)(3).
b. For purposes of determining the amount of Salary Reduction
Contributions and Employer Matching Contributions, the term "COMPENSATION"
shall have the same meaning as in the preceding subsection; provided that
any amounts attributable to an election by an Eligible Employee to reduce
such person's Compensation pursuant to the Plan or any other plan under
Code Sections 125 or 401(k) sponsored by an Employer shall be disregarded.
For purposes of this subsection, the term "COMPENSATION" shall not include
severance allowances, prizes, awards, amounts representing reimbursement
for travel or other expense or mileage allowances, moving expense
reimbursement, gift certificates, the imputed fair market value of an
Employer provided automobile or excess group term life insurance coverage.
In addition, the term "COMPENSATION" shall not include any amounts realized
from the exercise of nonqualified stock options or any amounts included in
taxable income when restricted stock (or other property) held by an
Employee either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture. Any Compensation paid or payable by reason
of services performed before the date an Employee is eligible to
participate in the Plan shall also be disregarded. Notwithstanding any
Plan provision to the contrary, the term "COMPENSATION" shall be
interpreted and construed in a manner consistent with the safe harbor
definition contained in Treasury Regulation Section 1.414(s)-1(c)(3).
c. For purposes of identifying a "KEY EMPLOYEE" under Code Section 416,
the term "COMPENSATION" shall have the same meaning as in subsection a.
above, determined without regard to elections under Code Sections 125 and
401(k).
d. The annual Compensation taken into account under the Plan for any Plan
Year shall not exceed $150,000 as adjusted by the Adjustment Factor for
Plan Years beginning on or after February 1, 1994. For Plan Years
beginning on or after February 1, 1989 and ending on or before January 31,
1994, the annual Compensation taken into account under the Plan shall not
exceed $200,000 as adjusted by the Adjustment Factor. The Compensation of
a Participant who is a five percent owner (as defined in Code Section
416(i)(1)) or one of the ten Highly Compensated Employees paid the greatest
amount of Compensation during the Plan Year shall be aggregated with the
Compensation of such Participant's spouse or lineal descendants under the
age of 19 as of the close of the Plan Year to the extent required by Code
Section 401(a)(17). In addition, and only to the extent required by Code
Section 414(q)(6), if a person is
MICHAELS STORES, INC.
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a Family Member of a Participant who is a five percent owner (as defined in
Code Section 416(i)(1)) or one of the ten Highly Compensated Employees paid
the greatest amount of Compensation, then:
1. such Family Member shall not be considered a separate Employee,
and
2. any Compensation paid to such Family Member and any benefit on
behalf of such Family Member shall be treated as if paid to or on
behalf of the five percent owner or Highly Compensated Employee.
If, as a result of the foregoing rules, the adjusted annual compensation
limitation is exceeded, then the limitation shall be applied in a pro rata
manner among the affected persons in proportion to each such person's
Compensation as determined under this Section prior to the application of
this limitation. This subsection shall be construed and applied in a
manner consistent with Code Sections 401(a)(17) and 414(q)(6).
1.13 CONTRIBUTION PERCENTAGE shall mean the ratio of the Employer Matching
Contributions on behalf of each Eligible Employee and the Employee Contributions
made by the Eligible Employee for the Plan Year to such person's Compensation
for the Plan Year. If an Eligible Employee does not receive an allocation of
Employer Matching Contributions and makes no Employee Contributions, the Actual
Contribution Percentage with respect to such person shall be zero. The Actual
Contribution Percentage of each Eligible Employee shall be calculated to the
nearest hundredth of a percentage point.
1.14 EFFECTIVE DATE shall mean October 1, 1996.
1.15 EMPLOYEE shall mean any person who is receiving remuneration for personal
services rendered in the employment of an Employer (or in the employment of any
other entity required to be aggregated with an Employer under Code Section
414(b), (c), (m) or (o)) including any officer or director of the Company so
employed, including any leased employee deemed to be an employee of an Employer
as provided in Code Section 414(n) or (o), except as provided below in this
Section; and including any person who would be receiving such remuneration
except for an authorized Leave of Absence. Notwithstanding the foregoing, the
term "EMPLOYEE" shall not include any person not classified by an Employer as an
Employee, notwithstanding a final determination by any governmental agency that
such person, in fact, is (or was) an Employee; provided that this exclusion
shall not apply prospectively from the date of such determination with respect
to any person who remains in the employment of an Employer after the date of
such determination.
The term "ELIGIBLE EMPLOYEE" shall mean all Employees of an Employer, except the
following:
a. Employees included in a unit of Employees covered by a collective
bargaining agreement between an Employer and employee representatives if
retirement benefits were the subject of good faith bargaining and if two
percent or fewer of the Employees who are covered pursuant to that
agreement are professionals as defined in Treasury Regulation Section
1.410(b)-9. The term "EMPLOYEE REPRESENTATIVES" does not include any
organization more than half of whose members are Employees who are owners,
officers or executives of an Employer,
b. Employees who are nonresident aliens (within the meaning of Code
Section 7701(b)(1)(B)) and who receive no earned income (within the meaning
of Code Section 911(d)(2)) from an Employer that constitutes income from
sources within the United States (within the meaning of Code Section
861(a)(3)),
c. any person receiving payments as a consultant, independent contractor
or other arrangement excluded from the common law definition of the term
"EMPLOYEE",
d. all leased employees as defined below in this Section, and
e. Employees of any employer that has not adopted the Plan.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 3
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Notwithstanding any Plan provision to the contrary, service performed by
Employees excluded from eligibility for participation pursuant to Sections 1.15a
and 1.15e shall be considered for purposes of crediting Years of Vesting
Service.
SPECIAL PROVISIONS FOR LEASED EMPLOYEES
The term "LEASED EMPLOYEE" shall mean any person (other than an Employee)
who pursuant to an agreement between an Employer and any other person (a
"LEASING ORGANIZATION") has performed services for an Employer (or for an
Employer and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one
year and such services are of a type historically performed by employees in
the business field of the Employers. Contributions or benefits provided to
Leased Employees by the leasing organization that are attributable to
services performed for an Employer shall be treated as provided by the
Employer.
Leased Employees shall not be considered as Employees if: (i) such person
is covered by a money purchase pension plan providing: (1) a nonintegrated
employer contribution rate of at least ten percent of compensation (as
defined in Code Section 415(c)(3)) but including amounts contributed
pursuant to a salary reduction agreement that are excludable from such
person's gross income under Code Sections 125, 402(e)(3), 402(h)(1)(B) or
403(b); (2) immediate participation; and (3) full and immediate vesting;
and (ii) Leased Employees do not constitute more than 20% of the Nonhighly
Compensated Employees of all Employers.
1.16 EMPLOYEE CONTRIBUTIONS shall mean the amounts contributed by an Eligible
Employee pursuant to Section 4.03.
1.17 EMPLOYEE CONTRIBUTION ACCOUNT shall mean the subaccount into which Employee
Contributions and investment earnings on those contributions shall be credited.
1.18 EMPLOYER shall mean the Company and any subsidiary or other affiliate of
the Company that adopts the Plan in a manner satisfactory to the Board.
1.19 EMPLOYER MATCHING CONTRIBUTIONS shall mean the amounts contributed pursuant
to Article 4.
1.20 EMPLOYER MATCHING CONTRIBUTION ACCOUNT shall mean the subaccount into which
Employer Matching Contributions and investment earnings on those contributions
shall be credited.
1.21 EMPLOYMENT COMMENCEMENT DATE shall mean the date on which an Employee is
first credited with an Hour of Service for the performance of duties for an
Employer. The Administration Committee may cause service with unrelated
entities to be recognized for eligibility and/or vesting purposes of the Plan;
provided that any such action by the Administration Committee shall be by
written resolution.
1.22 ERISA shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.23 EXCESS AGGREGATE CONTRIBUTIONS shall mean Employer Matching Contributions
in excess of the Contribution Percentage limit as described in Code Section
401(m)(6)(B).
1.24 EXCESS CONTRIBUTIONS shall mean Salary Reduction Contributions in excess of
the Actual Deferral Percentage limit as described in Code Section 401(k)(8)(B).
1.25 EXCESS DEFERRALS shall mean Salary Reduction Contributions in excess of the
limits imposed by Code Section 402(g).
1.26 FAMILY MEMBER shall mean an Employee, such Employee's spouse, lineal
ascendants and descendants and the spouses of such lineal ascendants and
descendants as described in Code Section 414(q)(6).
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 4
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1.27 HIGHLY COMPENSATED EMPLOYEE shall mean any Employee who performs services
for an Employer during the determination year and who, during the look-back
year:
a. received Compensation from an Employer in excess of $75,000 multiplied
by the Adjustment Factor,
b. received Compensation from an Employer in excess of $50,000 multiplied
by the Adjustment Factor and was a member of the top-paid group for such
year, or
c. was an officer of an Employer and received Compensation during such
year that is greater than 50% of the dollar limitation in effect under Code
Section 415(b)(1)(A).
The term "HIGHLY COMPENSATED EMPLOYEE" also includes:
d. Employees who are both described in the preceding sentence if the term
"DETERMINATION YEAR" is substituted for the term "LOOK-BACK YEAR" and the
Employee is one of the 100 Employees who received the most Compensation
from an Employer during the determination year, and
e. Employees who are five percent owners at any time during the look-back
year or determination year.
If no officer has satisfied the Compensation requirement of subsection c. above
during either a determination year or look-back year, the highest paid officer
for such year shall be treated as a Highly Compensated Employee. No more than
50 Employees (or if lesser, the greater of three Employees or ten percent of the
Employees) shall be treated as officers.
The determination year shall be the Plan Year. For Plan Years beginning after
December 31, 1996, the look-back year shall be the determination year.
If an Employee is, during a determination year or look-back year, a Family
Member of either a five percent owner who is an active or former Employee or a
Highly Compensated Employee who is one of the ten most Highly Compensated
Employees ranked on the basis of Compensation paid by an Employer during such
year, then the Family Member and the five percent owner or top ten Highly
Compensated Employee shall be aggregated. In such case, the Family Member and
five percent owner or top ten Highly Compensated Employee shall be treated as a
single Employee receiving Compensation and contributions or benefits of the
Family Member and five percent owner or top ten Highly Compensated Employee.
The determination of who is a Highly Compensated Employee, including the
determination of the number and identity of Employees in the top-paid group, the
top 100 Employees, the number of Employees treated as officers and the
Compensation that is considered shall be made in accordance with Code Section
414(q) and the Treasury Regulations promulgated thereunder.
1.28 HOUR OF SERVICE shall mean:
a. each hour for which an Employee is directly or indirectly paid or
entitled to payment for the performance of duties for an Employer; such
hours shall be credited to the computation period in which the duties are
performed, and
b. each hour for which an Employee is directly or indirectly entitled to
payment on account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity, disability, layoff, jury duty,
military duty or leave of absence; except that
1. not more than 501 Hours of Service shall be credited in each
single computation period during which the Employee performs no
duties, and
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 5
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2. Hours of Service shall not be counted where such payment is made
or is due:
A. under a plan maintained solely for the purpose of complying
with applicable worker's compensation, unemployment or disability
insurance laws, or
B. solely to reimburse an Employee for medical or medically
related expenses,
Hours credited under this subsection b. shall be credited to the
computation period in which the period during which no duties were
performed occurred, and
c. each hour for which back pay, irrespective of payment due to
mitigation of damages, is either awarded or agreed to by an Employer. Such
hours shall be credited to the computation period to which the award or
agreement for back pay pertains rather than to the computation period in
which the award, agreement or payment is made; provided, that the limits
under subsection b. above are applicable and that an Employee shall not be
entitled to additional Hours of Service under this subsection c. for the
same Hours of Service credited under subsections a. or b.
Hours of Service shall be calculated and credited in a manner consistent with
Department of Labor Regulation Sections 2530.200b-2(b) and (c), which are
incorporated by reference in the Plan.
Hours shall be credited on an equivalency basis pursuant to which an Employee
shall be credited with 190 Hours of Service for each month he performs an Hour
of Service for the Employer.
In determining Hours of Service for the purpose of determining whether an
Employee has incurred a One-Year Break In Service, if such Employee is absent
from employment because of the Employee's pregnancy, the birth of the Employee's
child, the placement of a child with the Employee in connection with the
adoption of such child by such Employee or the need to care for such Employee's
child during the period immediately after such child's birth or placement, then
the following hours shall be considered as Hours of Service:
d. the Hours of Service that otherwise would normally have been credited
to such Employee but for such absence, or
e. in any case in which the Administration Committee is unable to
determine the number of hours described in subsection d. above, eight Hours
of Service per day of absence,
provided that no more than 501 Hours of Service need be credited to an Employee
because of such pregnancy or placement.
The Hours of Service described in the preceding paragraph shall be treated as
Hours of Service only in the period in which the absence from employment begins
if an Employee would be prevented from incurring a One-Year Break in Service in
such year solely because the period of absence is considered as Hours of Service
under subsection d. or e. In any other case, such Hours of Service shall be
considered as Hours of Service in the immediately succeeding period.
Hours of Service shall not be credited to an Employee on account of pregnancy or
placement of a child for adoption as described above unless such Employee
furnishes to the Administration Committee such timely information as the
Administration Committee may require to establish that the absence from
employment is for the reasons described above and to establish the number of
days for which there was such an absence.
1.29 INVESTMENT COMMITTEE shall mean the persons appointed pursuant to Article
14 who are responsible for Plan investments, except as otherwise provided in the
Plan.
1.30 LEAVE OF ABSENCE shall mean an absence authorized by an Employer under its
personnel practices provided that the Employee resumes service with an Employer
within the period specified in the authorization for the Leave of Absence.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 6
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For purposes of determining an Employee's termination of employment date, a
Leave of Absence shall not exceed a period of 12 consecutive months.
Notwithstanding the foregoing, service in the United States Armed Forces shall
constitute an authorized Leave of Absence and shall be credited as employment
for purposes of determining a Participant's Years of Vesting Service provided
that:
a. the Employee leaves the employ of an Employer to enter the service of
the Armed Forces through the operation of any law, and
b. the Employee returns to the employ of an Employer within the period
provided by law for the protection of the Employee's reemployment rights.
1.31 LIMITATION YEAR shall mean the Plan Year; provided that the Limitation Year
for the period beginning on February 1, 1996 shall be a short period ending on
December 31, 1996. The adjustments described in Section 1.415-2(b)(4)(iii) of
the Treasury Regulations shall be applied with respect to such short Limitation
Year (or limitation period).
1.32 NORMAL RETIREMENT DATE shall mean the date that a Participant attains age
65.
1.33 NONHIGHLY COMPENSATED EMPLOYEE shall mean an Employee who is neither a
Highly Compensated Employee nor a Family Member.
1.34 ONE-YEAR BREAK IN SERVICE shall mean a 12 consecutive month period
beginning with or after an Employee's Employment Commencement Date in which the
Employee is credited with fewer than 501 Hours of Service.
1.35 PARTICIPANT shall mean any Employee or former Employee who has an Account
Balance.
1.36 PLAN shall mean the Michaels Stores, Inc. Employees 401(k) Plan (As Amended
and Restated Effective October 1, 1996).
1.37 PLAN YEAR shall mean (i) for the period beginning on February 1, 1996, the
eleven month period ending December 31, 1996 and (ii) for all periods after
December 31, 1996, the twelve month period beginning January 1 and ending
December 31.
1.38 PRIOR PLAN shall mean the Michaels Stores, Inc. Employees 401(k) Plan (As
Amended and Restated Effective February 1, 1994).
1.39 PRIOR PLAN ACCOUNT shall mean the subaccounts, other than Participants'
Rollover Contribution Accounts, resulting from a merger into the Plan of any
tax-qualified plan previously sponsored by the Company or one of its
subsidiaries or other affiliates. The Administration Committee may establish
one or more Prior Plan Accounts, and each Prior Plan Account may be subdivided
into such subaccounts as the Administration Committee determines is necessary in
connection with the Plan administration.
1.40 ROLLOVER CONTRIBUTIONS shall mean the amounts transferred to the Plan by a
Participant pursuant to Article 19. Rollover Contributions may include amounts
transferred to the Plan by Participants from a plan previously sponsored by the
Company or one of its subsidiaries or other affiliates or any of their
predecessors; provided, however, that Rollover Contributions shall not include
any amounts merged into the Plan by action of the Company or any other Employer.
1.41 ROLLOVER CONTRIBUTION ACCOUNT shall mean the subaccount into which Rollover
Contributions and investment earnings on those contributions shall be credited.
1.42 SALARY REDUCTION CONTRIBUTION ELECTION shall mean the means by which an
Eligible Employee authorizes and elects the percentage of such person's
Compensation to be withheld and contributed to the such person's Salary
Reduction Contribution Account.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 7
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1.43 SALARY REDUCTION CONTRIBUTION ACCOUNT shall mean the subaccount into which
Salary Reduction Contributions and investment earnings on those contributions
shall be credited.
1.44 SALARY REDUCTION CONTRIBUTIONS shall mean the amounts withheld from an
Eligible Employee's Compensation and contributed to the Plan by an Employer
pursuant to Section 3.01.
1.45 TRUST OR TRUST FUND shall mean the legal entity created by agreement
between the Company and Trustee for the purpose of managing and investing assets
accumulated pursuant to the Plan.
1.46 TRUST AGREEMENT shall mean the agreement entered into between the Company
and the Trustee that governs the management and administration of the Trust.
1.47 TRUSTEE shall mean the entity appointed under the Trust Agreement to serve
as the trustee of the Trust.
1.48 VALUATION DATE shall mean each business day on which the New York Stock
Exchange is open for trading and which is not a bank holiday in the United
States.
1.49 VESTING COMPUTATION PERIOD shall mean any Plan Year during which an
Employee completes not less than 1,000 Hours of Service with the Employer.
Notwithstanding the foregoing, for an Employee who was eligible to participate
in the Plan at any time during the period from February 1, 1994 through January
31, 1997 inclusive, the term "Vesting Computation Period" shall also mean the 12
consecutive month period beginning with the Employee's Employment Commencement
Date and each anniversary thereof ending on or before January 31, 1997, but only
if the use of such definition would allow an Employee to have more total Years
of Vesting Service than under the definition contained in the preceding
paragraph.
1.50 YEAR OF VESTING SERVICE shall mean a Vesting Computation Period in which an
Employee is credited with at least 1,000 Hours of Service.
ARTICLE 2
ELIGIBILITY AND PARTICIPATION
2.01 COMMENCEMENT OF PLAN PARTICIPATION. Each Eligible Employee who has
satisfied the requirements of Section 2.02 prior to or on the Effective Date may
participate in the Plan on the Effective Date. Each other Employee who
satisfies the requirements of Section 2.02 after the Effective Date may become a
Participant in the Plan as soon as administratively feasible following the date
on which such person satisfies such requirements. An Eligible Employee must
agree to make Salary Reduction Contributions to become a Participant.
2.02 PARTICIPATION REQUIREMENTS. An Eligible Employee may become a Participant
as soon as administratively feasible after completion of a six month eligibility
period in which such person is credited with at least 500 Hours of Service. The
initial eligibility period begins on the date an Eligible Employee first
performs an Hours of Service. Subsequent eligibility periods begin with the
start of each half of the Plan Year beginning after the first Hour of Service is
performed. Notwithstanding the foregoing, the eligibility provisions of the
Prior Plan shall continue to apply through January 31, 1997, if such provisions
would permit an Eligible Employee to become a Participant sooner than the
preceding provisions of this section.
2.03 TERMINATION OF EMPLOYMENT. A Participant's employment for purposes of the
Plan shall terminate upon the Participant's death, retirement or other cessation
of employment with all Employers under the Plan.
2.04 REHIRED EMPLOYEE. A Participant who ceases to be an Eligible Employee and
who is reemployed in a class of Eligible Employees shall be eligible to again
become a Participant as of the first day that he performs an Hour of Service.
Salary Reduction Contributions on behalf of such person shall begin as soon as
administratively feasible after the Participant makes a new Salary Reduction
Contribution. Each other Eligible Employee who is
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 8
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reemployed shall be eligible to become a Participant on a date determined in
accordance with Sections 2.01 and 2.02.
2.05 LOSS OF PARTICIPANT STATUS. An Eligible Employee who becomes a Participant
shall continue to be a Participant, whether or not such person continues to make
Salary Reduction Contributions, until such person's Account Balance has been
fully distributed from the Plan.
2.06 SUSPENSION OF PARTICIPATION. A person who for any reason ceases to be an
Eligible Employee but remains an Employee shall not be permitted to have Salary
Reduction Contributions and Employer Matching Contributions allocated on such
person's behalf. During the period of such suspension, such person's service
with the Employers shall continue to be considered for vesting purposes, and
such person's Account shall continue to be adjusted for investment gains and
losses. The suspension shall be removed and such person may have Salary
Reduction Contributions and Employer Matching Contributions allocated on such
person's behalf when such person becomes an Eligible Employee and makes a new
Salary Reduction Contribution Election.
2.07 REEMPLOYMENT; VESTING SERVICE. If an Employee has five consecutive One-
Year Breaks in Service, all Years of Vesting Service after such One-Year Breaks
in Service shall be disregarded for the purpose of vesting such person's
Employer Matching Contributions that were made to the Plan before such breaks,
but both pre-break and post-break service shall count for the purposes of
vesting contributions to such person's Employer Matching Contribution Account
that are made after such breaks. In the case of an Employee who does not have
five consecutive One-Year Breaks in Service, both the pre-break and post-break
service shall count in vesting both the pre-break and post-break Employer
Matching Contributions for such person.
2.08 NOTICE OF PARTICIPATION. The Administration Committee shall provide each
Eligible Employee reasonable notice of eligibility to commence participation,
including without limitation such forms and other documentation that the
Administration Committee determines to be necessary or appropriate for the
administration of the Plan.
ARTICLE 3
SALARY REDUCTION CONTRIBUTIONS
3.01 SALARY REDUCTION CONTRIBUTIONS.
a. Each Eligible Employee may elect to have a percentage of Compensation
(in whole amounts of not less than 1% but not more than 15%) during each
pay period contributed by such person's Employer directly into the Plan
instead of paid as cash Compensation. Once each Plan Year, each Eligible
Employee may elect to have a percentage of such person's annual bonus, if
any, that would otherwise become payable contributed by such person's
Employer directly into the Plan instead of paid in cash to such person.
Unless the Eligible Employee elects otherwise by notice given in a manner
prescribed by the Administration Committee on or before 30 days immediately
preceding payment of the bonus, the amount of the bonus that will be
contributed to the Plan shall be an amount equal to the total bonus
multiplied by the Participant's Salary Reduction Contribution Election
percentage in effect at the time the bonus is paid.
b. For Federal tax purposes (and wherever permitted, for state tax
purposes), Salary Reduction Contributions shall be deemed to be Employer
contributions and are intended to qualify as elective contributions made
pursuant to Code Section 401(k).
c. All Salary Reduction Contributions shall be forwarded by the Employer
to the Trustee as soon as administratively feasible after the contributions
have been withheld from the Eligible Employee's Compensation.
d. No Eligible Employee shall be permitted to make Salary Reduction
Contributions during any calendar year in excess of $7,000 as adjusted by
the Adjustment Factor. The limitation described in this Section 3.01d
applies on an individual basis to all elective deferrals (within the
meaning of Code Section
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 9
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401(k)) made by each Eligible Employee during a calendar year under this
or any other similar tax-qualified plan of the Employers.
e. Each Eligible Employee must coordinate such person's Salary Reduction
Contributions as needed to meet the limitation described above in
connection with any other plan or plans not sponsored by the Employers.
The Employers shall not take account of elective deferrals made to any
other plan not sponsored by the Employers. Notwithstanding any Plan
provision to the contrary, the Eligible Employee may apply to the
Administration Committee for the return of Excess Deferrals and such Excess
Deferrals and the income allocable thereto shall be distributed if
administratively feasible no later than April 15 after the calendar year
for which such Excess Deferrals are made. The Eligible Employee's
application shall be in writing; shall be submitted to the Administration
Committee no later than March 1; shall specify the Eligible Employee's
Excess Deferrals for the preceding calendar year; and shall be accompanied
by the Eligible Employee's statement that if such amounts are not
distributed, such Excess Deferrals, when added to amounts deferred under
other plans or arrangements described in Code Sections 401(k), 408(k) or
403(b), exceed the limit imposed on the Eligible Employee by Code Section
402(g) for the year in which the deferral occurred.
The Excess Deferrals shall be adjusted for income or loss. The income or
loss allocable to Excess Deferrals for the Plan Year shall be determined by
multiplying the income or loss allocable to the Eligible Employee's Salary
Reduction Contributions for the Plan Year by a fraction, the numerator of
which is the Excess Deferrals on behalf of the Eligible Employee for the
Plan Year and the denominator of which is the Eligible Employee's Account
Balance attributable to Salary Reduction Contributions on the last day of
the Plan Year reduced by the gain allocable to such total amount for the
Plan Year and increased by the loss allocable to such total amount for the
Plan Year.
The Administration Committee may determine that the income allocable to
Excess Deferrals for the period between the end of the Plan Year and the
date of the corrective distribution may be disregarded or calculated under
any method permissible in accordance with the Treasury Regulations and
other official pronouncements of the Secretary of the Treasury.
f. The Administration Committee may review Salary Reduction Contributions
from time to time. If the Administration Committee determines that an
Eligible Employee's Salary Reduction Contributions are likely to exceed the
limitations imposed by any Plan provision, the Administration Committee may
require such Eligible Employee to reduce the amount of any such Salary
Reduction Contributions or may require the suspension of any future Salary
Reduction Contributions. In the event that the Administration Committee
requires that an Eligible Employee's Salary Reduction Contributions be
reduced or suspended, the Administration Committee shall notify the
affected Eligible Employee and such person's Employer as soon as
administratively feasible.
3.02 SALARY REDUCTION CONTRIBUTION ELECTION. Each Eligible Employee who is (or
has agreed to become) a Participant may make a Salary Reduction Contribution
Election in accordance with procedures established by the Administration
Committee.
3.03 SUSPENSION OF, OR CHANGE IN, SALARY REDUCTION CONTRIBUTION ELECTION. A
Participant may elect to suspend or change all Salary Reduction Contributions at
any time by complying with procedures established by the Administration
Committee. Any such suspension or change election shall be effective as soon as
administratively feasible after the date such election is received by the
Administration Committee. A Participant who has suspended or changed a Salary
Reduction Contribution Election may make a new Salary Reduction Contribution
Election in accordance with procedures established by the Administration
Committee.
3.04 DEFERRAL PERCENTAGE LIMITATION. At such times as it deems appropriate, the
Administration Committee shall review all Salary Reduction Contributions to
determine that all Salary Reduction Contributions satisfy one of the tests
below:
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 10
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a. the Average Actual Deferral Percentage for Highly Compensated
Employees for the Plan Year shall not exceed the Average Actual Deferral
Percentage for Nonhighly Compensated Employees for the Plan Year multiplied
by 1.25, or
b. the Average Actual Deferral Percentage for Highly Compensated
Employees for the Plan Year shall not exceed the Average Actual Deferral
Percentage for Nonhighly Compensated Employees for the Plan Year multiplied
by two, provided that the Average Actual Deferral Percentage for Highly
Compensated Employees does not exceed the Average Actual Deferral
Percentage for Nonhighly Compensated Employees by more than two percentage
points. Notwithstanding the foregoing, the limit set forth in this Section
3.04b. shall be adjusted in accordance with Section 3.07.
3.05 SPECIAL RULES ON DEFERRAL PERCENTAGE LIMITATIONS.
a. The Actual Deferral Percentage for any Highly Compensated Employee for
the Plan Year and who is eligible to have Salary Reduction Contributions
allocated to such person's account under two or more plans or arrangements
described in Code Section 401(k) that are maintained by an Employer shall
be determined as if all such Salary Reduction Contributions were made under
a single arrangement. If a Highly Compensated Employee participates in two
or more plans or arrangements described in Code Section 401(k) that have
different plan years, all such arrangements ending with or within the same
calendar year shall be treated as a single arrangement.
b. For purposes of determining the Actual Deferral Percentage of an
Eligible Employee who is a five percent owner or one of the ten most highly
paid Highly Compensated Employees, the Salary Reduction Contributions and
Compensation of such person shall include Salary Reduction Contributions
and Compensation of the Family Members for the Plan Year. Family Members
with respect to such Highly Compensated Employees shall be disregarded as
separate Employees in determining the Average Actual Deferral Percentage
both for Nonhighly Compensated Employees and Highly Compensated Employees.
c. In the event that the Plan satisfies the requirements of Code Sections
401(k), 401(a)(4) or 410(b) only if aggregated with one or more other plans
or if one or more plans satisfy the requirements of such sections of the
Code only if aggregated with the Plan, then this Section shall be applied
by determining the Actual Deferral Percentage as if all such plans were a
single plan. Plans may be aggregated in order to satisfy Code Section
401(k) only if they have the same plan year.
d. In determining the Actual Deferral Percentage, Salary Reduction
Contributions must be made before the last day of the 12 month period
immediately after the Plan Year to which those contributions relate.
e. The determination and treatment of the Actual Deferral Percentage
shall satisfy such other requirements as may be prescribed by the Secretary
of the Treasury.
f. Salary Reduction Contributions shall be taken into account under the
Actual Deferral Percentage test for a Plan Year only if such contributions
relate to Compensation that either would have been received by the Eligible
Employee in the Plan Year (but for the Salary Reduction Contribution
Election) or is attributable to services performed by the Eligible Employee
in the Plan Year and would have been received by the Eligible Employee
within 2-1/2 months after the close of the Plan Year.
g. For purposes of determining whether the Plan satisfies the
requirements of Section 3.04, Salary Reduction Contributions shall be taken
into account only if such contributions are allocated as of a date within
that Plan Year. For this purpose, Salary Reduction Contributions are
considered allocated as of a date within a Plan Year if the allocations are
not contingent on participation or performance of services after such date
and the Salary Reduction Contributions are actually paid to the Trust as
provided in Section 3.05d.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 11
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3.06 ADJUSTMENT OF SALARY REDUCTION CONTRIBUTIONS.
a. In the event the Administration Committee determines that one of the
tests in Section 3.04 is not satisfied at the time of its review, the
Administration Committee may require that one or more Participants adjust
their Salary Reduction Contribution Election as of the first pay period
after receipt of the test results in order that one of the tests in Section
3.04 will be satisfied, or, to the extent permitted by law, the
Administration Committee shall have the power and authority to return all
or any part of the Salary Reduction Contributions of one or more
Participants in cash within 2-1/2 months after the end of the Plan Year but
in no instance later than the last day of the Plan Year after the Plan Year
for which the Excess Contributions were made, solely to the extent
necessary to satisfy one of the tests in Section 3.04.
b. The Excess Contributions shall be adjusted for income or loss. The
income or loss allocable to Excess Contributions for the Plan Year shall be
determined by multiplying the income or loss allocable to the Participant's
Salary Reduction Contributions for the Plan Year by a fraction, the
numerator of which is the Excess Contributions on behalf of the Participant
for the Plan Year and the denominator of which is the Participant's Account
Balance attributable to Salary Reduction Contributions on the last day of
the Plan Year reduced by the gain allocable to such total amount for the
Plan Year and increased by the loss allocable to such total amount for the
Plan Year. The Administration Committee may determine that the income
allocable to Excess Contributions for the period between the end of the
Plan Year and the date of the corrective distribution may be disregarded or
calculated under any method permissible in accordance with the Treasury
Regulations and other official pronouncements from the Secretary of the
Treasury.
c. Excess Contributions shall be returned in accordance with the
procedure in this Section 3.06c. The Actual Deferral Percentage of the
Highly Compensated Employee with the highest Actual Deferral Percentage
shall be reduced to the extent required to (i) enable the arrangement to
satisfy the test in Section 3.04, or (ii) cause such Highly Compensated
Employee's Actual Deferral Percentage to equal the ratio of the Highly
Compensated Employee with the next highest Actual Deferral Percentage and
the excess is allocated among Family Members in proportion to the Salary
Reduction Contributions of each Family Member that are combined to
determine the Actual Deferral Percentage. The foregoing procedure shall be
repeated until the Plan satisfies the test in Section 3.04. Excess
Contributions for Family Members shall be reduced according to procedures
described in Code Section 401(k)(8) and the Treasury Regulations
promulgated thereunder.
d. The amount of Excess Contributions to be distributed or
recharacterized shall be reduced by the amount of Excess Deferrals
previously distributed for the taxable year ending in the same Plan Year,
and Excess Deferrals to be distributed for a taxable year shall be reduced
by Excess Contributions previously distributed or recharacterized for the
Plan Year beginning in such taxable year.
3.07 AGGREGATE LIMIT. Notwithstanding the foregoing, if the Plan does not
satisfy the tests in Sections 3.04a and 4.04a, then the sum of the Average
Actual Deferral Percentage for Highly Compensated Employees for the Plan Year
plus the Average Contribution Percentage for Highly Compensated Employees for
the Plan Year shall be adjusted, if necessary, in accordance with Section 3.08
so that the Aggregate Limit is not exceeded. The term "AGGREGATE LIMIT" shall
mean the greater of:
a. the sum of:
1. 1.25 times the greater of the Average Actual Deferral Percentage
or the Average Contribution Percentage for Nonhighly Compensated
Employees for the Plan Year, plus
2. two percentage points plus the lesser of the Average Actual
Deferral Percentage or the Average Contribution Percentage for
Nonhighly Compensated Employees for the Plan Year. In no event,
however, shall the amount calculated pursuant to this Section 3.07a2
exceed the product of two times the lesser of the Average Actual
Deferral Percentage or the Average Contribution Percentage for
Nonhighly Compensated Employees for the Plan Year, or
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 12
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b. the sum of:
1. 1.25 times the lesser of the Average Actual Deferral Percentage
or the Average Contribution Percentage or the Average Contribution
Percentage for Nonhighly Compensated Employees for the Plan Year, plus
2. two percentage points plus the greater of the Average Actual
Deferral Percentage or the Average Contribution Percentage for
Nonhighly Compensated Employees for the Plan Year. In no event,
however, shall the amount calculated pursuant to this Section 3.07b2
exceed the product of two times the greater of the Average Actual
Deferral Percentage or the Average Contribution Percentage for
Nonhighly Compensated Employees for the Plan Year.
The Average Actual Deferral Percentage and the Average Contribution Percentage
for Highly Compensated Employees shall be determined after any corrective
distribution of Excess Deferrals pursuant to Section 3.01e, Excess Contributions
pursuant to Section 3.06c and Excess Aggregate Contributions pursuant to Section
4.06.
3.08 RETURN OF CONTRIBUTIONS ABOVE THE AGGREGATE LIMIT. If the Aggregate Limit
is exceeded, the Average Actual Deferral Percentage and the Average Contribution
Percentage for Highly Compensated Employees shall be reduced in accordance with
the following procedures:
a. first, by returning Excess Contributions in the same manner as
described in Section 3.06 until the Actual Deferral Percentage of a Highly
Compensated Employee is reduced to six percent or until the arrangement
satisfies the Aggregate Limit, whichever first occurs, and then
b. by returning Excess Contributions in the same manner as described in
Section 3.06 and by simultaneously forfeiting Attributable Employer
Matching Contributions to the extent necessary to enable the arrangement to
satisfy the Aggregate Limit. The term "ATTRIBUTABLE EMPLOYER MATCHING
CONTRIBUTIONS" shall mean those Employer Matching Contributions that were
made pursuant to Section 4.01 to match the Excess Contributions returned
pursuant to this Section 3.08b.
ARTICLE 4
EMPLOYER MATCHING CONTRIBUTIONS AND EMPLOYEE CONTRIBUTIONS
4.01 EMPLOYER MATCHING CONTRIBUTIONS.
a. As soon as administratively feasible after the end of each pay period,
each Employer shall make an Employer Matching Contribution on behalf of
Participants who made Salary Reduction Contributions during the preceding
pay period. The aggregate amount of the Employer Matching Contribution
shall be equal to 50% of each Participant's Salary Reduction Contributions
that do not exceed six percent of the Participant's Compensation in such
pay period. Compensation earned by a Participant prior to the
Participant's eligibility for Plan participation shall be disregarded.
Employer Matching Contributions shall be allocated to each Participant's
Employer Matching Contribution Account at the time such contribution is
made.
4.02 TIMING OF EMPLOYER MATCHING CONTRIBUTIONS. Each Employer shall forward
Employer Matching Contributions to the Trustee for investment in the Trust Fund
as soon as administratively feasible after the amount of the Employer Matching
Contribution for the applicable pay period has been determined.
4.03 EMPLOYEE CONTRIBUTIONS. Each Eligible Employee may elect to make
voluntary, after-tax contributions to the Participant's Employee Contribution
Account for each pay period prior to the Participant's termination of employment
under the Plan, subject to the provisions and limitations below:
a. no Eligible Employee shall be required to make Employee Contributions,
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 13
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b. Employee Contributions shall be subject to the limitations of Section
4.04,
c. an Eligible Employee may not make Employee Contributions in an amount
less than one percent nor more than ten percent of such person's
Compensation during each pay period, and all Employee Contributions shall
be fully vested at all times,
d. Employee Contributions may be made by either payroll deduction or by a
lump sum deposit with the Administration Committee within the month
preceding the end of the Plan Year. An Eligible Employee may elect to
commence or cease making Employee Contributions at any time,
e. an Eligible Employee may not make Employee Contributions during any
period in which such person is not accruing Hours of Service with an
Employer, and
f. from time to time, the Administration Committee may review the
Employee Contributions made by Participants. If the Administration
Committee determines that the Employee Contributions of any Participant are
likely to exceed the limitations imposed by any provision of the Plan, the
Administration Committee may require such Participant to reduce the amount
of any such Employee Contributions or may require the suspension of any
future Employee Contributions. In the event that the Administration
Committee requires that a Participant's Employee Contributions be reduced
or suspended, the Administration Committee shall notify the affected
Participant and such person's Employer as soon as administratively
feasible.
4.04 PERCENTAGE LIMITATION ON EMPLOYER MATCHING CONTRIBUTIONS. At such
intervals as it shall deem proper, the Administration Committee shall review
Employer Matching Contributions and Employee Contributions in order to determine
that such contributions satisfy one of the tests below:
a. the Average Contribution Percentage for Highly Compensated Employees
for the Plan Year shall not exceed the Average Contribution Percentage for
Nonhighly Compensated Employees for the Plan Year multiplied by 1.25, or
b. the Average Contribution Percentage for Highly Compensated Employees
for the Plan Year shall not exceed the Average Contribution Percentage for
Nonhighly Compensated Employees for the Plan Year multiplied by two,
provided that the Average Contribution Percentage for Highly Compensated
Employees does not exceed the Average Contribution Percentage for Nonhighly
Compensated Employees by more than two percentage points. Notwithstanding
the foregoing, the limit set forth in Section 4.04b shall be adjusted in
accordance with Section 3.07.
4.05 SPECIAL RULES FOR CONTRIBUTION PERCENTAGE LIMIT TESTING.
a. The Average Contribution Percentage for any Highly Compensated
Employee for the Plan Year and who is eligible to receive Employer Matching
Contributions or to make Employee Contributions under two or more plans
described in Code Section 401(a) that are maintained by an Employer shall
be determined as if all such contributions were made under a single plan.
b. In the event that the Plan satisfies the requirements of Code Sections
401(m), 401(a)(4) and 410(b) only if aggregated with one or more other
plans or if one or more other plans satisfy the requirements of such Code
sections only if aggregated with the Plan, then this Section 4.05b shall be
applied by determining the Average Contribution Percentages as if all such
plans were a single plan.
c. For purposes of determining the Contribution Percentage of an Eligible
Employee who is a five percent owner or one of the ten most highly paid
Highly Compensated Employees, Employer Matching Contributions, Employee
Contributions and Compensation of such person shall include the Employer
Matching Contributions, Employee Contributions and Compensation of Family
Members for the Plan Year. Family Members with respect to Highly
Compensated Employees shall be disregarded as separate Employees in
determining the Average Contribution Percentage both for Nonhighly
Compensated Employees and Highly Compensated Employees.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 14
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d. For purposes of determining the test described in Section 4.04,
Employer Matching Contributions and Employee Contributions must be made
before the last day of the 12 month period immediately after the Plan Year
to which those contributions relate.
e. The determination and treatment of the Average Contribution Percentage
shall satisfy such other requirements as may be prescribed by the Secretary
of the Treasury.
4.06 ADJUSTMENTS TO CONTRIBUTIONS.
a. Excess Aggregate Contributions plus any income and minus any loss
allocable thereto until the date of distribution shall be forfeited if
forfeitable or if not forfeitable shall be distributed in cash to Highly
Compensated Employees within 2-1/2 months after the end of the Plan Year
but in no instance later than the last day of the Plan Year after the Plan
Year for which the Excess Aggregate Contributions were made.
b. The Excess Aggregate Contributions shall be adjusted for income or
loss. The income or loss allocable to Excess Aggregate Contributions for
the Plan Year shall be determined by multiplying the income or loss
allocable to the Participant's Employer Matching Contributions and Employee
Contributions for the Plan Year by a fraction, the numerator of which is
the Excess Aggregate Contributions on behalf of the Participant for the
Plan Year and the denominator of which is the sum of the Participant's
Account Balance attributable to Employer Matching Contributions and
Employee Contributions on the last day of the Plan Year reduced by the gain
allocable to such amount for the Plan Year and increased by the loss
allocable to such amount for the Plan Year. The Administration Committee
may determine that the income allocable to Excess Aggregate Contributions
for the period between the end of the Plan Year and the date of the
corrective distribution may be disregarded or calculated under any method
permissible in accordance with the Treasury Regulations and other official
pronouncements from the Secretary of the Treasury.
c. Excess Aggregate Contributions shall be returned in accordance with
the procedure in this Section 4.06c. The Contribution Percentage of the
Highly Compensated Employee with the highest Contribution Percentage shall
be reduced to the extent required to enable the arrangement to satisfy the
test described in Section 4.04 or cause such Highly Compensated Employee's
Contribution Percentage to equal the ratio of the Highly Compensated
Employee with the next highest Contribution Percentage and the excess shall
be allocated among Family Members in proportion to the Employer Matching
Contributions and Employee Contributions made on behalf of each Family
Member that are combined to determine the Contribution Percentage. The
foregoing procedure shall be repeated until the Plan satisfies the test
described in Section 4.04. Excess Aggregate Contributions for Family
Members shall be reduced according to procedures established by Code
Section 401(m)(6) and the Treasury Regulations promulgated thereunder.
4.07 OVERALL LIMITATION ON ANNUAL ADDITIONS. Notwithstanding any Plan provision
to the contrary, in no event shall the annual additions allocated to a
Participant's Account for any Limitation Year exceed the lesser of:
a. 25% of the Participant's Compensation for the Limitation Year, or
b. $30,000 (or, if greater, 1/4 of the amount in effect under Code
Section 415(b)(1)(A)) for such Limitation Year.
The Compensation limitation referred to in Section 4.07a shall not apply to:
c. any contribution for medical benefits (within the meaning of Code
Section 419A(f)(2)) after separation from service that is otherwise treated
as an annual addition, or
d. any amount otherwise treated as an annual addition under Code Section
415(1)(1).
If, as of the last day of the Plan Year, a Participant's annual additions would
exceed the amount provided for in this Section as a result of a reasonable error
in estimating the Participant's Compensation or under other limited facts and
circumstances that the Commissioner of the Internal Revenue Service determines
to be appropriate, the excess amount shall be computed and administered in
accordance with the following procedures:
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 15
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a. the excess shall be refunded to the Participant from the Participant's
Salary Reduction Contribution Account adjusted for earnings and losses
thereon to the extent the excess results from a mistaken application of the
limitations of Section 3.01a,
b. next, the excess shall be refunded to the Participant from the
Participant's Employee Contribution Account adjusted for earnings and
losses thereon,
c. next, the excess shall be forfeited from the Participant's Employer
Matching Contribution Account adjusted for earnings and losses thereon and
the total amount of such forfeitures for all Participants shall be held in
a suspense account the balance of which shall be used to offset the amount
of additional Employer Matching Contributions, and
d. finally, any remaining excess shall be refunded to the Participant
from the Participant's Salary Reduction Contribution Account adjusted for
earnings and losses thereon.
4.08 SPECIAL RULES.
a. PARTICIPATION IN ANOTHER DEFINED CONTRIBUTION PLAN. The limitations
in Section 4.07 with respect to any Participant who at any time has
participated in any other tax-qualified defined contribution plan
maintained by an Employer shall apply as if the total contributions
allocated under all such defined contribution plans in which the
Participant has participated were allocated under one plan.
b. PARTICIPATION IN ANOTHER DEFINED BENEFIT PLAN. If a Participant has
at any time been a participant in a tax-qualified defined benefit plan
maintained by an Employer, the sum of the Participant's Defined Benefit
Plan Fraction and Defined Contribution Plan Fraction (as those terms are
defined below) for any year shall not exceed one. In the event the sum of
the Defined Benefit Plan Fraction and Defined Contribution Plan Fraction
would otherwise exceed one for any Plan Year, the projected annual
retirement income benefit under an Employer sponsored defined benefit plan
shall be limited to the extent necessary to reduce the Defined Benefit Plan
Fraction so that the sum of the two fractions does not exceed one.
1. The "DEFINED BENEFIT PLAN FRACTION" for any Limitation Year is a
fraction the numerator of which is the Participant's projected annual
retirement income benefit under all defined benefit plans maintained
by the Employers determined as of the end of the Limitation Year and
the denominator of which is the lesser of:
A. the product of 1.25 multiplied by $90,000 adjusted by the
Adjustment Factor, and
B. the product of 1.4 multiplied by 100% of the Participant's
average annual Compensation for the three consecutive calendar
years during which the Participant's Compensation was the
highest.
2. The "DEFINED CONTRIBUTION PLAN FRACTION" for any Limitation Year
is a fraction the numerator of which is the sum of the annual
additions to the accounts of the Participant in all defined
contribution plans maintained by the Employer as of the end of the
Limitation Year for that Limitation Year and all preceding Limitation
Years and the denominator of which is the sum of the lesser of the
amounts below determined for such Limitation Year and for each prior
Limitation Year of service with the Employer:
A. the product of 1.25 multiplied by $30,000 adjusted by the
Adjustment Factor, and
B. the product of 1.4 multiplied by 25% of the Participant's
Compensation for such Limitation Year.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 16
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c. ADJUSTMENT OF LIMITATION FOR YEARS OF SERVICE OR PARTICIPATION.
1. In the case of a Participant who has completed less than ten
years of participation in the Plan, the limitation set forth in
Section 4.08b1A above shall be adjusted by multiplying such amount by
a fraction the numerator of which is the Participant's number of years
(or part thereof) of participation in the Plan and the denominator of
which is ten.
2. If a Participant has completed less than ten years of service
with the Employers, the limitation set forth in Section 4.08b1B shall
be adjusted by multiplying such amount by a fraction the numerator of
which is the Participant's number of years of service (or part
thereof) and the denominator of which is ten.
d. Notwithstanding any Plan provision to the contrary, Sections 4.07,
4.08 and 4.09 shall be construed in a manner that is consistent with Code
Section 415 and the Treasury Regulations and other rulings promulgated
thereunder, all of which to the extent necessary are incorporated by this
reference and made a part of the Plan.
4.09 DEFINITIONS. As used in Sections 4.07 and 4.08, the term "ANNUAL ADDITION"
shall mean the amount allocated to a Participant's Account during the Limitation
Year attributable to:
a. Salary Reduction Contributions,
b. Employer Matching Contributions,
c. Employee Contributions,
d. allocated forfeitures, and
e. amounts described in Code Sections 415(1)(1) and 419A(d)(2).
4.10 REVERSION OF EMPLOYER MATCHING CONTRIBUTIONS. Except as provided in this
Section 4.10 and in Section 15.03, Plan assets shall never be returned to the
Employers.
a. In the case of an Employer Matching Contribution that is made as a
result of a mistake of fact, such contribution may be returned to the
Employer within one year after the payment of the contribution.
b. If an Employer Matching Contribution is conditioned upon initial
qualification of the Plan under Code Section 401(a) and if the Plan
receives an adverse determination with respect to its initial
qualification, then such contribution may be returned to the Employers
within one year after such determination if application for determination
is made by the time prescribed by law for filing the Company's Federal tax
return for the taxable year in which the Plan was adopted or such later
date as the Secretary of the Treasury may prescribe.
c. In the case of an Employer Matching Contribution that is determined to
be not deductible under Code Section 404, then such contribution shall be
returned to the Employers within one year after such disallowance of the
deduction.
With respect to Sections 4.10a and 4.10c, investment earnings attributable to
such returned amounts shall not be returned to the Employers, and investment
losses attributable to such returned amounts shall reduce the amount eligible to
be returned.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 17
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ARTICLE 5
PARTICIPANT ACCOUNTS
5.01 SEPARATE SUBACCOUNTS. The Administration Committee shall maintain or cause
to be maintained a separate Account for each Participant that shall consist of
the Participant's Salary Reduction Contribution Account, Employer Matching
Contribution Account, Employee Contribution Account, Rollover Contribution
Account and Prior Plan Account.
5.02 VALUATION OF TRUST FUND. The fair market value of all assets comprising
the Trust Fund shall be determined as of each Valuation Date in accordance with
procedures approved by the Administration Committee.
5.03 STATEMENTS. From time to time the Administration Committee shall cause to
be furnished to each Participant and Beneficiary of deceased Participants a
statement showing the value of such persons' Accounts.
ARTICLE 6
INVESTMENTS
6.01 TRUST FUND. All Plan contributions shall be paid into the Trust Fund. All
such amounts shall be held and disbursed in accordance with the provisions of
the Plan and Trust Agreement. No person shall have any interest in or right to
any part of the Trust Fund except as expressly provided in the Plan or Trust
Agreement.
6.02 AUTHORIZED INVESTMENTS AND INVESTMENT CONTROL. The Investment Committee
and Trustee shall be subject to the following requirements in connection with
the management and investment of Plan assets. Participants and Beneficiaries
shall direct the Trustee with respect to the investment of their Account
Balances. Such investments shall be made among various investment fund
alternatives that represent varying degrees of risk and potential investment
return. The Investment Committee shall be responsible for the selection and
retention of the various investment funds available in the Trust. The
Investment Committee may add to or replace any investment fund at any time and
for any reason; provided that the Administration Committee shall provide
reasonable advance notice to affected Participants and Beneficiaries of the
addition or discontinuation of a specific investment fund. The Investment
Committee reserves the right to terminate all investment funds and invest all
assets of the Trust Fund for the general benefit of Participants and
Beneficiaries.
If a Participant or Beneficiary does not indicate such person's investment fund
election, then the Administration Committee shall cause the amounts held in such
Participant's or Beneficiary's Account to be invested in the currently available
intermediate investment fund available in the Trust until such time as the
Participant's or Beneficiary's instructions are made in accordance with
procedures established by the Administration Committee. The Administration
Committee shall establish such rules as it deems necessary or appropriate
respecting investment elections.
One of the investment fund alternatives shall be a fund designed to invest
primarily in the common stock of the Company. The Company common stock to be
held by the Trustee may be contributed or sold to the Plan by the Company or may
be acquired on the market. The acquisition, investment and holding of Plan
assets in the Company common stock investment fund is expressly authorized by
the Plan and shall not be subject to any other limitations or restrictions to
the fullest extent permitted by ERISA.
Participants may allocate their Account Balance among the investment funds
available under the Plan in whole percentages of not less than one percent.
Participant may change their investment fund allocations on a daily basis, but
not more frequently than one time per day.
6.03 ASSUMPTION OF RISK BY PARTICIPANTS. Each Participant and Beneficiary
assumes the investment risk in connection with the investment of such person's
Account Balance, and neither the Company, any Employer, any Administration
Committee member, any Investment Committee member nor the Trustees shall have
any liability to any person with respect to any such investment allocation
decision.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 18
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6.04 GENERAL PROVISIONS REGARDING INVESTMENT DIRECTION. Participant investment
directions are subject to the following provisions:
a. The Administration Committee shall be responsible for providing
information to and responding to requests from Participants concerning
investment directions.
b. The Administration Committee shall provide Participants with the
information listed below which may be contained in the Plan's summary plan
description or in other Plan related materials:
1. an explanation that the Plan is intended to constitute a plan
described in ERISA Section 404(c) and the Department of Labor
regulations promulgated thereunder,
2. a statement that the Plan fiduciaries may be relieved of
liability for any losses that are the direct and necessary result of
investment directions given by Participants or Beneficiaries,
3. a description of the investment funds available under the Trust
and with respect to each designated investment fund a general
description of the investment objective including information relating
to the type and diversification of assets comprising the portfolio of
the designated investment fund,
4. an explanation of the circumstances under which Participants and
Beneficiaries may give investment directions and an explanation of any
specific Plan limitations on such directions including any
restrictions on transfers to or from a designated investment fund,
5. a description of any transaction fees and expenses that affect
the Participant's or Beneficiary's Account Balance in connection with
purchases or sales of interests in the investment funds (for example,
commissions, sales loads, deferred sales charges and redemption or
exchanges fees), and
6. in the case of an investment fund that is subject to the
Securities Act of 1933 and in which the Participant or Beneficiary has
no assets invested immediately after the Participant's or
Beneficiary's initial investment a copy of the most recent prospectus
provided to the Plan.
c. The Administration Committee shall provide the information listed
below upon request by a Participant or Beneficiary:
1. a description of the annual operating expenses of each designated
investment fund (for example, investment management fees,
administrative fees and transaction costs) that reduce the rate of
return to Participants and Beneficiaries and the aggregate amount of
such expenses expressed as a percentage of average net assets of the
designated investment fund,
2. copies of any prospectuses, financial statements, reports and of
any other materials relating to the investment funds available under
the Trust to the extent such information is provided to the Plan,
3. information concerning the value of shares or units in the
designated investment funds in the Trust as well as the past and
current investment performance of such alternatives determined net of
expenses on a reasonable and consistent basis, and
4. information concerning the value of shares or units in the
designated investment funds in which the Accounts of Participants and
Beneficiaries are invested.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 19
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ARTICLE 7
DEATH BENEFITS AND BENEFICIARY DESIGNATIONS
7.01 DISTRIBUTION DUE TO DEATH. If a Participant dies while employed under the
Plan, all amounts in such deceased Participant's Account shall be fully vested.
In such case, the deceased Participant's Account Balance, determined as soon as
administratively feasible after the Participant's death, shall be paid in a lump
sum in cash, in kind, or part in cash and part in kind to the deceased
Participant's Beneficiary.
7.02 BENEFICIARY DESIGNATION.
a. Each Participant may designate one or more persons as Beneficiary of
the Participant's Account not otherwise to be distributed to the
Participant's surviving spouse in the event of the Participant's death. If
more than one Beneficiary is designated, the Participant may specify the
sequence and/or proportion in which distributions shall be made to each
Beneficiary. The designation shall be made on a form acceptable to the
Administration Committee and shall become effective when filed with the
Administration Committee. Each Participant may change the Beneficiary
designation from time to time by filing a new designation form with the
Administration Committee. Prior to the death of the Participant, no
designated Beneficiary shall have any interest in any amounts held in the
Participant's Account. Participants may not designate the Company, any
Employer or a Plan fiduciary in their respective capacities as such as
Beneficiary.
b. If a married Participant designates a person other than or in addition
to the Participant's spouse as Beneficiary, then such designation shall not
be effective unless the Participant's spouse executes a written consent to
such designation. The consent of the spouse must be in writing, must
acknowledge the effect of the consent, must acknowledge the designation of
a specific Beneficiary and must be witnessed by a notary public or, if
permitted by the Administration Committee, a Plan representative.
Notwithstanding the spousal consent requirement, such consent shall not be
required if it is established to the satisfaction of the Administration
Committee that the consent cannot be obtained because there is no spouse,
the spouse cannot be located or such other circumstances as may be
prescribed by applicable Treasury Regulations. Any consent under this
Section 7.02b shall be valid only with respect to the spouse who signs the
consent. A designation made by a Participant and consented to by the
Participant's spouse may be revoked by the Participant in writing without
the consent of the spouse anytime prior to the commencement of
distributions from the Participant's Account. Any new designation of a
nonspousal Beneficiary must comply with the requirements of this Section
7.02b.
c. If a married Participant designates a person other than or in addition
to the married Participant's spouse as Beneficiary and does not obtain the
spousal consent to such designation as required by Section 7.02b, then all
of the Participant's remaining Account Balance shall be paid to the
Participant's surviving spouse in the event of the Participant's death.
d. If no designated Beneficiary exists upon the death of a Participant,
then the deceased Participant's Account Balance shall be paid to the
deceased Participant's estate. If, however, a married Participant fails to
designate a Beneficiary, the deceased Participant's surviving spouse shall
be the Beneficiary of the deceased Participant's entire Account Balance.
e. If any doubt exists as to the right of any person to receive any
distribution from the Plan with respect to a deceased Participant, the
Trustee on instructions from the Administration Committee may retain the
deceased Participant's entire Account Balance until the rights thereto are
determined or the Administration Committee may direct the Trustee to pay
such Account Balance into any court of competent jurisdiction. In either
of such events, neither the Company, any of the Employers, nor any Plan
fiduciary shall have any obligations to any claimant of the deceased
Participant's Account Balance.
f. The Administration Committee may adopt such rules and develop such
forms and other procedures as it determines are necessary or appropriate
for the administration of the Plan's Beneficiary designation provisions.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 20
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g. A Participant's Beneficiary designation shall be void in the event of
the Participant's marriage, and the newly married Participant must comply
with the foregoing provisions to designate a Beneficiary other than the
Participant's spouse.
ARTICLE 8
VESTING AND TERMINATION OF EMPLOYMENT
8.01 VESTING IN SALARY REDUCTION, EMPLOYEE AND ROLLOVER CONTRIBUTIONS. Each
Participant's Salary Reduction Contribution Account, Employee Contribution
Account and Rollover Contribution Account shall be fully vested at all times.
8.02 VESTING IN EMPLOYER MATCHING CONTRIBUTIONS. A Participant whose employment
under the Plan is terminated prior to the Participant's Normal Retirement Date
for any reason other than death shall have a vested interest in the
Participant's Employer Matching Contribution Account and any earnings or losses
attributable thereto determined as follows:
YEARS OF VESTING SERVICE PERCENTAGE VESTED
------------------------ -----------------
less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
Notwithstanding the foregoing, Participants employed by an Employer before May
1, 1992, shall have a fully vested interest upon the completion of five Years of
Vesting Service rather than six Years of Vesting Service. For all such
Participants, vesting for service of less than five years shall be in accordance
with the foregoing vesting schedule.
8.03 FORFEITURES.
a. If a Participant terminates employment under the Plan and the value of
the Participant's vested Account Balance derived from Employer Matching
Contributions and Employee Contributions is not greater than $3,500, the
Participant shall receive a distribution of the value of the entire vested
Account Balance and the nonvested portion shall be treated immediately as a
forfeiture. For purposes of this Section 8.03a, if the value of a
Participant's vested Account Balance is zero, the Participant shall be
deemed to have received a distribution of such vested Account Balance at
the time of such termination of employment.
b. If a Participant terminates employment under the Plan and elects in
accordance with the requirements of Section 9.02 to receive a distribution
of the value of the Participant's vested Account Balance, the nonvested
portion shall be treated immediately as a forfeiture. A Participant may
not elect to take less than the entire portion of such Participant's vested
Account Balance as a distribution from the Plan.
c. If a Participant receives or is deemed to receive a distribution
pursuant to this Section and the Participant resumes employment covered
under the Plan, the Participant's previously forfeited Account Balance
shall be restored to the amount on the date of distribution if the
Participant is reemployed before the date the Participant incurs five
consecutive One-Year Breaks in Service following the date of the
distribution. A reemployed Participant shall have no obligation to repay a
previous distribution from the Plan as a condition to restoration of his
previously forfeited Account Balance.
d. If a Participant does not receive or is not deemed to receive a
distribution pursuant to this Section and the Participant does not resume
covered employment under the Plan, the nonvested portion of the
Participant's Account Balance shall become a permanent forfeiture after the
Participant incurs five consecutive One-Year Breaks in Service.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 21
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e. Forfeitures arising under the Plan shall be used to reduce future
Employer Matching Contributions under the Plan.
8.04 DISTRIBUTION OF VESTED BENEFITS. Benefits payable in the case of a
Participant whose employment is terminated shall be paid in accordance with
Article 7 in the case of death or Article 9 in the case of a Participant who
retires or otherwise terminates employment under the Plan with a vested Account
Balance.
ARTICLE 9
DISTRIBUTION OF BENEFITS
9.01 NORMAL FORM OF BENEFIT. Subject to the limitations of Article 8, all Plan
distributions shall be paid in a single sum in cash, in kind or part in cash and
part in kind in an amount equal to the value of the Participant's vested Account
Balance determined at the time of the distribution.
9.02 TIME OF DISTRIBUTION. Distribution of a Participant's vested Account
Balance shall be made in accordance with the following provisions:
a. If a Participant's vested Account Balance is greater than $3,500, but
the Participant and the Participant's spouse do not consent to an immediate
distribution, the Participant's Account Balance shall be retained until:
1. distributed as soon as administratively feasible after the
earlier of the Participant's request for distribution after the
Participant's Normal Retirement Date or the date the Participant and
the Participant's spouse consent to an immediate distribution, or
2. distributed pursuant to Section 9.02c prior to the Participant's
Normal Retirement Date after a written request by the Participant and
consent of the Participant's spouse if necessary.
b. If on termination of a Participant's employment under the Plan the
value of the Participant's vested Account Balance is not greater than
$3,500, the entire Account Balance may be distributed as soon as
administratively feasible to the Participant in a single sum distribution.
c. If on termination of a Participant's employment under the Plan the
value of the Participant's vested Account Balance is greater than $3,500,
then the Participant may elect to receive the Participant's Account Balance
in substantially equal monthly installments payable on the first day of
each month over a period of 60, 120 or 180 consecutive months in lieu of a
single sum distribution. Any such election must be in a manner acceptable
to the Administration Committee. In no event, however, shall the period of
distribution exceed the Participant's life expectancy. If the Participant
dies after the distribution commencement date but before the number of
certain payments has been made, the monthly payments shall continue to be
made to the deceased Participant's Beneficiary until the total number of
payments has been made unless the deceased Participant's Beneficiary elects
in accordance with the provisions of Article 7 to receive the remaining
Account Balance in a single sum distribution.
If a distribution is made in installments, the Participant's undistributed
Account Balance shall be held in the Trust until the last installment is paid.
The aggregate of such installment payments of such Participant may be more or
less than the value of the Participant's Account Balance at the Participant's
retirement or death depending on the investment performance of, and expenses
allocated to, the Trust Fund during the period over which such installments are
paid from the Trust Fund.
9.03 INVESTMENT OF ACCOUNT BALANCE OF TERMINATED PARTICIPANT. In the event a
Participant's employment under the Plan is terminated and the Participant does
not consent to an immediate distribution of the Participant's Account Balance,
such Account Balance shall continue to be invested as if the terminated
Participant's employment under the Plan continued.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 22
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9.04 LATEST DISTRIBUTION DATE. Nothing in the Plan shall be construed to permit
distribution of a Participant's Account Balance to begin later than the 60th day
after the close of the Plan Year in which occurs (a) the date on which the
Participant reaches the Normal Retirement Date, (b) the tenth anniversary of the
year in which the Participant commenced Plan participation, or (c) the date the
Participant terminates employment under the Plan, whichever is latest.
9.05 MANDATED COMMENCEMENT OF BENEFITS. Notwithstanding any Plan provision to
the contrary, distribution of a Participant's Account Balance shall commence not
later than April 1 of the calendar year after the calendar year in which the
Participant attains age 70-1/2, and Plan distributions shall be made in
accordance with Code Section 401(a)(9) and the Treasury Regulations and other
rulings promulgated thereunder, all of which to the extent necessary are
incorporated by this reference and made a part of the Plan.
9.06 DIRECT ROLLOVERS. A distributee may elect at the time and in the manner
prescribed by the Administration Committee to have any portion of an eligible
rollover distribution paid directly to an eligible retirement plan specified by
the distributee in a direct rollover.
a. The term "ELIGIBLE ROLLOVER DISTRIBUTION" shall mean any distribution
of all or any portion of the balance to the credit of the distributee
except that an eligible rollover distribution shall not include any
distribution that is one of a series of substantially equal periodic
payments not less frequently than annually made for the life or life
expectancy of the distributee or the joint lives or joint life expectancies
of the distributee and the distributee's designated beneficiary or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under Code Section 401(a)(9); or the portion of
any distribution that is not includible in gross income determined without
regard to the exclusion for net unrealized appreciation with respect to
employer securities.
b. The term "ELIGIBLE RETIREMENT PLAN" shall mean an individual
retirement account described in Code Section 408(a), an individual
retirement annuity described in Code Section 408(b), an annuity plan
described in Code Section 403(a) or an exempt trust described in Code
Section 401(a) that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to
the Participant's surviving spouse, the term "ELIGIBLE RETIREMENT PLAN"
shall mean an individual retirement account or individual retirement
annuity.
c. The term "DISTRIBUTEE" shall include an Employee or former Employee.
In addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the
Alternate Payee under a Qualified Domestic Relations Order (as defined in
Section 21.02) are distributees with regard to the interest of the spouse
or former spouse.
d. The term "DIRECT ROLLOVER" shall mean a payment by the Plan to the
eligible retirement plan specified by the distributee.
9.07 WAIVER OF 30 DAY NOTICE. If a distribution is one to which Code Sections
401(a)(11) and 417 do not apply, such distribution may commence less than 30
days after the notice required under Treasury Regulation Section 1.411(a)-11(c)
is given provided that:
a. the Administration Committee clearly informs the Participant that the
Participant has a right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect a distribution
and the available distribution options, and
b. the Participant after receiving the notice affirmatively elects to
receive a distribution and waives the remainder of the 30 day period.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 23
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ARTICLE 10
WITHDRAWALS WHILE EMPLOYED
10.01 WITHDRAWALS. A Participant may withdraw all or any part of the funds in
the Participant's Salary Reduction Contribution Account, Employee Contribution
Account and Rollover Contribution Account. Notwithstanding the foregoing,
withdrawals from a Participant's Salary Reduction Contribution Account shall be
subject to the requirements of Section 10.02. Except as provided in Section
10.03, a Participant may not receive any withdrawal from the Participant's
Employer Matching Contribution Account or Prior Plan Account. Participants may
apply for withdrawals by following procedures approved by the Administration
Committee for that purpose. The minimum withdrawal amount under this Article 10
is $500 or such other amount as may be approved by the Administration Committee
in accordance with uniform and nondiscriminatory standards.
10.02 HARDSHIP WITHDRAWALS. A Participant may withdraw all or any part of the
funds exclusive of earnings thereon in the Participant's Salary Reduction
Contribution Account only on account of a hardship. A withdrawal shall be on
account of hardship only if the withdrawal:
a. is made on account of an immediate and heavy financial need of the
Participant limited to:
1. medical expenses (as described in Code Section 213(d)) incurred
by the Participant, the Participant's spouse or any dependent of the
Participant,
2. purchase excluding mortgage payments of a principal residence
for the Participant,
3. payment of tuition for the next 12 months of post-secondary
education for the Participant or the Participant's spouse, children
or dependents,
4. the need to prevent eviction of the Participant from the
Participant's principal residence or foreclosure on the mortgage of
the Participant's principal residence, or
5. such other immediate and heavy financial needs as determined by
the Commissioner of the Internal Revenue Service and announced by
publication of revenue rulings, notices and other documents of
general applicability,
b. is necessary to satisfy such immediate and heavy financial need and
does not exceed the amount required to relieve such need and is not
reasonably available from other resources of the Participant. A
withdrawal will be necessary to satisfy the immediate and heavy financial
need of the Participant if the Administration Committee reasonably relies
upon the Participant's representation that the need cannot be relieved:
1. through reimbursement or compensation by insurance or
otherwise,
2. by reasonable liquidation of the Participant's assets to the
extent such liquidation would not itself cause an immediate and
heavy financial need,
3. by cessation of Salary Reduction Contributions, or
4. by other distributions or nontaxable (determined at the time of
the loan) loans from plans maintained by the Employers or by any
other employer or by borrowing from commercial sources on reasonable
commercial terms.
The Participant's resources shall be deemed to include those assets of
the Participant's spouse and minor children that are reasonably available
to the Participant.
The Administration Committee may require the submission of such evidence as it
may reasonably deem necessary to confirm the existence of such a hardship. An
application for a hardship withdrawal shall be acted upon by the
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 24
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Administration Committee as soon as administratively feasible after the date
the Participant's application is made in the manner prescribed by the
Administration Committee. If the Administration Committee approves the
Participant's application, the withdrawal shall be paid as soon as
administratively feasible thereafter from the Participant's Salary Reduction
Contribution Account; provided, that under no circumstance shall earnings on
the Participant's Salary Reduction Contributions be withdrawn at any time.
If the Administration Committee denies the Participant's application, the
Administration Committee shall promptly notify the Participant of the reason
for the denial.
10.03 IN-SERVICE WITHDRAWALS FOR FORMER LEEWARDS PLAN PARTICIPANTS. This
Section 10.03 applies only to Participants who were participants in the Leewards
Profit Sharing and 401(k) Plan (the "LEEWARDS PLAN") as of December 31, 1994,
and whose account balances attributable to elective deferrals (as defined in
Code Section 402(g)(3)) were transferred to the Plan and as of the date of any
application under this Section 10.03 continue to be held in the Trust. The term
"TRANSFERRED BALANCE" shall mean the Participant's balance in the Leewards Plan
as of December 31, 1994, adjusted for earnings and losses on such amount in
accordance with the Plan after December 31, 1994. With respect to any such
transferred balance, a Participant who has attained age 59-1/2 may apply for a
withdrawal of all or a part of such transferred balance without regard to the
Participant's continued employment under the Plan and without regard to the
existence or not of a hardship as defined in Section 10.02 above. An
application for withdrawal shall be acted upon by the Administration Committee
as soon as administratively feasible after the date the Participant's
application is filed in the manner prescribed by the Administration Committee.
If the Administration Committee approves the Participant's application, the
withdrawal shall be paid as soon as administratively feasible thereafter. If
the Administration Committee denies the Participant's application, the
Administration Committee shall promptly notify the Participant of the reason for
the denial.
ARTICLE 11
LOANS
11.01 OVERALL LIMITATIONS. The Trustee may make loans from the Trust Fund to
any Participant who is an Eligible Employee at the time such loan is made. Each
loan shall be made upon application of the Participant in a manner prescribed by
the Administration Committee. A Participant shall not be allowed to have more
than two outstanding loan at any time. A Participant who is not accruing Hours
of Service shall not be permitted to obtain a Plan loan.
No loan shall be granted to the extent it would cause the aggregate balance of
all loans that a Participant has outstanding from the Plan and from any other
tax-qualified plan maintained by the Employers (an "OTHER PLAN") to exceed an
amount equal to the lesser of:
a. $50,000 reduced by the excess if any of:
1. the highest outstanding balance of all loans from the Plan and
all Other Plans during the one year period ending on the Loan
Determination Date, over
2. the outstanding balance of all loans from the Plan and all
Other Plans on the date the loan is made, or
b. one-half of the Participant's vested Account Balance.
The "LOAN DETERMINATION DATE" for purposes of determining a Participant's
maximum loan hereunder and the outstanding balance of any loan shall be the date
on which the Participant's loan application is made. A Participant must consent
to the repayment of any outstanding loan balance from the Participant's Account
Balance in the event of a default as determined in accordance with Section 11.05
at the time when the Participant is first eligible to receive a distribution of
the Participant's Account Balance.
11.02 TERMS OF LOAN. All loans shall be on such terms and conditions as the
Administration Committee may determine provided that all loans shall:
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 25
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a. be made pursuant to a promissory note that is subject to default
rules that are not inconsistent with those described in Section 11.05
and that is secured by the Participant's Account Balance as provided by
ERISA,
b. be amortized on a substantially level basis with payments to be
made from payroll deductions except as otherwise permitted by the
Administration Committee,
c. bear a reasonable rate of interest that may be a fluctuating rate
that shall be based on the prime rate,
d. be adequately secured by a pledge of not more than fifty percent of
the Participant's vested account balance; provided that consent of the
Participant's spouse is not required as a condition to such pledge,
e. provide for repayment in full on or before the earlier of five years
after the date on which the loan is made (ten years after the date the
loan is made if the loan if the loan proceeds will be used to acquire a
dwelling that within a reasonable period of time is to be used as the
principal residence of the Participant) or the date of distribution of
the Participant's Account Balance,
f. be due in full within 30 days following the Participant's
termination of employment, and
g. be in an amount not less than $1,000 or such other amount determined
from time to time by the Administration Committee.
11.03 SOURCE OF LOANS. A loan account shall be established for each
Participant who receives a Plan loan. The Administration Committee shall
develop such rules as may be necessary to govern the transfer from the
Participant's Account to the Participant's loan account.
11.04 WITHHOLDING AND APPLICATION OF LOAN PAYMENTS. Principal and interest
payments shall be made through periodic payroll deduction. Principal and
interest payments first shall be credited to the Participant's loan account and
any loss caused by nonpayment of such loan shall be borne solely by such
Participant's loan account and shall then be transferred to the Participant's
Account in the ratio in which such Account provided funding for the original
loan proceeds to be invested in accordance with the Participant's investment
instructions in effect at the time of such repayment.
11.05 DEFAULT. A Participant's promissory note shall be considered in default
in the event the Participant terminates Plan participation, a payment is not
made when due, the Participant files for relief under the United States
Bankruptcy Code or the Plan is terminated. In the event a default occurs and is
not cured within any grace period set forth in the promissory note or otherwise
allowed by the Administration Committee, the full amount due under the
promissory note shall become immediately due and payable. In such event, the
Administration Committee may instruct the Trustee to take such actions as the
Administration Committee deems necessary or appropriate to protect the Plan,
including without limitation repayment of the promissory note by offset against
any distribution or withdrawal to which the Participant is or may become
entitled to receive from the Plan. Until a Participant's promissory note is
repaid in fact or by offset, the balance of such promissory note shall be
included in the Participant's Account Balance regardless of the Federal income
tax requirements otherwise applicable under Code Section 72(p).
ARTICLE 12
PLAN FIDUCIARIES
12.01 FIDUCIARIES. The Plan's named fiduciaries are as follows:
a. the Company,
b. the Administration Committee,
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 26
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c. the Investment Committee,
d. the Trustee and
e. such other persons that are designated to carry out Plan fiduciary
responsibilities in accordance with Section 12.03b.
Any person may serve in more than one fiduciary capacity with respect to the
Plan. A fiduciary may employ one or more persons to render advice with regard
to any responsibility such fiduciary has under the Plan.
12.02 ALLOCATION OF RESPONSIBILITIES. The powers and responsibilities of the
Plan fiduciaries are allocated in the following manner:
a. COMPANY. The Company shall be responsible for all functions
assigned or reserved to it in the Plan and Trust Agreement. Any
authority assigned or reserved to the Company in the Plan and Trust
Agreement shall be exercised by the Board.
b. ADMINISTRATION COMMITTEE. The Administration Committee shall have
the responsibility and authority to control the operation and
administration of the Plan in accordance with the terms of the Plan and
Trust except with respect to duties and responsibilities specifically
allocated to other fiduciaries. The Administration Committee shall have
the authority to issue directions to the Trustee to the extent provided
in the Trust Agreement. The Trustee shall follow the Administration
Committee's directions unless the actions to be taken in furtherance of
such directions would violate ERISA fiduciary standards or would be
contrary to the terms of the Plan or Trust Agreement.
c. INVESTMENT COMMITTEE. The Investment Committee shall have the
responsibility and authority to control the investment of the Trust Fund
in accordance with the terms of the Plan and Trust except with respect
to duties and responsibilities specifically allocated to other Plan
fiduciaries or to Participants and Beneficiaries. The Investment
Committee shall have the authority to issue directions to the Trustee to
the extent provided in the Trust Agreement. The Trustee shall follow the
Investment Committee's directions unless the actions to be taken in
furtherance of such directions would violate ERISA fiduciary standards or
would be contrary to the terms of the Plan or Trust Agreement.
d. TRUSTEE. The Trustee shall have the duty and responsibility
provided in the Trust Agreement subject to direction by the
Administration Committee or Investment Committees as also provided in
the Trust Agreement.
Powers and responsibilities of Plan fiduciaries may be allocated to other Plan
fiduciaries in accordance with Section 12.03 or as otherwise provided in the
Plan or Trust Agreement. Article 12 allocates to each named fiduciary the
responsibility for the prudent execution of the functions assigned to it, and
none of such responsibilities or any other responsibility shall be shared by
more than one of such named fiduciaries unless such sharing shall be provided by
a specified provision of the Plan or Trust Agreement.
12.03 PROCEDURES FOR DELEGATION AND ALLOCATION OF RESPONSIBILITIES. Fiduciary
responsibilities may be allocated as follows:
a. The Administration Committee and/or the Investment Committee may
specifically allocate responsibilities to a specified member of each
such committee.
b. The Administration Committee and/or the Investment Committee may
designate a person other than a fiduciary to carry out Plan fiduciary
responsibilities; provided that such authority shall not cause any person
employed to perform ministerial acts and services for the Plan to be
deemed a Plan fiduciary.
c. The Administration Committee or the Investment Committee may appoint
an investment manager to manage the Plan's assets or a portion thereof.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 27
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d. If at any time there are multiple Trustees serving under the Trust
Agreement, such Trustees may allocate specific responsibilities,
obligations or duties among themselves in such manner as they shall
agree.
Any allocation of responsibilities shall be made by filing a notice thereof with
such committee or the Trustee (as applicable) specifically designating the
person to whom such responsibilities or duties are allocated and specifically
setting out the particular duties and responsibilities with respect to which the
allocation or designation is made.
12.04 GENERAL FIDUCIARY STANDARDS. Subject to Section 12.05 hereof, a Plan
fiduciary shall discharge such person's Plan duties solely in the interest of
Participants and Beneficiaries and
a. for the exclusive purpose of providing benefits to Participants and
Beneficiaries and defraying reasonable expenses of Plan administration,
b. with the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent man acting in a like capacity and familiar
with such matters would use in the conduct of an enterprise of a like
character and with like aims,
c. by diversifying the Plan's investments so as to minimize the risk of
large losses unless under the circumstances it would be clearly prudent
not to do so, and
d. in accordance with the documents and instruments governing the Plan
insofar as such documents and instruments are consistent with the
provisions of Title I of ERISA.
12.05 LIABILITY AMONG CO-FIDUCIARIES.
a. GENERAL. Except for any liability that a person may have under
ERISA, a Plan fiduciary shall not be liable for the breach of a fiduciary
duty by another Plan fiduciary except in the following circumstances:
1. the Plan fiduciary participates knowingly in or knowingly
undertakes to conceal an act or omission of such other Plan
fiduciary knowing such act or omission is a breach,
2. by the Plan fiduciary's failure to comply with the general
fiduciary standards set out in Section 12.04 in the administration
of such fiduciary's specific responsibilities that give rise to such
person's status as a Plan fiduciary, the Plan fiduciary has enabled
such other fiduciary to commit a breach, or
3. the Plan fiduciary has knowledge of a breach by such other Plan
fiduciary and the Plan fiduciary does not undertake reasonable
efforts under the circumstances to remedy the breach.
b. CO-TRUSTEES. In the event that there are multiple co-Trustees
serving under the Trust Agreement, each co-Trustee shall use reasonable
care to prevent a co-Trustee from committing a breach of fiduciary
responsibility, and all co-Trustees shall jointly manage and control
Plan assets, except that in the event of an allocation of
responsibilities, obligations or duties, a co-Trustee to whom such
responsibilities, obligations or duties have not been allocated shall
not be liable to any person by reason of this Section 12.05, either
individually or as a co-Trustee, for any loss resulting to the Plan
arising from the acts or omissions on the part of the co-Trustee to whom
such responsibilities, obligations or duties have been allocated.
c. LIABILITY WHERE ALLOCATION IS IN EFFECT. To the extent that
fiduciary responsibilities are specifically allocated by a fiduciary or
pursuant to the express terms of the Plan to any person, then such Plan
fiduciary shall not be liable for any act or omission of such person in
carrying out such responsibility except to the extent that the Plan
fiduciary violated Section 12.04:
1. with respect to such allocation or designation,
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 28
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2. with respect to the establishment or implementation of the
procedure for making such an allocation or designation,
3. in continuing the allocation or designation, or
4. the Plan fiduciary would otherwise be liable in accordance with
this Section 12.05.
d. LIABILITY OF TRUSTEE FOLLOWING COMMITTEE DIRECTIONS. No Trustee shall
be liable for following directions of the Administration Committee given
pursuant to Section 12.02b and the Investment Committee given pursuant to
Section 12.02c.
e. NO RESPONSIBILITY FOR EMPLOYER ACTION. Neither the Trustee,
Administration Committee nor Investment Committee shall have any obligation
or responsibility with respect to any act or omission of the Employers or
any other person; neither the Trustee, Administration Committee nor
Investment Committee shall have any obligation or responsibility with
respect to the collection of any contributions required by the Plan or with
respect to the determination of the correctness of the amount of any
Employer contribution.
f. NO DUTY TO INQUIRE. Neither the Trustee, the Administration Committee
nor the Investment Committee shall have any obligation to inquire into or
be responsible for any act or failure to act on the part of the others.
g. LIABILITY WHERE INVESTMENT MANAGER APPOINTED. If an investment
manager has been appointed pursuant to Section 12.03c, then neither the
Trustee nor the Investment Committee shall be liable for the acts or
omissions of such investment manager or be under any obligation to invest
or otherwise manage any Plan assets that are subject to the management of
such investment manager.
h. SUCCESSOR FIDUCIARY. No Plan fiduciary shall be liable with respect
to any breach of an ERISA fiduciary duty if such breach was committed
before such person became a Plan fiduciary or after such person ceased to
be a Plan fiduciary.
ARTICLE 13
COMPANY AND EMPLOYER ADMINISTRATION PROVISIONS
13.01 INFORMATION. The Employers shall upon request or as may be
specifically required in the Plan furnish or cause to be furnished all of the
information or documentation that is necessary or required by the Administration
Committee, Investment Committee and Trustee to perform their respective Plan
duties and functions.
13.02 NO LIABILITY. Neither the Company nor any Employer assumes any
obligation or responsibility to any Employees, Participants or Beneficiaries for
any act of, or failure to act, on the part of the Administration Committee,
Investment Committee or Trustee.
13.03 COMPANY AND EMPLOYER ACTION. Any action required by the Company or
any Employer shall be by resolution of its respective board of directors or by a
person duly authorized to act on behalf of such board of directors.
13.04 INDEMNITY. The Company and each Employer indemnify and hold harmless
the members of their respective boards of directors, non-corporate Plan
Trustees, Administration Committee members and Investment Committee members from
and against any and all loss resulting from liability to which any such persons
may be subjected by reason of any act or conduct except willful or reckless
misconduct in their official capacities in the administration of the Plan or the
Trust or both including all expenses reasonably incurred in their legal defense
in case the Company or the Employers fail to provide such legal defense. The
foregoing indemnification provisions shall not relieve such persons from any
liability that they may incur individually or collectively under ERISA for
breach of a fiduciary duty imposed by ERISA.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 29
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13.05 AMENDMENT TO VESTING SCHEDULE. Although the Company reserves the
right to amend the vesting schedule in Section 8.02 at any time, the Company
shall not amend the vesting schedule and no amendment shall be effective if the
amendment would reduce the vested percentage of any Participant's Account
derived from Employer Matching Contributions determined as of the later of the
date the amendment is adopted or the date the amendment becomes effective to a
percentage less than the vested percentage determined without regard to the
amendment.
In the event the vesting schedule is amended, any Participant who has completed
at least three Years of Vesting Service may elect to have the vesting of such
Participant's Account determined without regard to such amendment by notifying
the Administration Committee in writing during the election period described
below. The election period shall begin on the date such amendment is adopted
and shall end no earlier than the latest of the date that is 60 days after the
date (a) such amendment is adopted; (b) such amendment becomes effective; or (c)
the Participant is given notice of such amendment by the Administration
Committee. Any election made pursuant to the foregoing shall be irrevocable.
The Administration Committee shall forward a copy of any vesting schedule
amendment as soon as administratively feasible to each affected Participant
together with an explanation of the effect of the amendment, the appropriate
form upon which the Participant may make an election to remain under the vesting
schedule provided in the Plan prior to the amendment and notice of the time
within which the Participant must make an election to remain under the prior
vesting schedule.
ARTICLE 14
COMMITTEE ADMINISTRATION PROVISIONS
14.01 APPOINTMENT OF COMMITTEES. The Board shall appoint an Administration
Committee to administer the Plan and an Investment Committee to be responsible
for the investment of Plan assets. The persons selected to serve on such
committees may or may not be Participants.
14.02 TERM. Each committee member shall serve until such person's successor
is appointed by the Board. Any committee member may be removed by the Board
with or without cause, and the Board shall have the power to fill any vacancy
that may occur. A committee member may resign upon notice to the Board. A
committee member who is an Employee shall cease to be a committee member upon
such person's termination of employment under the Plan unless expressly provided
to the contrary in writing at the time of such termination.
14.03 COMPENSATION. The committee members shall serve without compensation
for services as such, but the Employers shall pay all expenses of the committees
including the expenses for any bond required by ERISA. To the extent such
expenses are not paid by the Employers, such expenses shall be paid from the
Trust Fund.
14.04 POWER OF ADMINISTRATION COMMITTEE. The Administration Committee shall
have the powers and duties set out below:
a. to direct all aspects of the administration of the Plan,
b. to adopt rules of procedure and regulations necessary for the
administration of the Plan provided that such rules are not inconsistent
with the Plan's terms,
c. to determine all questions with regard to rights of Employees,
Participants and Beneficiaries including but not limited to rights of
eligibility of an Employee to participate in the Plan, the computation of
the value of a Participant's Account Balance and the computation of the
vesting of a Participant's Account Balance,
d. to enforce the Plan document and the rules and regulations adopted by
the Administration Committee,
e. to direct the Trustee as respects the Trust and all other matters
within its discretion as provided in the Trust Agreement,
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 30
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f. to review and render decisions respecting a claim for or denial of a
claim for any benefit or the exercise of any right in the Plan,
g. to furnish the Employers with information that the Employers may
require for tax or other purposes,
h. to engage the service of legal counsel, who may be legal counsel for
an Employer, and agents that it deems advisable to assist it with the
performance of its duties,
i. to prescribe procedures to be followed by Participants and
Beneficiaries in obtaining benefits,
j. to receive from the Employers and Employees such information as shall
be necessary for the Plan's administration,
k. to receive and review reports of the financial condition and of the
receipts and disbursements of the Trust Fund from the Trustee,
l. to maintain or cause to be maintained separate accounts in the name of
each Participant and Beneficiary to reflect such person's Account Balance,
m. to select a secretary who need not be an Administration Committee
member, and
n. to interpret and construe the Plan and to determine any and all other
questions arising under the Plan.
14.05 POWER OF INVESTMENT COMMITTEE. The Investment Committee shall have
the powers and duties set out below:
a. to direct the Trustee in the investment, reinvestment and disposition
of the Trust Fund as provided in the Trust Agreement, subject, however, to
the right granted in the Plan to each Participant to direct the investment
of such person's Account Balance among the investment funds selected by the
Investment Committee,
b. to make decisions regarding the selection, retention and replacement
of investment funds to be made available to Participants under the Plan,
c. to furnish the Employers with information that the Employers may
require for tax or other purposes,
d. to engage the service of legal counsel, who may be legal counsel for
an Employer, and agents that it deems advisable to assist with the
performance of its duties,
e. to receive and review reports of the financial condition and of the
receipts and disbursements of the Trust Fund from the Trustee,
f. to engage the services of an investment manager who shall have full
power and authority to manage, acquire or dispose (or direct the Trustee
with respect to acquisition or disposition) of any asset under its control,
g. to select a secretary who need not be an Investment Committee member,
h. to adopt such rules as it deems necessary or appropriate to implement
voting with respect to securities held in the Trust, including pass through
voting to Participants if appropriate, and
i. to interpret and construe the Plan and Trust with respect to the
investment, reinvestment and disposition of Plan assets.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 31
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14.06 MANNER OF ACTION. With respect to each committee, the decision of a
majority of the committee members appointed and qualified to serve shall
control. In case of a vacancy in the committee membership, the remaining
members of each respective committee may exercise any and all of the powers,
authorities, duties and rights conferred upon such committee pending the filling
of such vacancy by the Board. The committees may but need not call or hold
formal meetings. Any decisions made or actions taken pursuant to approval of a
majority of the then serving committee members shall be sufficient. Each
committee shall maintain adequate records of its decisions.
14.07 AUTHORIZED REPRESENTATIVE. Each committee may authorize any one of
its members or its secretary to sign on its behalf any notices, directions,
applications, certificates, consents, approvals, waivers, letters or other
documents. Each committee must evidence such authority by an instrument signed
by all its respective members and filed with the Trustee.
14.08 NONDISCRIMINATION. The Administration Committee shall administer the
Plan in a uniform and nondiscriminatory manner for the exclusive benefit of
Participants and Beneficiaries.
14.09 INTERESTED MEMBER. No Administration Committee member may decide or
determine any matter concerning the distribution, nature or method of settlement
of such person's own Plan benefits.
14.10 BOOKS AND RECORDS. The Administration Committee shall maintain or
cause to be maintained records that adequately disclose at all times the
financial condition of the Trust Fund and of each Participant's and
Beneficiary's interest therein. The books, forms and methods of accounting for
the Plan and Trust shall be the responsibility of the Administration Committee.
ARTICLE 15
THE TRUST
15.01 PURPOSE OF THE TRUST FUND. A Trust Fund, including various subfunds
(as determined by the Investment Committee) shall be maintained for the purposes
of the Plan, and the assets of the Trust Fund shall be invested in accordance
with the terms of the Trust Agreement. All contributions shall be paid into the
Trust Fund, and all benefits shall be paid from the Trust Fund.
15.02 APPOINTMENT OF TRUSTEE. The Trustees shall be appointed by the Board.
The Trustees' obligations, duties and responsibilities shall be governed by the
Trust Agreement.
15.03 EXCLUSIVE BENEFIT OF PARTICIPANTS. Except as expressly provided to
the contrary in the Plan, the Trust Fund shall be used and applied in accordance
with the Plan's provisions to provide benefits to Participants and
Beneficiaries; no part of the corpus or income of the Trust Fund shall be used
for or diverted to purposes other than for the exclusive benefit of Participants
and Beneficiaries and for the payment of the Plan's administration expenses.
The Company expressly reserves the right to recover any amounts held in a
suspense account upon the Plan's termination but only to the extent of such
amount that cannot be allocated to the Accounts of Participants in the year of
the Plan's termination due to the limitations of Code Section 415.
15.04 BENEFITS LIMITED TO THE TRUST FUND. A Participant's or Beneficiary's
interest in the Plan shall be limited to the amount of such person's Account
Balance as adjusted from time to time.
ARTICLE 16
PARTICIPANT ADMINISTRATION PROVISIONS
16.01 PERSONAL DATA TO ADMINISTRATION COMMITTEE. Each Participant and
Beneficiary must furnish to the Administration Committee such information as the
Administration Committee considers necessary or desirable for the Plan's
administration.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 32
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16.02 ADDRESS FOR NOTIFICATION. Each Participant and each Beneficiary of a
deceased Participant shall file with the Administration Committee notice of such
person's post office address and each subsequent change of such post office
address. Any Plan payment or distribution and any communication addressed to a
distributee at the last address filed with the Administration Committee (or if
no such address has been filed, then the last address indicated on the records
of the Employers) shall be deemed to have been delivered to the distributee on
the date that such distribution or communication is deposited in the United
States mail.
If a distribution or payment, including without limitation a distributee's
entire Account Balance, cannot be made because the location of the distributee
is unknown, such distribution and all subsequent distributions otherwise due to
such distributee shall be forfeited 24 months after the date such distribution
first became due; provided, that such distribution and any subsequent
distributions shall be reinstated retroactively, no later than 60 days after the
Participant is located. The Administration Committee shall have no obligation
to locate a missing distributee other than by attempting delivery of a
communication to the missing distributee's last known address via United States
mail, return receipt requested.
16.03 INFORMATION AVAILABLE. All Participants and Beneficiaries of deceased
Participants may examine copies of the Plan, summary plan description, Trust
Agreement and latest annual report of the Plan. The Administration Committee
shall maintain all of such items in its office or in such other places as it may
designate for examination during reasonable business hours. Upon the written
request of a Participant or Beneficiary, the Administration Committee shall
furnish copies of any such document described in this Section 16.03. The
Administration Committee may assess a reasonable charge to the requesting person
for the copies so furnished.
16.04 CLAIMS PROCEDURE. A Participant or Beneficiary (a "CLAIMANT") shall
file a claim with the Administration Committee if the claimant believes that
such person is entitled to exercise a right or receive a benefit under the Plan.
The Administration Committee shall act upon such claims in accordance with the
provisions of this Section 16.
16.05 APPEAL PROCEDURE FOR DENIAL OF BENEFITS. The Administration Committee
shall provide adequate notice in writing to any claimant whose claim under the
Plan has been denied. Such notice must be sent within 90 days after the date
the claim is received by the Administration Committee unless special
circumstances require an extension of time for processing the claim. Such
extension shall not exceed 90 days, and no extension shall be allowed unless,
within the initial 90 day period, the claimant is sent an extension notice
indicating the special circumstances requiring the extension and specifying a
date by which the Administration Committee expects to render its final decision.
The Administration Committee's notice of denial to the claimant shall set forth:
a. the specific reason for the denial,
b. specific references to pertinent Plan provision on which the denial is
based,
c. a description of any additional material and information needed for
the claimant to perfect the claim and an explanation of why the material or
information is needed,
d. a statement that the claimant may:
1. request a review upon written application to the Administration
Committee,
2. review pertinent Plan documents, and
3. submit issues and comments in writing, and
e. that any appeal the claimant wishes to make of the adverse
determination must be made in writing to the Administration Committee
within 60 days after receipt of the Administration Committee's notice of
denial. The Administration Committee's notice must further advise the
claimant that a failure to appeal the action to the Administration
Committee in writing within the 60 day period shall render the
Administration Committee's determination final, binding and conclusive.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 33
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If the claimant appeals to the Administration Committee, the claimant or the
claimant's duly authorized representative may submit in writing issues and
comments that such person determines to be pertinent. The Administration
Committee shall reexamine all facts related to the appeal and make a final
determination as to whether the denial was justified under the circumstances.
The Administration Committee shall advise the claimant in writing of its
decision on the appeal, the specific reasons for the decision and the specific
Plan provisions on which the decision is based. The notice of the decision
shall be given within 60 days after the claimant's written request for review,
unless special circumstances (such as a hearing) would make the rendering of a
decision within the 60 day period infeasible, but in no event shall the
Administration Committee render a decision on appeal later than 120 days after
its receipt of an appeal request. If an extension of time for review on appeal
is required because of special circumstances, written notice of the extension
shall be furnished to the claimant prior to the date the extension period
commences. The Administration Committee's notice of denial shall identify the
name of the Administration Committee representative and address to which the
claimant may forward the appeal.
ARTICLE 17
AMENDMENT OR TERMINATION
17.01 RIGHT TO AMEND.
a. The Board reserves the right at any time and from time to time (and
retroactively if deemed necessary or appropriate to meet the requirements
of ERISA and Code Section 401(a)) to modify or amend, in whole or in part,
any or all of the Plan's provisions.
b. No such modification or amendment shall make it possible for any part
of the corpus or income of the Trust Fund to be used for or diverted to
purposes other than for the exclusive benefit of Participants and
Beneficiaries prior to the satisfaction of all liabilities with respect
thereto. Moreover, no modification or amendment shall make it possible to
deprive any Participant of a previously accrued benefit (including an
optional form of benefit) within the meaning of Code Section 411(d)(6).
c. The Administration Committee may adopt amendments that do not
significantly affect the cost of the Plan and that may be necessary or
appropriate to qualify or maintain the Plan and Trust as a plan and trust
meeting the requirements of ERISA and of Code Sections 401(a) and 501(a).
17.02 RIGHT TO TERMINATE PLAN. The Board reserves the right to terminate
the Plan at any time with respect to any or all Employers. Unless the Plan is
sooner terminated, a successor to the business or any portion thereof of an
Employer, by whatever form or manner resulting, with the written consent of the
Company, may continue the Plan and become a party to the Trust Agreement by
executing appropriate supplemental agreements and other documents, and such
successor shall succeed to all applicable rights, powers and duties of such
Employer with respect thereto. Any Participant's employment who is continued in
the employ of such successor shall not be deemed to have been terminated or
severed for any purpose of the Plan.
17.03 OBLIGATIONS UPON MERGER, CONSOLIDATION OR TRANSFER. In the event of
any merger or consolidation with, or transfer of assets and liabilities to, any
other plan, each Participant shall be entitled to receive a benefit if the Plan
were to terminate immediately after the merger, consolidation or transfer, that
is not less than the benefit that such person would have been entitled to
receive if the Plan had terminated immediately before the merger, consolidation
or transfer.
17.04 OBLIGATIONS UPON TERMINATION, PARTIAL TERMINATION OR DISCONTINUANCE.
While the Company intends to continue the Plan indefinitely, the Company assumes
no obligation as to the Plan's continuance. Upon termination or partial
termination of the Plan and Trust Agreement by formal action or for any other
reason, or if Plan contributions by the Employers are permanently discontinued
for any reason, the Account Balances of all Participants directly affected by
such action shall be fully vested and distributed to such Participants in cash,
in kind, or part in cash and part in kind as soon as administratively feasible
in connection with the liquidation of the assets of the Trust. Notwithstanding
the foregoing, an amount may only be distributed if the Employers do not
maintain or establish another defined contribution plan at the time the Plan is
terminated or within the 12 month period ending
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 34
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after distribution of all assets from the Plan, other than an employee stock
ownership plan (as defined in Code Section 4975(e) or Code Section 409), a
simplified employee pension plan (as defined in Code Section 408(k)) or a
defined contribution plan if fewer than two percent of the Employees who are
eligible under the Plan at the time of termination are or were eligible under
such other defined contribution plan at any time during the 24 month period
beginning 12 months before the Plan's termination. In addition,
distributions made after March 31, 1988, on account of the Plan's termination
must be made in a lump sum in accordance with Treasury Regulation
Section 1.401(k)-1(d)(5).
17.05 CONTINUED FUNDING AFTER PLAN TERMINATION. Notwithstanding any Plan
provision to the contrary, no Employer upon any termination or partial
termination of the Plan shall have any obligation or liability whatsoever to
make any further contributions for the benefit of Participants (including all or
any part of any contributions payable prior to any Plan termination) to the
Trust Fund. No person, committee or board shall have any right to compel an
Employer to make any Plan contribution after the termination or partial
termination of the Plan.
17.06 DISTRIBUTION UPON DISPOSITION OF ASSETS OR SUBSIDIARY.
Notwithstanding any Plan provision to the contrary and in accordance with the
provisions of Code Section 401(k)(2)(B)(i)(II), a Participant's Account may be
distributed to the Participant as soon as administratively feasible after the
sale or other disposition of substantially all of the assets used by the
Participant's Employer in the trade or business in which the Participant is
employed if the Participant is no longer employed by the Company or one of its
subsidiaries or other affiliates that has adopted the Plan and the assets were
not sold to a related employer. The Account of a Participant employed by the
Company or one of its subsidiaries or other affiliates may be distributed to the
Participant as soon as administratively feasible after the sale or other
disposition of the Employer's interest in the subsidiary or other affiliate to
an entity that is not a related Employer as long as the Participant continues
employment with such other entity.
ARTICLE 18
GENERAL PROVISIONS
18.01 NO CONTRACT OF EMPLOYMENT; NO RIGHTS IMPLIED. The Plan shall not be
deemed to constitute a contract between the Company or any Employer and any
Employee. It is not a promise of continued employment by the Company or any
Employer or of continued benefits as an Employee. Employees are employed "at
will." Each Employer has and shall continue to have the absolute right and
authority to dismiss any Employee at any time, with or without cause, without
regard to the effect that such action may have upon an Employee as a
Participant. Nothing in the Plan or Trust Agreement shall give any Employee,
Participant, Beneficiary or any other person any legal or equitable right
against the Trustee or its agents or employees, except as expressly provided by
the Plan, the Trust or ERISA.
18.02 NONALIENATION. No portion of a Participant's or Beneficiary's Account
Balance, including without limitation a distribution or payment therefrom, shall
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, whether voluntary or involuntary, and
any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber
or charge the same shall be void; nor shall any such distribution or payment be
in any way liable for or subject to the debts, contracts, liabilities,
engagements or torts of any person entitled to such distribution or payment. If
any Participant or Beneficiary is adjudicated bankrupt or purports to
anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any
such distribution or payment voluntarily or involuntarily, the Administration
Committee in its sole discretion may hold or cause to be held or applied such
distribution or payment or any part thereof to or for the benefit of such
Participant or Beneficiary in such manner as the Administration Committee shall
direct. Notwithstanding the foregoing, the right to a benefit payable with
respect to a Participant pursuant to a Qualified Domestic Relations Order (as
defined Section 21.02) may be credited, assigned or recognized.
18.03 INCAPACITY. If any person entitled to receive any distribution or
payment from the Plan is a minor or is legally, physically or mentally incapable
of personally receiving and receipting for any such distribution or payment, the
Administration Committee may instruct the Trustee to make such distribution or
payment to such other person or institution then maintaining or in custody of
such person. As a condition to the issuance of such instruction for
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 35
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the distribution or payment to such other person or institution, the
Administration Committee may require such person or institution to secure an
order, decree or judgment of a court of competent jurisdiction with respect
to the incapacity of the person who would otherwise be entitled to receive
the distribution or payment. Distributions and payments made pursuant to the
foregoing shall completely discharge the Company, all Employers and Plan
fiduciaries of any further liability with respect to such distribution or
payment.
18.04 SERVICE IN MORE THAN ONE CAPACITY. Any person may serve in more than
one fiduciary capacity with respect to the Plan and Trust.
18.05 INTENT TO QUALIFY. The Company intends that the Plan shall be a tax-
qualified profit sharing plan and that the Trust shall be a tax-exempt trust
within the meaning of Code Sections 401(a) and 501(a), respectively, and the
Treasury Regulations promulgated thereunder. In the event that any question of
interpretation arises in connection with the administration of the Plan, such
question shall be resolved in a manner that will not jeopardize the continued
tax qualification of the Plan or the tax-exemption of the Trust.
ARTICLE 19
ROLLOVER CONTRIBUTIONS AND TRANSFERS
19.01 ROLLOVER FROM OTHER PLANS. In the event that an Eligible Employee:
a. becomes a Participant in the Plan, has not satisfied the eligibility
requirements of Article 2, or does not elect to make Salary Reduction
Contributions,
b. was a participant in another employer's tax-qualified plan,
c. received from such plan a distribution that qualifies for rollover
treatment in accordance with the Code, and
d. such distribution consists of money or other property, but only if the
other property has been sold and converted to money after the distribution,
then, the Eligible Employee may transfer any portion of the distribution to the
Plan on or before the 60th day after the day on which the Eligible Employee
received such property, and upon receipt by the Plan, such amount shall be
credited to the Eligible Employee's Rollover Contribution Account. The Eligible
Employee shall have a fully vested interest in all amounts credited to such
Eligible Employee's Rollover Contribution Account as a result of such transfer.
19.02 ROLLOVER FROM CONDUIT INDIVIDUAL RETIREMENT ARRANGEMENT. In the event
that an Eligible Employee:
a. becomes a Participant in the Plan, has not satisfied the eligibility
requirements of Article 2, or does not elect to make Salary Reduction
Contributions,
b. established an individual retirement account or individual retirement
annuity (an "IRA") described in Code Sections 408(a) and 408(b),
respectively, that is comprised solely of amounts constituting a rollover
contribution of a distribution from a previous employer's tax-qualified
plan, and
c. received from such IRA the entire amount of the account or the entire
value of the annuity, including any earnings on such account or annuity,
pursuant to Code Section 408(d)(3)(A)(ii),
then, the Eligible Employee may transfer any portion of the distribution to the
Plan on or before the 60th day after the day on which the Eligible Employee
received such distribution, and upon receipt by the Plan, such amount shall be
credited to the Eligible Employee's Rollover Contribution Account. The Eligible
Employee shall have a fully vested interest in all amounts credited to such
Eligible Employee's Rollover Contribution Account as a result of such transfer.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 36
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19.03 TRANSFERS DIRECTLY FROM OTHER PLANS. An Eligible Employee who is not
eligible to participate in the Plan solely because such Employee has not
satisfied the eligibility requirements of Article 2 or does not elect to make
Salary Reduction Contributions may arrange with the Administration Committee to
transfer an amount to the Plan directly from the trustee of any other tax-
qualified plan; provided that such transfer satisfies the requirements of Code
Section 411(d)(6). A separate subaccount shall be established for the
transferred assets allocable to each Employee. Notwithstanding the foregoing,
an Eligible Employee may not transfer any amount to the Plan that if transferred
would cause the Plan to be a direct or indirect transferee plan (within the
meaning of Code Section 401(a)(11)(B)(iii)(III) and the Treasury Regulations
promulgated thereunder) of a plan described in Code Section 401(a)(11)(B)(i) or
(ii).
19.04 MISTAKEN ROLLOVER. If an Eligible Employee's Rollover Contribution
fails to qualify under the Code as a tax-free rollover, then as soon as
administratively feasible the balance in the Eligible Employee's Rollover
Contribution Account shall be:
a. segregated from all other Plan assets,
b. treated as a nonqualified trust established by and for the benefit of
the Eligible Employee, and
c. distributed to the Eligible Employee.
Such a mistaken Rollover Contribution shall be deemed never to have been a part
of the Plan and shall not adversely affect the Plan's tax-qualification.
ARTICLE 20
TOP-HEAVY PROVISIONS
20.01 TOP-HEAVY PLAN DEFINED. This Article shall apply if the Plan is a
"TOP-HEAVY PLAN." The Plan shall be a Top-Heavy Plan in a Plan Year if, as of
the Determination Date, the present value of the cumulative accrued benefits (as
calculated below) of all Key Employees exceeds 60% of the present value of the
cumulative accrued benefits in the Plan of all Employees and Key Employees, but
excluding the value of the accrued benefits of former Key Employees. All plans
that are part of the Required Aggregation Group shall be treated as a single
plan.
Solely for the purpose of determining if the Plan, or any other plan included in
a Required Aggregation Group of which the Plan is a part, is a Top-Heavy Plan,
the accrued benefit of a Non-Key Employee shall be determined under (a) the
method, if any, that uniformly applies for accrual purposes under all plans
maintained by the Company and its subsidiaries and other affiliates, or (b) if
there is no such method, as if such benefit accrued not more rapidly than the
slowest accrual rate permitted under the fractional accrual rate of Code Section
411(b)(1)(C).
The present value of an Eligible Employee's accrued benefit shall be equal to
the sum of a. and b. below:
a. the sum of (i) the present value of the Eligible Employee's accrued
retirement income in each defined benefit plan that is included in the
Required Aggregation Group determined as of the most recent valuation date
within the 12 month period ending on the Determination Date and as if the
Eligible Employee had terminated employment with all Employers as of such
valuation date, and (ii) the aggregate distribution made with respect to
such Eligible Employee during the five year period ending on the
Determination Date from all defined benefit plans included in the Required
Aggregation Group and not reflected in the value of the Eligible Employee's
accrued retirement income as of the most recent valuation date. In
determining present value for all plans in the Required Aggregation Group,
the actuarial assumptions set forth for such purpose in the Employer's
defined benefit plan shall be utilized and the commencement date shall be
determined taking any nonproportional subsidy into account, and
b. the sum of (i) the aggregate balance of the Eligible Employee's
accounts in all defined contribution plans that are part of the Required
Aggregation Group as of the most recent valuation date within the 12 month
period ending on the Determination Date, (ii) any contributions allocated
to such an account after
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 37
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the valuation date and on or before the Determination Date and (iii) the
aggregate distributions made with respect to such Eligible Employee during
the five year period ending on the Determination Date from all defined
contribution plans that are part of the Required Aggregation Group and
not reflected in the value of such Eligible Employee's account as of
the most recent valuation date.
20.02 OTHER DEFINITIONS. Some of the terms used in Article 20 are defined
as follows:
a. "DETERMINATION DATE" shall mean the last day of the preceding Plan
Year.
b. "EMPLOYEE" shall mean a current Eligible Employee or a former Eligible
Employee who performed services for any of the Employers during the Plan
Year containing the Determination Date or any of the four preceding Plan
Years.
c. "KEY EMPLOYEE" shall mean an Eligible Employee, a former Eligible
Employee or the Beneficiary of a deceased Eligible Employee who, in the
Plan Year containing the Determination Date, or any of the four preceding
Plan Years, is:
1. an officer of an Employer having an annual Compensation greater
than 50% of the amount in effect under Code Section 415(b)(1)(A) for
any such Plan Year. Not more than 50 Eligible Employees or, if
lesser, the greater of three Eligible Employees or ten percent of the
Eligible Employees shall be considered as officers.
2. one of the ten Eligible Employees owning (or considered as owning
within the meaning of Code Section 318) the largest interests in the
Employers, which is more than a .5% ownership interest in value, and
whose Compensation equals or exceeds the maximum dollar limitation
under Code Section 415(c)(1)(A) as in effect for the calendar year in
which the Determination Date falls.
3. a five percent owner of an Employer.
4. a one percent owner of an Employer having an annual Compensation
from the Employer of more than $150,000.
Whether an Eligible Employee is a five percent owner or a one percent owner
shall be determined in accordance with Code Section 416(i).
d. "NON-KEY EMPLOYEE" shall mean an Eligible Employee who is not a Key
Employee.
e. "REQUIRED AGGREGATION GROUP" shall mean:
1. each stock bonus, pension or profit sharing plan of the Employers
in which a Key Employee participates and which is intended to qualify
under Code Section 401(a), and
2. each other such stock bonus, pension or profit sharing plan of
the Employers that enables any plan in which a Key Employee
participates to meet the requirements of Code Sections 401(a)(4) or
410.
20.03 TOP-HEAVY CONTRIBUTIONS. Solely in the event that a Non-Key Employee
is not covered by a defined benefit plan of an Employer that provides the
minimum benefit required by Code Section 416(c)(1) during a Plan Year in which
the Plan is a Top-Heavy Plan, the Employer contributions and forfeitures
allocated to each such Non-Key Employee who has not separated from service by
the end of the Plan Year shall be equal to not less than the lesser of:
a. three percent of such Participant's Compensation in the Plan Year, or
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 38
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b. the percentage of such Participant's Compensation in the Plan Year
that is equal to the percentage of which contributions and forfeitures are
made to the Key Employee for whom such percentage is the highest for the
year.
The percentage referred to in Section 20.03b shall be determined by dividing the
contributions and forfeitures allocated to the Key Employee by such Eligible
Employee's Compensation. The Employers shall make such additional contributions
to the Plan as shall be necessary to make the allocation described above. This
Section applies without regard to contributions or benefits under Social
Security or any other Federal or State law. An adjustment may be made to this
Section, as permitted under Treasury Regulations, in the event an Eligible
Employee is also entitled to an increased benefit in any other Top-Heavy Plan
while such plan is in the Aggregation Group with the Plan.
A Non-Key Employee who is otherwise entitled to a minimum contribution shall not
fail to receive the required minimum contribution because the Eligible Employee
is excluded from participation because the Eligible Employee failed to make
Salary Reduction Contributions or because the Eligible Employee failed to accrue
1,000 Hours of Service during the Plan Year.
20.04 ADJUSTMENT TO LIMITATION ON ANNUAL ADDITIONS.
a. If an Employer also maintains a tax-qualified defined benefit plan (as
defined in Section 3(35) ERISA and Code Section 414(j)) and which is not
part of a floor-offset arrangement (as defined in Code Section 414(k)),
then the denominator of both the Defined Benefit Plan Fraction and Defined
Contribution Plan Fraction, as set forth in Section 4.08, for the
Limitation Year ending in such Plan Year shall be adjusted by substituting
1 for 1.25 in each place where such figure occurs.
b. The adjustments referred to in Section 20.04a are not required if:
1. the Plan would not be a Top-Heavy Plan if 90% were substituted
for 60% in Section 20.01, and
2. Section 20.03a. is adjusted by substituting four percent for
three percent where such number appears.
c. The adjustments referred to in Section 20.04a do not apply to any
Participant as long as no Employer contributions, forfeitures, salary
deferrals or nondeductible voluntary contributions are allocated to such
Participant's Account, and the Participant does not accrue any benefits
under any defined benefit plan maintained by the Employer.
ARTICLE 21
QUALIFIED DOMESTIC RELATIONS ORDERS
21.01 TERMS OF QDRO. Section 18.02 shall not apply to a Qualified Domestic
Relations Order if such order:
a. creates or recognizes the existence of an Alternate Payee's right to,
or assigns to an Alternate Payee the right to, receive all or a portion of
a Participant's Account Balance,
b. clearly specifies:
1. the name and the last known mailing address if any of the
Participant and the name and mailing address of each Alternate Payee
covered by the order,
2. the amount or percentage of the Participant's Account Balance to
be distributed by the Plan to each Alternate Payee or the manner in
which such amount or percentage is to be determined,
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 39
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3. the period to which such order applies, and the Valuation Date on
which the division shall be made, and
4. the name of the plan to which such order applies,
c. does not require the Plan to provide any type or form of distribution
or any optional form of payment not provided by the Plan,
d. does not require the Plan to provide increased benefits (other than
investment earnings of the Alternate Payee's separate account), and
e. does not require the distribution of any portion of an Account Balance
to an Alternate Payee that is required to be paid to another Alternate
Payee under another order previously determined to be a Qualified Domestic
Relations Order.
21.02 QDRO DEFINITIONS. Some of the terms used in Article 21 are defined as
follows:
a. "QUALIFIED DOMESTIC RELATIONS ORDER" shall mean any judgment, decree
or order (including approval of a property settlement agreement) that:
1. relates to the provision of child support, alimony payments or
marital property rights to a spouse, former spouse, child or other
dependent of a Participant,
2. is made pursuant to a state domestic relations law (including a
community property law), and
3. meets the requirements of the foregoing Section 21.01.
b. "ALTERNATE PAYEE" shall mean any spouse, former spouse, child or other
dependent of a Participant who is recognized by a Qualified Domestic
Relations Order as having a right to receive all or a portion of the
Account Balance payable from the Plan with respect to such Participant.
21.03 DISTRIBUTION BEFORE TERMINATION OF EMPLOYMENT. In the case of any
distribution made before a Participant has terminated employment under the Plan,
a Qualified Domestic Relations Order shall not be considered as failing to meet
the requirements of Section 21.01 solely because such order requires that a
distribution be made to an Alternate Payee:
a. on or after the date on which the Participant attains (or would have
attained) the Earliest Retirement Age (as defined below),
b. as if the Participant had retired on the date on which such
distribution is to be made under such order (but taking into account only
the Participant's Account Balance on such date), and
c. in any form in which such distribution may be paid from the Plan to
the Participant.
The term "EARLIEST RETIREMENT AGE" shall mean the earlier of (i) the date on
which the Participant would be entitled to a distribution from the Plan, or (ii)
the later of (1) the date the Participant attains age 50, or (2) the earliest
date on which the Participant could begin receiving benefits from the Plan if he
separated from service under the Plan.
Notwithstanding the foregoing, the Administration Committee shall comply with
any Qualified Domestic Relations Order that requires distribution to an
Alternate Payee at any time after the Administration Committee accepts the
Qualified Domestic Relations Order, without regard to the continued employment
under the Plan or not of the Participant to whom the Qualified Domestic
Relations Order relates.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 40
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21.04 TREATMENT OF FORMER SPOUSE. To the extent provided in any Qualified
Domestic Relations Order:
a. the former spouse of a Participant shall be treated as a "SURVIVING
SPOUSE" of such Participant for purposes of Code Sections 401(a)(11) and
417, and any spouse of the Participant shall not be treated as a spouse of
the Participant for such purposes, and
b. if married for at least one year to the Participant, such former
spouse shall be treated as meeting the requirements of Code Section 417(d).
21.05 NOTIFICATION OF RECEIPT OF ORDER. The Administration Committee shall
promptly notify the Participant and Alternate Payee of the receipt of a proposed
Qualified Domestic Relations Order and of the Plan's procedure for determining
whether the proposed Qualified Domestic Relations Order meets the requirements
of a Qualified Domestic Relations Order. Within a reasonable time after receipt
of such proposed Qualified Domestic Relations Order, the Administration
Committee shall determine whether such proposed Qualified Domestic Relations
Order meets the requirements of a Qualified Domestic Relations Order. The
Administration Committee may act in accordance with such procedures as it shall
from time to time establish. The Administration Committee shall notify the
Participant and Alternate Payee of its determination.
21.06 SEPARATE ACCOUNTING. During any period in which the issue of whether
a proposed Qualified Domestic Relations Order meets the requirements stated
above is being determined, the Administration Committee shall separately account
for the amounts (the "SEGREGATED AMOUNTS") that would have been payable to the
Alternate Payee during such period if the proposed Qualified Domestic Relations
Order had been determined to be a Qualified Domestic Relations Order. If,
within 18 months, such proposed Qualified Domestic Relations Order is determined
to be a Qualified Domestic Relations Order, the Administration Committee shall
pay the segregated amounts (adjusted for investment earnings and losses thereon)
to the person or persons entitled thereto. If, within 18 months, such proposed
Qualified Domestic Relations Order is determined not to be a Qualified Domestic
Relations Order, or the issue as to whether such proposed Qualified Domestic
Relations Order so qualifies is not resolved, then the Administration Committee
shall pay the segregated amount (adjusted for investment earnings and losses
thereon) to the person or persons who would have been entitled to such amounts
if there had been no proposed Qualified Domestic Relations Order. Any
determination that a proposed Qualified Domestic Relations Order is a Qualified
Domestic Relations Order that is made after the end of the 18 month period shall
be applied prospectively only.
ARTICLE 22
EMPLOYER PARTICIPATION
22.01 ADOPTION BY EMPLOYERS. Any corporation with employees that is a
member of an affiliated group of corporations (as defined in Code Section
1504(a)) of which the Company is the common parent corporation and that is
otherwise legally eligible may with the consent and approval of the Board adopt
the Plan and the Trust by formal resolution and decision of its own board of
directors for all or any classification of its employees and thereby from and
after the specified effective date of the adoption become an Employer. Such
adoption shall be evidenced by a resolution of the Board authorizing, consenting
to, containing or incorporating by reference such resolution or decision of the
adopting corporation. The adoption resolution or decision shall become, as to
such adopting corporation and its employees, a part of the Plan as then or
subsequently amended. The adopting corporation shall not be required or
permitted to sign or execute the Plan document or any amendment thereto. The
Plan's effective date for any such adopting corporation shall be that stated in
the resolution or decision of adoption of the adopting corporation, and from and
after such effective date the adopting corporation shall assume all the rights,
obligations and liabilities of the Employer as to its employees. The
administrative powers and control granted to the Company, including the sole
right of amendment of the Plan and Trust and of appointment and removal of the
Administration Committee, the Investment Committee and their respective
successors, shall not be diminished by reason of the participation of any such
adopting employer in the Plan.
22.02 WITHDRAWAL BY EMPLOYER. Any Employer, by action of its board of
directors and upon notice to the Company and the Trustee, may withdraw from the
Plan and Trust at anytime without affecting the other Employers not withdrawing,
by complying with the Plan's provisions. Termination of the Plan as it relates
to any Employer
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 41
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upon its withdrawal shall be governed by the provisions of Article 17. A
withdrawing Employer may arrange for the continuation of the Plan and Trust
by itself or its successor in separate form for its own Employees, with such
amendments, if any, as it may deem proper or may arrange for continuation of
the Plan and Trust by merger with an existing tax-qualified plan and transfer
of such portion of the Trust assets as the Administration Committee
determines are allocable to the Employees of the withdrawing Employer. The
Company may, in its sole discretion and in any reasonable manner, terminate
an Employer's adoption of the Plan at any time when the Employer is no longer
a member of the group that entitles it to adopt the Plan pursuant to Section
22.01 or when in the Company's judgment the Employer fails or refuses to
discharge its obligations under the Plan after delivery of such notice and
opportunity to cure as may be appropriate under the circumstances.
22.03 ADOPTION CONTINGENT UPON INITIAL AND CONTINUED QUALIFICATION. The
adoption of the Plan and Trust by an Employer as provided in Section 22.01 shall
be contingent upon and subject to the condition that the adoption of the Plan
and Trust by the adopting Employer does not adversely affect the continued tax
qualification of the Plan and Trust as to all Employers. The Company may
request a determination letter from the Internal Revenue Service with respect to
the adopting Employer. In the event the Plan or the Trust become disqualified
for any reason as to an adopting Employer, the portion of the Trust Fund
allocable to the Employees of the adopting Employer shall be segregated as soon
as administratively feasible pending the requalification of the Plan and Trust
as to the adopting Employer; the withdrawal of such adopting Employer from the
Plan and Trust; or the termination of the Plan and Trust as to the adopting
Employer and its Employees.
ARTICLE 23
MISCELLANEOUS
23.01 RECEIPTS. Any payment in accordance with the Plan provisions to any
Participant or to such person's legal representative or a Beneficiary of such
person's entire Account Balance as reflected in the Plan records shall be in
full satisfaction of all claims against the Plan and Trust and their respective
fiduciaries, agents and representatives. The Administration Committee may
require any payee, as a condition precedent to such payment, to execute a
receipt and release therefor in such form as the Administration Committee shall
specify.
23.02 NO GUARANTEE OF INTEREST. Neither the Trustee, the Administration
Committee, the Investment Committee, nor any Employer guarantees the Trust Fund
from loss or depreciation. No Employer guarantees the payment of any money or
other value that may be or become due to any person from the Trust Fund. The
liability of the Administration Committee, the Investment Committee and the
Trustee to make any payment from the Trust Fund is limited to the then available
assets of the Trust Fund.
23.03 PAYMENT OF EXPENSES. All expenses incident to the administration,
termination and protection of the Plan and Trust, including but not limited to
legal, accounting and Trustee fees, shall be paid by the Employers, except that
in case the Employers' for any reason do not pay such expenses, the expenses
shall be paid from the Trust Fund and until paid shall constitute a first and
prior claim and lien against the Trust Fund.
23.04 RECORDS. The Employers' records as to any employment data of any
person with respect to the Plan shall be conclusive against all persons and for
all purposes, unless such records are determined by the Administration Committee
to be erroneous.
23.05 INTERPRETATIONS AND ADJUSTMENTS. To the fullest extent permitted by
law, any Plan interpretation or decision on any matter made in good faith by the
Administration Committee within its discretion shall be final, conclusive and
binding on all persons for all purposes. The Administration Committee shall
correct any misstatement or other mistake in such manner as it determines to be
equitable and feasible.
23.06 EVIDENCE. Evidence required of any person in connection with the Plan
may be by certificate, affidavit, document or other form that the person acting
on it considers pertinent and reliable.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 42
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23.07 SEVERABILITY. In the event any Plan provision shall be held to be
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining Plan provisions but shall be fully severable, and the Plan shall
be construed and enforced as if the illegal or invalid provision had never been
included in the Plan.
23.08 NOTICE. Any notice required by the Plan shall be deemed delivered
when personally delivered or placed in the United States mail in an envelope
addressed to the last known address of the person to whom the notice is to be
given. Any person entitled to notice under the Plan may waive the notice.
23.09 SUCCESSORS. The Plan and Trust shall be binding upon all persons
entitled to any Plan benefits and upon all persons who have received Plan
benefits and their respective heirs and legal representatives; upon each
Employer and their respective successors and assigns; upon the Trustees and
their successors; and upon the committees and their successors.
23.10 HEADINGS. The titles and headings of Articles and Sections are
included for convenience and reference only and are not to be considered in the
construction of the Plan provisions.
23.11 GOVERNING LAW. All questions arising with respect to the Plan's
provisions shall be determined by application of the laws of the State of Texas
except to the extent Texas law is preempted by ERISA or other applicable Federal
law.
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 43
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IN WITNESS WHEREOF, MICHAELS STORES, INC. has caused this instrument to be
executed by its duly authorized officer on this 25th day of September, 1996,
but otherwise effective as stated herein.
MICHAELS STORES, INC.
By: /s/ R. D. Morris
--------------------------------
Its: Executive Vice President &
Chief Financial Officer
--------------------------------
MICHAELS STORES, INC.
EMPLOYEES 401(k) PLAN--(October 1996) PAGE 44
<PAGE>
_____________________________________________________________________________
TRUST AGREEMENT
<PAGE>
TABLE OF CONTENTS
OF
TRUST AGREEMENT
Page
----
Section 1. Administration . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Trustee's Powers . . . . . . . . . . . . . . . . . . . . . 3
Section 3. Accountings . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. Compensation of Trustee. . . . . . . . . . . . . . . . . . 8
Section 5. Responsibilities and Scope of Duties of Trustee. . . . . . 9
Section 6. Removal and Resignation of Trustee; Successor Trustee. . .11
Section 7. Construction . . . . . . . . . . . . . . . . . . . . . . .11
Section 8. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . .11
<PAGE>
MICHAELS STORES, INC. TRUST AGREEMENT
THIS TRUST AGREEMENT, made this 11th day of July, 1996, by and between
Michaels Stores, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Company"), and WACHOVIA BANK OF NORTH CAROLINA,
N.A., a national banking association organized under the laws of the United
States of America, (the "Trustee"), in its capacity as Trustee under the plan;
WITNESSETH:
WHEREAS, the Company has duly established the Michaels Stores, Inc. Employees
401(k) Plan (the "Plan") for the benefit of eligible employees of the Company
and other related employers, and has authorized the creation of a Trust Fund to
be administered under the Plan by the Trustee for the exclusive benefit of said
employees and their beneficiaries in accordance with the provisions of the Plan
and as hereinafter set forth; and
WHEREAS, it is desired through this Trust Agreement to provide for the
administration of the Trust which will be a part of the Plan; and
NOW, THEREFORE, the Company and the Trustee agree as follows:
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<PAGE>
SECTION 1. ADMINISTRATION OF TRUST
1.1 The Company has adopted the Plan for the exclusive benefit of certain
of its employees and their beneficiaries. The Company intends to make
contributions to this Trust as provided in the Plan. The Company
establishes with the Trustee and the Trustee accepts, pursuant to the
Plan, a Trust governed by this Trust Agreement.
1.2 Terms defined in the Plan and used herein shall have the same meaning
as in the Plan. Other terms are defined below in Section 1.4. This
Trust Agreement shall be a part of the Plan and shall be administered
for the exclusive purpose of providing benefits to participants as
defined in the Plan and their beneficiaries, and shall be administered
in accordance with the provisions of this Trust Agreement, the Plan
and ERISA.
1.3 The Company reserves the right to amend this Trust Agreement by action
of its Board of Directors at any time and to the extent that it may
deem advisable or appropriate, provided however that no amendment may
affect the duties, rights, responsibilities or liabilities of the
Trustee without its written consent.
1.4 The following terms are hereby defined for this Trust Agreement:
-2-
<PAGE>
(a) ADMINISTRATOR shall, with respect to the Plan, mean the Plan
Administrator appointed to administer the Plan.
(b) CODE shall mean the Internal Revenue Code of 1986, as the same
may be amended from time to time.
(c) COMMITTEE shall, with respect to the Plan and Trust, mean the
Plan Administrator who is entitled to direct the Trustee with
respect to investments or to administer the Plan.
(d) COMPANY shall mean Michaels Stores, Inc., its successors and
assigns.
(e) EMPLOYER shall mean the Company and any employing entity or
individual affiliated with the Company that has adopted this
Trust Agreement as a part of its qualified Plan.
(f) ERISA shall mean the Employee Retirement Income Security Act of
1974, as the same may be amended from time to time.
(g) PLAN shall mean each plan qualified under Section 401(a) of the
Code sponsored and maintained by the Company and adopted by an
Employer of which the Trust created hereby forms a part.
-3-
<PAGE>
(h) PLAN YEAR shall, with respect to a Plan, mean the twelve
consecutive month period ending on 1/31 of each year. The books
and records of the Plan are maintained on a Plan Year basis.
(i) TRUST shall mean the Trust hereby created accompanying the Plan
or Plans of the Company.
(j) TRUST AGREEMENT shall mean this agreement between the Trustee,
the Company and each entity or individual affiliated with the
Company that has adopted this Trust.
(k) TRUST FUND shall mean the assets of the Trust held by the Trustee
pursuant to the provisions of this Trust Agreement.
(l) TRUSTEE shall mean Wachovia Bank of North Carolina, N.A., its
successors and assigns.
1.5 The Company intends that the Plan shall meet the requirements of ERISA
and shall qualify under Code Section 401(a) and therefore the Trust
shall obtain tax exempt status under Section 501(a) of the Code.
-4-
<PAGE>
1.6 The Trustee shall have no duty to collect or enforce payment to it of
any contributions, or to require any contributions to be made, and
shall have no duty to compute any amount to be paid to it nor to
determine whether amounts paid comply with the terms of the Plan. The
Trustee shall hold the Trust Fund without distinction between
principal and interest.
SECTION 2. TRUSTEE'S POWERS
2.1 The Trustee shall receive, hold, manage, convert, sell, exchange,
invest, reinvest, disburse and otherwise deal with the assets of the
Trust, including contributions to the Trust and the income and profits
therefrom, in the manner and for the uses and purposes of the Plan and
as herein provided.
2.2 In the investment, reinvestment and management of the fund
constituting the Trust, and subject to the provisions of the Plan, the
Trustee is hereby authorized and empowered:
2.2.1 To sell, exchange, convey, transfer or dispose of any property,
whether real or personal at any time held by it for cash or upon
credit as the Trustee may deem fit.
-5-
<PAGE>
2.2.2 To receive all rents, issues, dividends, income, profits and
properties of every nature due the Trust, and to hold or make
distribution thereof in accordance with the terms of the Plan and
this Trust Agreement.
2.2.3 To retain the properties now or hereafter received by the Trust,
or to dispose of them as and when deemed advisable by public or
private sale or exchange or otherwise, for cash or on credit, or
partly on cash and partly on credit, and on such terms and
conditions as shall be deemed proper.
2.2.4 To participate in any plan of liquidation, reorganization,
consolidation, merger, or other financial adjustment of any
corporation or business in which the Trust is or shall be
financially interested, and to exchange any property held in the
Trust for property issued under any such plan.
2.2.5 To invest or reinvest principal and income of the funds belonging
to the Trust in (i) common or preferred stocks, or mutual funds
(including qualifying employer securities), (ii) bonds, notes or
other securities (including commercial paper and other short term
obligations), (iii) real or personal properties or any interests
therein, (iv) group annuity investment contracts or guaranteed
investment contracts issued by a legal reserve life insurance
company, (v) cash equivalent deposits or accounts (including such
deposits or accounts issued by the Trustee), or any combination
of (i) through (v), as shall from time to time be approved by
-6-
<PAGE>
the Trustee, or to hold any part of such principal or income in
cash as may from time to time be determined by the Trustee.
2.2.6 To hold any investment belonging to the Trust in bearer form, or
to register and hold the same in the name of the Trustee or in
the name of the Trustee's duly authorized nominee.
2.2.7 To borrow for the benefit of the Trust for such periods of time
and upon such terms and conditions as may be deemed proper, any
sum or sums of money, and to secure such loans by mortgage or
pledge of any property belonging to the Trust, without personal
liability therefor.
2.2.8 To compromise, arbitrate or otherwise adjust or settle claims in
favor of or against the Trust, except to the extent the Plan
provides otherwise with respect to claims for benefits under the
Plan.
2.2.9 To execute such deeds, leases, contracts, bills of sale, notes,
proxies and other instruments in writing as shall be deemed
requisite or desirable in the proper Administration of the Trust.
2.2.10 To make distributions from the Plan to participants or their
beneficiaries at the direction of the Committee or Plan Administrator.
-7-
<PAGE>
2.2.11 To renew or extend or participate in the renewal or extension of any
mortgage, upon such terms as may be deemed advisable, and to agree to
a reduction in the rate of interest on any mortgage or to any other
modification or change in the terms of any mortgage or of any
guarantee pertaining thereto, in any manner and to any extent that may
be deemed advisable for the protection of the Trust Fund or the
preservation of the value of any investment of the Trust Fund, to
waive any default, whether in the performance of any covenant or
condition of any mortgage or in the performance of any guarantee, or
to enforce any such default in such manner and to such extent as may
be deemed advisable, to exercise and enforce any and all rights of
foreclosure, to bid on property in foreclosure, to take a deed in lieu
of foreclosure with or without paying a consideration therefor, and in
connection therewith to release the obligation on the bond secured by
such mortgage, and to exercise and enforce in any action, suit or
proceeding at law or in equity any rights or remedies in respect to
any mortgage or guarantee.
2.2.12 To repair, alter or improve any buildings which may be on any real
estate forming part of the Trust Fund or to erect entirely new
structures thereon.
2.2.13 To exercise the right to vote any securities held in the Trust, or to
grant proxies to vote such securities, except to the extent that the
right to vote any such securities may specifically be designated to
another in the Plan, an Investment Manager, or this Trust Agreement.
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2.2.14 To lend stock certificates or other securities to a broker-dealer
registered under the Securities Exchange Act of 1934 or who is
exempted from registration under Section 15(a)(1) of such Act as a
dealer in exempted Government Securities.
2.2.15 To transfer, at any time and from time to time, a portion of the
assets held by it pursuant to the Plan to any common trust fund within
the meaning of Section 584 of the Code or to any common trust fund
established pursuant to Revenue Ruling 81-100, and which common trust
fund is maintained as a medium for the pooling of funds of pension and
profit-sharing trusts for diversifying investments (including but not
limited to the Plan of Wachovia Corporation Diversified Funds for
Retirement Trusts). The terms and provisions of any such trust shall,
upon such transfer and execution, be incorporated by reference into
this Trust and underlying Plan to the extent of the assets so
transferred.
2.2.16 To do all acts and to exercise any and all powers, although not
specifically set forth in this Trust Agreement, as the Trustee may
deem are for and in the best interest of the Trust.
2.3 In carrying out the powers and duties specified in Section 2.2
regarding the investment and reinvestment of Trust assets, the Trustee
shall follow investment guidelines which may be communicated to the
Trustee from time to time by the Committee.
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2.4 The Committee may at any time direct the Trustee to segregate all or a
specified portion of the Trust assets into a separate fund (the
"Directed Fund") and invest it in accordance with the directions of
the Committee or one or more Investment Managers appointed by the
Committee, subject to the following provisions:
2.4.1 Any Investment Manager so appointed shall (i) be registered as an
investment adviser under the Investment Adviser's Act of 1940;
(ii) be a bank, as defined in the Investment Adviser's Act of
1940; or (iii) be an insurance company qualified under the laws
of more than one state to manage, acquire and dispose of assets
of the Trust under the Plan.
2.4.2 The Committee shall deliver to the Trustee a copy of a written
acknowledgment by the Investment Manager that it meets the
requirements of Section 2.4.1, that it is a fiduciary with
respect to the Plan, and that it has accepted appointment as an
Investment Manager. The Trustee shall be protected in assuming
that the appointment of an Investment Manager remains in effect
until the Trustee shall be notified in writing by the Committee
that such Investment Manager has been removed or has resigned.
2.4.3 The Trustee shall invest and reinvest the Directed Fund only to
the extent and in the manner directed by the Investment Manager
or the Committee. If the Trustee has not received instructions
from an Investment Manager or the Committee with
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respect to the investment of all or a part of the Directed Fund,
the Trustee shall invest such amounts in interest bearing
obligations having maturity dates of ninety (90) days or less,
or in a common fund comprised substantially of such obligations,
until directed otherwise by the Investment Manager or the
Committee.
2.4.4 Any Investment Manager or the Committee may from time to time
issue orders for the purchase or sale of securities directly to a
broker or dealer, and the Trustee, upon direction from the
Investment Manager or the Committee, shall execute and deliver
appropriate trading authorization. Written notice of the
issuance of each order and of execution of each order shall
authorize the Trustee to receive securities purchased against
payment thereto and to deliver securities sold against receipt of
the proceeds therefrom, as the case may be.
2.4.5 Upon removal or resignation of an Investment Manager, and pending
appointment of a substitute Investment Manager, the Trustee shall
invest any uninvested cash in the manner described in Section
2.4.3, and shall not sell or liquidate any investments of the
Directed Fund.
2.5 Notwithstanding the provisions of Section 2.2, in no event shall the
Trustee exercise any powers under the Plan in a manner that will
constitute a prohibited transaction as defined in Section 4975 of the
Code or in Section 406 of ERISA.
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2.6 The Trustee shall be fully protected in acting upon any instrument,
certificate, letter or other document which the Trustee believes to be
genuine. No person dealing with the Trustee in any transaction shall
be required to inquire into the decisions or authorities of the
Trustee or to see to the application by the Trustee of any properties
involved in such transaction; provided, that this provision shall not
relieve any Plan fiduciary dealing with the Trustee from fulfilling
his fiduciary duty. For the purposes of this Trust Agreement, the
"fiduciary duty" of the Plan fiduciaries (including the Trustee) shall
include the duties specified in Plan, the obligation not to enter into
prohibited transactions as described in Section 2.5 and all other
duties imposed on Plan fiduciaries by the Plan, this Trust Agreement
and under ERISA.
2.7 In the management of the Trust Fund, the Trustee may employ agents and
delegate to them such ministerial and limited discretionary duties as
the Trustee shall see fit, and the Trustee shall not be responsible
for any loss occasioned by any such agent unless the Trustee shall
commit a breach of its fiduciary duty (as defined in Section 2.6
hereof) in the designation of such agents, in establishing or
implementing a procedure for making such designation, or in continuing
such designation in effect. The Trustee may consult with counsel of
the Trustee's own selection, who may also be of counsel to the
Company. The reasonable compensation or fees charged by all such
persons for their services shall be deemed to be expenses of
administration of the Trust.
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2.8 All real and personal property taxes, income taxes and other taxes of
any and all kinds whatsoever upon or in respect of the Trust hereby
created or any money, income or property forming a part thereof, and
all expenses actually and properly incurred in the administration of
the Trust, shall be paid by the Trustee out of principal or income of
the Trust Fund as the Trustee, in its discretion, shall determine;
provided, that the Company may pay any of the expenses incurred in the
administration of the Trust. The payment out of the Trust Fund of any
of the taxes and expenses authorized in this Section 2.8, and of all
other costs, expenses or compensation authorized by this Trust
Agreement to be paid out of the Trust Fund, shall be deemed to be for
the exclusive benefit of the participants.
SECTION 3. ACCOUNTINGS
3.1 The Trustee shall keep accurate and detailed accounts of all
investments, receipts, disbursements and other transactions and
proceedings under this Trust Agreement and all such accounts and other
records relating thereto shall be open to inspection and audit at all
reasonable times by any person designated by the Board or the
Committee. Within ninety (90) days after the end of each Plan Year
and at such other times as may be mutually agreed, the Trustee shall
prepare and deliver to the Company a statement of its accounts and
proceedings for such Plan Year.
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3.2 The Committee may approve each accounting by written notice of
approval delivered to the Trustee. If the Committee has any
objections, it will submit objections to the Trustee within ninety
(90) days after it receives the accounting.
SECTION 4. COMPENSATION OF TRUSTEE
4.1 All brokerage costs and transfer taxes incurred in connection with the
investment and reinvestment of the Trust Fund, all expenses (other
than fees for legal services rendered to the Trustee) incurred in
connection with the acquisition or holding of real or personal
property, any interest therein or mortgage thereon, and all income
taxes or other taxes of any kind whatsoever which may be levied or
assessed under existing or future laws upon or in respect of the Trust
Fund, shall be paid from the Trust Fund and until paid shall
constitute a charge upon said Trust Fund. All other administrative
expenses incurred by the Trustee in the performance of its duties with
respect to the Plan including fees for legal services rendered to the
Trustee, such compensation to the Trustee as may be agreed upon from
time to time between the Company and the Trustee and all other proper
charges and disbursements of the Trustee, shall be paid by the Trust
Fund; and, until paid, shall constitute a charge upon such Trust Fund;
provided, however, that said expense, charge or disbursement shall not
be paid by such Trust Fund, or constitute a charge thereon, if it is
previously paid by an Employer.
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4.2 The Trustee shall deduct from and charge against the Trust Fund with
respect to the Plan any taxes paid by it which may be imposed upon
such Trust Fund or income thereon which the Trustee is required to pay
with respect to the interest of any person therein. The Trustee is
not authorized to pay any excise or other tax levied upon any
disqualified person imposed by reason of such person's engagement in
any prohibited transaction. The Trustee is also not authorized to
purchase any errors and omissions insurance for fiduciaries not
permitted by ERISA Section 410(b)(3).
SECTION 5. RESPONSIBILITIES AND SCOPE OF DUTIES OF TRUSTEE
5.1 The Trustee hereby agrees to hold in Trust and administer the fund
hereunder, subject to all of the terms and conditions hereof and of
the Plan, and to render an annual account as provided in Section 3
hereof. The Trustee shall act in accordance with written instructions
or directions of the Committee made in conformity with ERISA and the
terms of the Plan and this Trust Agreement. In carrying out such
instructions or directions, the Trustee shall not be obligated to
inquire into the purpose or purposes for such instructions or
directions or whether such instructions or directions are consistent
with the Plan or are otherwise proper.
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5.2 (i) The Company has allocated fiduciary responsibility among various
persons in accordance with the terms of the Plan and this Trust
Agreement. Except with respect to such fiduciary responsibility
as is allocated to the Trustee, the Trustee shall have no
responsibility for any error or loss that may result by reason of
the exercise or non-exercise of that fiduciary responsibility by
the person to whom it is allocated.
(ii) The Company shall indemnify the Trustee, directly from the
Company's own assets (including the proceeds of any insurance
policy the premiums of which are paid from the Company's own
assets), from and against any and all claims, demands, losses,
damages, expenses (including, by way of illustration and not
limitation, reasonable attorneys' fees and other legal and
litigation costs), judgments and liabilities arising from, out
of, or in connection with the administration of the Plan or
Trust, except when determined to be due to the Trustee's gross
negligence or willful misconduct.
(iii) This exception set forth in subparagraph (ii) shall not
apply with respect to any action taken by the Trustee or any
failure to act by the Trustee if the action taken or the
failure to act was directed by the Administrative Committee,
the Investment Committee, the Company, or an Investment
Manager or any other named fiduciary and the Trustee
reasonably relied
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on such direction and the Trustee reasonably believed such
direction was consistent with ERISA.
5.3 The Trustee shall not be liable for any distribution from the
Trust Fund made in good faith without actual notice or knowledge
of the changed condition or status of any recipient.
5.4 The Trustee shall have no responsibility for: (a) any condition
which now exists or may hereafter be found to exist in, under, or
about any real estate investment of the Trust Fund or of a
corporation organized under Section 501 (c) (2) or 501 (c) (25)
of the Code, the stock of which is held as an asset of the Trust
Fund; or (b) any violation of any applicable environmental or
health or safety law, ordinance, regulation or ruling; or (c) the
presence, use, generation, storage, release, threatened release,
or containment, treatment or disposal of any hazardous or toxic
substances or materials including such situations at or
activities on any investment of the Trust Fund or of a Section
501 (c) (2) or 501 (c) (25) corporation, the stock of which is
held as an asset of the Trust Fund. The Trustee is hereby
authorized to pay from the Trust Fund all costs and expenses
(including attorneys fees) relating to or connected with any
condition, violation, presence or other situation referred to in
(a), (b) and (c) above, and notwithstanding anything to the
contrary in this Trust Agreement, to
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the extent permitted by law, Wachovia Bank of North Carolina,
N.A. shall be indemnified from the Trust Fund from all claims,
suits, losses and expenses (including attorneys fees) arising
therefrom. The authority to pay from the Trust Fund and the
right of indemnification set forth in the preceding sentence
include and relate to, without limitation, any claims, suits,
liabilities, losses and expenses (including attorney fees)
arising from any matters relating to the existence of
petroleum including crude oil and any fraction thereof,
hazardous substances, pollutants, or contaminants as
defined in the Comprehensive Environmental, Responsibility,
Compensation, and Liability Act, as amended, 42 U.S.C. Section
9601 ET SEQ., or hazardous wastes as defined in the Resource
Conservation and Liability Act, 42 U.S.C. Section 6906 ET SEQ.,
or as any of the foregoing terms or similar terms may be defined
in similar state environmental laws or subsequent federal or
state legislation of a similar nature which may be enacted from
time to time. This Section 5.4 shall survive the sale or other
disposition of any real estate investment of the Trust Fund and
the termination of this Trust Agreement. Nothing in this Section
5.4 shall be construed to in any way limit the indemnification
rights of the Trustee provided for in this Section 5.
5.5 The indemnity provided by this Section 5 shall survive the
termination of this Trust Agreement.
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SECTION 6. REMOVAL AND RESIGNATION OF TRUSTEE; SUCCESSOR TRUSTEE
The Trustee may be removed by the Board at any time upon sixty (60) days' notice
in writing to the Trustee. The Trustee may resign at any time upon sixty (60)
days' notice in writing to the Company. On any such removal or resignation of
the Trustee, the Trustee shall render a statement, as of the effective date of
removal or resignation. The Board, or Committee, shall appoint a successor
Trustee and there shall be conveyed and delivered to such successor all property
then constituting the Trust Fund hereunder. If, within sixty (60) days after
notice of resignation or removal of the Trustee has been given under the
provisions of this Section, a successor to the Trustee has not been appointed,
the resigning or removed Trustee or the Company may apply to a court of
competent jurisdiction for the appointment of a successor Trustee. The
successor trustee shall succeed to all the powers and duties given to the
Trustee by this Trust Agreement.
The Trustee is authorized to reserve such sum of money as it may deem advisable
for the payment of its fees and expenses in connection with the settlement of
its account or otherwise, and the balance of any such reserve remaining after
such fees and expenses shall be paid over to the successor Trustee.
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<PAGE>
SECTION 7. CONSTRUCTION
The provisions of this Trust Agreement shall be construed and enforced according
to the laws of the State of North Carolina, except to the extent such laws shall
be superseded by the provisions of ERISA.
SECTION 8. MISCELLANEOUS
8.1 Anything in this Trust Agreement to the contrary notwithstanding, at
no time prior to the satisfaction of all liabilities with respect to
the participants and their beneficiaries under the Plan shall any part
of the principal or income of the Trust Fund applicable to such Plan
be used for or diverted to purposes other than for the exclusive
benefit of said participants and their beneficiaries, including the
payment of reasonable expenses attributable to the administration of
the Plan in accordance with ERISA.
8.2 Except as may be permitted under Code Section 414(p) and ERISA
Sections 206(d) and 514(b)(7), no distribution or payment under this
Trust Agreement to any participant or his beneficiary under the Plan
shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, whether voluntary
or involuntary, and no attempt so to anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same shall be valid
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or recognized by the Trustee, nor shall any such distribution or
payment be in any way liable for or subject to the debts, contracts,
liabilities, engagements or torts of any person entitled to such
distribution or payment. If the Trustee is notified by the
Administrator that any such participant or his beneficiary has been
adjudicated bankrupt or has purported to anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge any such distribution or
payment, voluntarily or involuntarily, the Trustee, shall, if so
directed by the Administrator, hold or apply said distribution or
payment of any part thereof to or for the benefit of said participant
or his beneficiaries in such manner as the Administrator shall direct.
8.3 Except as otherwise herein provided, any action by the Company
pursuant to any of the provisions of this Trust Agreement shall be
evidenced by a letter executed by the Company to the Trustee and the
Trustee shall be fully protected in acting in accordance with a letter
so provided to it. The Company shall furnish the Trustee from time to
time with certified copies of documents evidencing the appointment
and/or termination of appointment of an Administrator and the
Committee and the appointment and termination of appointment of
successors thereto. All orders, requests and instructions of an
Administrator and the Committee to the Trustee shall be in writing
signed by the Administrator and the Committee, and the Trustee shall
be fully protected in acting in accordance with any such orders,
requests, and instructions. The Trustee shall have the right to rely
on and shall be fully protected in acting in accordance with any
order,
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request or instruction which it believes to be genuine and which
purports to have been executed in accordance with Sections 8.3
and 8.4.
8.4 Instructions and directions from the Administrator, the Committee, or
an Investment Manager shall be delivered to the Trustee by delivery of
a writing, facsimile or by such other electronic media or additional
means as may be agreed to by the parties.
8.5 Notwithstanding any other contrary provisions of this Trust Agreement,
it is intended that this Trust and the Plan shall qualify for tax
exemption and qualification under the Code.
8.6 The Company reserves the right at any time and from time to time to
amend any or all the provisions of this Trust Agreement by notice
thereof in writing delivered to the Trustee provided, however, that no
such amendment which affects the rights, duties or responsibilities of
the Trustee may be made without its consent; and provided, further,
that no such amendment shall authorize or permit at any time, prior to
the satisfaction of all liabilities for benefits under a Plan, any
part of the corpus of income of the Trust Fund with respect to the
Plan to be used for or diverted to purposes other than for the
exclusive benefit of participants under the Plan and their
beneficiaries and payment of expenses of the Plan.
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IN WITNESS WHEREOF, this Trust Agreement has been executed in behalf of the
Company and the Trustee, on the day and year first above written.
MICHAELS STORES, INC. WACHOVIA BANK OF NORTH CAROLINA, N.A.
as TRUSTEE
By: /s/ R. Don Morris By: /s/ Steven C. Watts
--------------------------- ------------------------------
Executive Vice President Senior Vice President
Attest: /s/ Mark V. Beasley Attest: /s/ Donna L. Stern
--------------------------- --------------------------
Secretary Secretary
[Corporate Seal] [Corporate Seal]
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