<PAGE>
As filed with the Securities and Exchange Commission on June 17, 1997.
Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MICHAELS STORES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1943604
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8000 BENT BRANCH DRIVE
IRVING, TEXAS 75063
P.O. BOX 619566
DFW, TEXAS 75261-9566
(972) 409-1300
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
---------------
R. MICHAEL ROULEAU
Chief Executive Officer
Michaels Stores, Inc.
8000 Bent Branch Drive
Irving, Texas 75063
(972) 409-1300
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
---------------
With copies to:
MARK V. BEASLEY, ESQ. ROBERT L. ESTEP, ESQ.
Michaels Stores, Inc. Jones, Day, Reavis & Pogue
8000 Bent Branch Drive 2300 Trammell Crow Center
Irving, Texas 75063 2001 Ross Avenue
(972) 409-1300 Dallas, Texas 75201
(214) 220-3939
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering.
/ / _______________.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / / _____________.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum
Title of Amount Offering Aggregate Amount of
Securities to to be Price per Offering Registration
be Registered Registered (1) Share (2) Price (2) Fee (2)
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Common Stock, par value
$0.10 per share ........ 1,450,000 $20.75 $24,230,000 $7,343
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1. Represents (i) 940,000 shares to be offered and sold by Michaels Stores,
Inc. (the "Company"), 740,000 of which are issuable upon exercise of
options available for grant under the Michaels Stores, Inc. Amended and
Restated 1994 Non-Statutory Stock Option Plan (the "Plan"), and the
remaining 200,000 of which are issuable upon exercise of options granted
to R. Michael Rouleau pursuant to the provisions of the Michaels Stores,
Inc. Stock Option Agreement dated June 6, 1997 (the "Agreement"), between
the Company and R. Michael Rouleau, and (ii) 510,000 additional shares
acquired or to be acquired by such persons or permitted transferees
(collectively, the "Selling Stockholders") upon exercise of options
granted under the Plan or the Agreement and which may be offered and sold
from time to time by such Selling Stockholders. Pursuant to Rule 416,
there are also registered hereunder such indeterminate number of
additional shares as may become subject to awards under the Plan and the
Agreement as a result of the antidilution provisions contained therein.
2. The registration fee with respect to these shares has been computed in
accordance with paragraphs (c) and (h) of Rule 457, based upon, in the case
of options previously granted, the stated exercise price of such options,
and, in the case of options still available for grant and shares being
registered for resale, the average of the reported high and low sale prices
of shares of the Common Stock on the Nasdaq National Market System on
June 13, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion, Dated June 17, 1997
PROSPECTUS
1,450,000 SHARES
MICHAELS STORES, INC.
Common Stock
This Prospectus relates to the offer and sale by Michaels Stores,
Inc. ("Michaels" or the "Company") of up to 940,000 shares (the "Primary
Shares") of the Company's common stock, par value $0.10 per share (the
"Common Stock"), 740,000 of which are issuable by the Company upon exercise
of options (the "1994 Options") to be granted from time to time to eligible
persons pursuant to the provisions of the Michaels Stores, Inc. Amended and
Restated 1994 Non-Statutory Stock Option Plan (the "Plan"), and the remaining
200,000 of which are issuable by the Company upon the exercise of options
(the "Rouleau Options") granted to R. Michael Rouleau ("Rouleau") pursuant to
the provisions of the Michaels Stores, Inc. Stock Option Agreement, dated
June 6, 1997 (the "Agreement"), between the Company and Rouleau (the 1994
Options and the Rouleau Options are referred to herein as the "Options"), and
the subsequent offer and resale of such Shares from time to time by certain
of such persons or permitted transferees (collectively, the "Selling
Stockholders"). In addition, this Prospectus relates to such indeterminate
number of additional shares of Common Stock as may become subject to awards
under the Plan and the Agreement as a result of the antidilution provisions
contained therein. This Prospectus also relates to the offer and sale by the
Selling Stockholders listed herein of up to 510,000 additional shares (together
with the Primary Shares, the "Shares"), acquired or to be acquired by such
Selling Stockholders upon the exercise of other options granted pursuant to
the Plan or the Agreement, which may be offered and sold from time to time by
such Selling Stockholders.
Sales by the Selling Stockholders may be made through the Nasdaq
National Market System, on one or more exchanges, in the over the counter
market, or in negotiated transactions, in each case at prices and at terms
then prevailing or at prices related to the then current market price or at
negotiated prices and terms. Upon any sale of the Shares offered hereby, the
Selling Stockholders and participating agents, brokers or dealers may be
deemed to be underwriters as that term is defined in the Securities Act of
1933, as amended (the "Securities Act"), and commissions or discounts or any
profit realized on the resale of such securities may be deemed to be
underwriting commissions or discounts under the Securities Act. See "Plan of
Distribution."
The Common Stock is quoted on the Nasdaq National Market System
under the symbol "MIKE." On June 16, 1997, the closing price of the Common
Stock on the Nasdaq National Market System was $20.625. The Company will pay
all expenses in connection with this offering, which are estimated to be
approximately $23,000.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is June __, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copied
at the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the public
reference facilities maintained by the Commission at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and at 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of such materials
can also be obtained at prescribed rates from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission and that is located at http://www.sec.gov.
The Company's Common Stock is quoted on the Nasdaq National Market. Copies
of such reports and other information can also be inspected at the offices of
the Nasdaq National Market, 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus constitutes a part of a Registration Statement filed by
the Company with the Commission under the Securities Act relating to the
securities issuable pursuant to the Plan and the Agreement offered hereby.
This Prospectus omits certain of the information contained in the
Registration Statement, and reference is hereby made to the Registration
Statement and to the exhibits relating thereto for further information with
respect to the Company and the securities offered hereby. Any statements
contained herein concerning the provisions of any document are not
necessarily complete, and in each instance reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety
by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus (i) the
Company's Annual Report on Form 10-K for the fiscal year ended February 1,
1997, (ii) the Company's Quarterly Report on Form 10-Q for the period ended
May 3, 1997, and (iii) the description of the Company's Common Stock contained
in the Company's Registration Statement on Form 8-A (Commission File No.
0-11822), filed August 30, 1991.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of
the offering made hereby, shall be deemed incorporated by reference in this
Prospectus and to be a part of this Prospectus from the date of the filing of
such reports.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain, without
charge, upon written or oral request, a copy of any of the documents
incorporated by reference herein, except for the exhibits to such documents
(other than the exhibits expressly incorporated in such documents by
reference). Requests should be directed to the General Counsel of the
Company at 8000 Bent Branch Drive, Irving, Texas 75063 (telephone: (972)
409-1300).
THE COMPANY
The Company is the nation's largest retailer dedicated to serving the
arts, crafts and decorative items marketplace. The Company's Michaels stores
offer a wide selection of competitively priced items, including general
crafts, home decor items, picture framing materials and services, art and
hobby supplies, party supplies, silk and dried flowers, wearable art and
seasonal and holiday merchandise. Since March 1995, when the
2
<PAGE>
Company acquired Aaron Brothers Holdings, Inc., the Company has also operated
the Aaron Brothers specialty framing and art supply stores located primarily
in California. The Company's principal executive offices are located at 8000
Bent Branch Drive, Irving, Texas 75063, and the Company's telephone number at
such address is (972) 409-1300.
USE OF PROCEEDS
The proceeds from the issuance of the Shares upon exercise of Options
will be added to the Company's funds and used for general corporate purposes.
The Company will not receive any of the proceeds from the sale of Shares by
the Selling Stockholders.
SELLING STOCKHOLDERS
This Prospectus covers the purchase from the Company of an aggregate of
up to 940,000 Primary Shares plus such indeterminate number of additional
shares of Common Stock as may become subject to awards under the Plan and the
Agreement as a result of the antidilution provisions contained therein, by
the holders of Options upon the exercise thereof in accordance with their
terms and the subsequent offer and resale of Shares previously acquired or to
be acquired by certain holders of Options upon the exercise thereof.
Pursuant to the provisions of the Plan, the Board of Directors of the
Company (the "Board") and/or the 1994 Non-Statutory Plan Committee of the
Board (the "1994 Non-Statutory Plan Committee") will, among other things,
determine from time to time (i) the individuals, from among the full-time
employees and key advisors, including directors, of the Company and its
subsidiaries, to whom 1994 Options will be granted, (ii) the number of shares
of Common Stock to be covered by each 1994 Option (provided the maximum
aggregate number of shares of Common Stock with respect to which 1994 Options
may be granted to any participant under the Plan may not exceed 50% of the
total number of shares of Common Stock that may be issued from time to time
under the Plan), and (iii) the purchase price of Common Stock subject to each
1994 Option, which may not be less than the fair market value of the Common
Stock on the date of grant. Unless sooner terminated by action of the Board,
the Plan terminates on December 31, 2014, and no 1994 Options may be granted
pursuant to the Plan after such date.
Pursuant to the Agreement, the Company granted the Rouleau Options to
Rouleau. The Rouleau Options and all rights incident thereto terminate on
April 1, 2000.
The following table sets forth certain information as of May 31, 1997,
with respect to Selling Stockholders who currently hold Options to purchase
Shares, including any positions, offices or other material relationships of
certain Selling Stockholders with the Company. The Company is unaware of
whether the Selling Stockholders listed below presently intend to sell the
Shares they may acquire upon exercise of Options. The Company in the future
may grant additional Options to the persons listed below and to persons other
than those listed below whose subsequent sale of Shares will be covered by
this Prospectus, which, in such case, will be supplemented.
3
<PAGE>
<TABLE>
COMMON STOCK NUMBER OF COMMON STOCK
OWNERSHIP SHARES OF OWNERSHIP
PRIOR TO OFFERING (1)(2) COMMON STOCK AFTER OFFERING (2)
------------------------ -------------- ------------------
NAME AND POSITION NUMBER PERCENTAGE OFFERED HEREBY NUMBER PERCENTAGE
- ------------------------ --------- ------------ -------------- ------ ----------
<S> <C> <C> <C> <C> <C>
Yurta Faf Limited (3) 100,000 * 100,000 0 *
Soulieana Limited (4) 50,000 * 50,000 0 *
Dortmund Limited (5) 30,000 * 30,000 0 *
Donald R. Miller, Jr. (6) 174,366 * 30,000 144,366 *
Managing Director and
Vice President - Market
Development
R. Michael Rouleau (7) 514,879 1.9% 500,000 14,879 *
President and
Chief Executive Officer
</TABLE>
* Less than 1% of class.
(1) Based on ownership as of May 31, 1997. Persons holding shares of Common
Stock pursuant to the Michaels Stores, Inc. Employees 401(k) Plan (the
"401(k) Plan") generally have sole voting power, and investment power
with respect to such shares.
(2) Based on 26,045,753 shares of Common Stock issued and outstanding as of
May 31, 1997.
(3) Includes 100,000 Shares to be acquired upon exercise of 1994 Options
granted under the Plan, all of which are presently exercisable. The
Selling Stockholder named in the table is an Isle of Man entity owned by an
irrevocable trust of which Sam Wyly and his family are included among the
discretionary beneficiaries. Sam Wyly is Managing Director and Chairman of
the Board of Directors of the Company.
(4) Includes 50,000 Shares to be acquired upon exercise of 1994 Options granted
under the Plan, all of which are presently exercisable. The Selling
Stockholder named in the table is an Isle of Man entity owned by an
irrevocable trust of which Charles J. Wyly, Jr. and his family are included
among the discretionary beneficiaries. Charles J. Wyly, Jr. is Managing
Director and Vice Chairman of the Board of Directors of the Company.
(5) Includes 30,000 Shares to be acquired upon exercise of 1994 Options granted
under the Plan, all of which are presently exercisable. The Selling
Stockholder named in the table is an Isle of Man entity owned by an
irrevocable trust of which Evan Wyly and his family are included among the
discretionary beneficiaries. Evan Wyly is a Managing Director of the
Company.
(6) Includes 30,000 Shares to be acquired upon exercise of 1994 Options granted
under the Plan, all of which are presently exercisable and 129,250 Shares to
be acquired upon exercise of options granted under other stock option plans
of the Company. Also includes 187 Shares held of record by Mr. Miller's
wife and 10,929 shares of Common Stock held pursuant to the 401(k) Plan.
(7) Includes 500,000 Shares to be acquired upon exercise of the Non-Plan Options
granted under the Agreement, 300,000 of which are presently exercisable and
100,000 of which become exercisable on each of April 2, 1998, and April 2,
1999. Also includes 1,879 shares of Common Stock held pursuant to the
401(k) Plan.
4
<PAGE>
1994 NON-STATUTORY STOCK OPTION PLAN
GENERAL
A copy of the Plan has been filed as an exhibit to the Registration
Statement of which this Prospectus constitutes a part. The summaries of
certain provisions of the Plan do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all of the
provisions of the Plan, including the definitions therein of certain terms.
Copies of the Plan and additional information regarding the Plan and the
Plan's administrators may be obtained by contacting the Company. See
"Incorporation of Certain Documents by Reference." Capitalized terms not
otherwise defined below or elsewhere in this Prospectus have the meanings
given to such terms in the Plan.
PURPOSE AND ADOPTION
The Plan is intended to provide employees and key advisors with a
proprietary interest in the Company and its subsidiaries in order to (a)
increase the interest in the Company's welfare of those employees and key
advisors who share primary responsibility for the management, growth and
protection of the business of the Company, (b) recognize the contributions
made by certain employees and key advisors to the Company's growth during its
development stage, (c) furnish an incentive to such employees and key
advisors to continue their services for the Company, and (d) provide a means
through which the Company may attract able persons to engage as employees and
key advisors. The 1994 Non-Statutory Plan Committee adopted the Plan
effective as of March 31, 1994, subject to the approval of the shareholders
of the Company. The shareholders approved the adoption of the Plan at the
annual meeting of shareholders held May 24, 1994. The Plan was amended and
restated effective as of September 17, 1996.
SHARES COVERED
As of June 12, 1997, the total number of shares of Common Stock available
for issuance under the Plan was 950,000 and 1994 Options exercisable for
740,000 of such shares had been granted, resulting in Options for 210,000
shares being available for grant as of such date.
OPTIONS
The Plan authorizes the grant of 1994 Options to purchase shares of Common
Stock that are not intended to qualify as incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
and which permit a participant to benefit from increases in the value of
shares of Common Stock above a predetermined purchase price per share. The
1994 Options are more fully described under "-- Description of Awards" below.
ADMINISTRATION
The Plan is administered by the 1994 Non-Statutory Plan Committee and the
Board, which have the authority to determine from time to time the
individuals to whom 1994 Options will be granted; to determine the number of
shares to be covered by each 1994 Option; to determine the time or times at
which 1994 Options will be granted; to interpret the provisions of the Plan
and the instruments by which 1994 Options will be evidenced; to make, amend
and rescind rules and regulations relating to the Plan; to determine the
terms and provisions of the instruments by which 1994 Options will be
evidenced; to modify or amend any 1994 Option agreement or waive any
conditions or restrictions applicable to any 1994 Option or the exercise
thereof; and to make all other determinations necessary or advisable for the
administration of the Plan; PROVIDED that the 1994 Non-Statutory Plan
Committee has exclusive authority with respect to 1994 Options intended to
comply with Section 162(m) of the Code. All of the members of the 1994
Non-Statutory Plan Committee, which may not be comprised of less than two
members, are intended to qualify as "outside directors" within the meaning of
Section 162(m) of the Code and as "Non-Employee Directors" within the meaning
of Rule 16b-3 under the Exchange Act.
5
<PAGE>
Any determination or interpretation by the 1994 Non-Statutory Plan
Committee or the Board, as applicable, will be final and conclusive; PROVIDED
that in the event the 1994 Non-Statutory Plan Committee and the Board
disagree with respect to such interpretation or determination, the Board's
interpretation or determination will be final and conclusive.
ELIGIBILITY
Full-time employees and key advisors, including officers and directors, of
the Company are eligible to receive grants of 1994 Options.
TRANSFERABILITY
1994 Options granted under the Plan may be transferred by the holder
thereof upon five days prior written notice to the Company, subject to such
transfer restrictions, if any, as may be set forth in the individual option
agreement pursuant to a determination of the 1994 Non-Statutory Plan
Committee or the Board, as applicable.
ADJUSTMENTS
The 1994 Non-Statutory Plan Committee or the Board may adjust the number
of shares available for 1994 Options, the number of shares of Common Stock
subject to and the exercise price of 1994 Options granted under the Plan to
effect a change in capitalization of the Company, such as a stock dividend,
stock split, reverse stock split, share combination, exchange of shares,
merger, consolidation, reorganization, liquidation or the like, of or by the
Company.
NONQUALIFIED AND UNFUNDED
The Plan is unfunded and does not give participants any rights that are
superior to those of the Company's general creditors. The Plan is not subject
to the provisions of ERISA and is not qualified under Section 401(a) of the
Code.
CONTINUATION AND TERMINATION OF EMPLOYMENT OR ADVISOR RELATIONSHIP
The Plan and any 1994 Option granted under the Plan do not confer upon any
Plan participant any right to be employed or to continue employment in the
Company.
TERMINATION AND AMENDMENT
Unless sooner terminated by action of the Board or, if the Board has
specifically delegated its authority to terminate the Plan to the 1994
Non-Statutory Plan Committee, by the 1994 Non-Statutory Plan Committee, the
Plan will terminate on December 31, 2014. The Plan may be amended, altered
or discontinued by the Board or, if the Board has delegated this authority to
the 1994 Non-Statutory Plan Committee, by the 1994 Non-Statutory Plan
Committee, without approval of the Company's shareholders. In the event any
law, or any rule or regulation issued or promulgated by the Internal Revenue
Service, the Commission, the National Association of Securities Dealers,
Inc., any stock exchange upon which the Common Stock is listed for trading,
or any other governmental or quasi-governmental agency having jurisdiction
over the Company, the Common Stock or the Plan requires the Plan to be
amended, the Plan will be amended at that time and all 1994 Options then
outstanding will be subject to such amendment.
DESCRIPTION OF AWARDS
The Plan does not specify a maximum term for 1994 Options granted
thereunder. The maximum aggregate fair market value (determined at the time
the 1994 Option is granted) of the Common Stock for which any Plan
participant may be granted 1994 Options in any calendar year shall be
determined by the Board or the 1994 Non-Statutory Plan Committee, as
applicable, in its discretion; PROVIDED, HOWEVER, the maximum aggregate
number of shares of Common Stock with respect to which 1994 Options may be
granted to any
6
<PAGE>
participant in the Plan during the term of the Plan shall not exceed 50% of
the total number of shares of Common Stock that may be issued from time to
time under the Plan.
The purchase price of Common Stock subject to a 1994 Option granted
pursuant to the Plan shall be no less than the fair market value of the
Common Stock on the date of grant. Payment for Common Stock purchased upon
the exercise of a 1994 Option may be made in cash, in shares of Common Stock
then owned by the Plan participant, with a promissory note, or in any other
form of valid consideration, or a combination of any of the foregoing, as
required or approved by the Board or the 1994 Non-Statutory Plan Committee,
as applicable, in its discretion.
FEDERAL INCOME TAX CONSEQUENCES
The following summary of certain federal income tax consequences of the
grant or award of 1994 Options under the Plan is based on the Code, as
amended to date, applicable proposed and final Treasury Regulations, judicial
authority and current administrative rulings and practice, all of which are
subject to change. This summary does not attempt to describe all of the
possible tax consequences that could result from the acquisition, holding,
exercise or disposition of a 1994 Option or the shares of Common Stock
purchased thereunder.
1994 Options granted under the Plan are intended to be nonqualified stock
options. Nonqualified stock options generally will not result in any taxable
income to the optionee at the time of the grant, but the holder thereof will
realize ordinary income at the time of exercise of the 1994 Options if the
shares are not subject to any substantial risk of forfeiture (as defined in
Section 83 of the Code). Under such circumstances, the amount of ordinary
income is measured by the excess of the fair market value of the optioned
shares at the time of exercise over the exercise price. An optionee's tax
basis in shares acquired upon the exercise of nonqualified stock options is
generally equal to the exercise price plus any amount treated as ordinary
income. If the exercise price of a nonqualified stock option is paid for, in
whole or in part, by the delivery of shares of Common Stock previously owned
by the optionee ("Previously Acquired Shares"), no gain or loss will be
recognized on the exchange of the Previously Acquired Shares for a like
number of shares of Common Stock. The optionee's basis in the number of
optioned shares received equal to the number of Previously Acquired Shares
surrendered would be the same as the optionee's basis in the Previously
Acquired Shares. However, the optionee would be treated as receiving
ordinary income equal to the fair market value (at the time of exercise) of
the number of shares of Common Stock received in excess of the number of
Previously Acquired Shares surrendered, and the optionee's basis in such
excess shares would be equal to their fair market value at the time of
exercise.
SPECIAL RULES APPLICABLE TO INSIDERS. In limited circumstances where the
sale of shares of Common Stock that are received as the result of the
exercise of a 1994 Option could subject an officer or director to suit under
Section 16(b) of the Exchange Act, the tax consequences to the officer or
director may differ from the tax consequences described above. In these
circumstances, unless a special election has been made, the principal
difference usually will be to postpone valuation and taxation of the stock
received so long as the sale of the shares received could subject the officer
or director to suit under Section 16(b) of the Exchange Act, but not longer
than six months.
GENERAL MATTERS APPLICABLE TO THE COMPANY. To the extent that an optionee
recognizes ordinary income in the circumstances described above, the Company
would be entitled to a corresponding deduction, provided in general that (i)
the amount is an ordinary and necessary business expense and such income
meets the test of reasonableness, (ii) the deduction is not disallowed
pursuant to the annual compensation limit set forth in Section 162(m) of the
Code and (iii) certain statutory provisions relating to so-called "excess
parachute payments" do not apply.
BECAUSE THE TAX CONSEQUENCES TO A PLAN PARTICIPANT MAY VARY DEPENDING ON
HIS OR HER INDIVIDUAL CIRCUMSTANCES, EACH PLAN PARTICIPANT SHOULD CONSULT HIS
OR HER PERSONAL TAX ADVISOR REGARDING THE FEDERAL AND ANY STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES TO HIM OR HER.
7
<PAGE>
STOCK OPTION AGREEMENT
GENERAL
A copy of the Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus constitutes a part. The summaries of
certain provisions of the Agreement do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all of the
provisions of the Agreement, including the definitions therein of certain
terms. Copies of the Agreement and additional information regarding the
Agreement may be obtained by contacting the Company. See "Incorporation of
Certain Documents by Reference." Capitalized terms not otherwise defined
below or elsewhere in this Prospectus have the meanings given to such terms
in the Agreement.
PURPOSE AND ADOPTION
The Agreement is intended to provide Rouleau with a proprietary interest in
the Company and its subsidiaries in order to (a) increase his interest in the
welfare of the Company with respect to the management, growth and protection of
the business of the Company and (b) furnish an incentive to Rouleau to continue
his services for the Company. Pursuant to a duly adopted resolution dated June
6, 1997, the Board authorized the Company to issue to Rouleau the Non-Plan
Options effective as of April 2, 1996.
SHARES COVERED
As of June 12, 1997, the total number of shares of Common Stock available
for issuance under the Agreement was 500,000 and Rouleau Options exercisable
for all 500,000 of such shares had been granted. Rouleau Options exercisable
for 300,000 shares are currently exercisable and Rouleau Options exercisable
for 100,000 shares become exercisable on each of April 2, 1998 and April 2,
1999. Thus, no Rouleau Options are currently available for grant under the
Agreement.
OPTIONS
The Agreement authorizes the grant of Rouleau Options to purchase shares
of Common Stock that are not intended to qualify as incentive stock options
under Section 422 of the Code, and which permit a participant to benefit from
increases in the value of shares of Common Stock above a predetermined
purchase price per share. The Rouleau Options are more fully described under
"-- Description of Awards" below.
TRANSFERABILITY
The Non-Plan Options granted under the Agreement may be transferred by the
holder thereof upon five days prior written notice to the Company.
ADJUSTMENTS
The Board may adjust the number of shares available for the Rouleau
Options, the number of shares of Common Stock subject to and the exercise
price for each share covered by the unexercised portions of the Rouleau
Options granted under the Agreement (but without change in the aggregate
exercise price applicable to such unexercised portions of the Rouleau
Options) to effect a change in capitalization of the Company, such as a stock
dividend, stock split, reverse stock split, share combination, exchange of
shares, merger, consolidation, reorganization, liquidation or the like, of or
by the Company.
NONQUALIFIED AND UNFUNDED
The Agreement is unfunded and does not give participants any rights that
are superior to those of the Company's general creditors. The Agreement is
not subject to the provisions of ERISA and is not qualified under Section
401(a) of the Code.
8
<PAGE>
CONTINUATION AND TERMINATION OF EMPLOYMENT OR ADVISOR RELATIONSHIP;
TERMINATION OF OPTIONS.
The Agreement and the Rouleau Options granted under the Agreement do not
confer upon the holder of the Rouleau Options any right to be employed or to
continue employment in the Company. The Rouleau Options will terminate on
April 1, 2000.
DESCRIPTION OF AWARDS
The purchase price of Common Stock subject to the Rouleau Options granted
pursuant to the Agreement is $12.50 per share. Payment for Common Stock
purchased upon the exercise of the Rouleau Options may be made in cash, in
shares of Common Stock then owned by the holder(s) of the Rouleau Options,
with a promissory note, or in any other form of valid consideration, or a
combination of any of the foregoing.
FEDERAL INCOME TAX CONSEQUENCES
The following summary of certain federal income tax consequences of the
grant or award of the Rouleau Options under the Agreement is based on the
Code, as amended to date, applicable proposed and final Treasury Regulations,
judicial authority and current administrative rulings and practice, all of
which are subject to change. This summary does not attempt to describe all
of the possible tax consequences that could result from the acquisition,
holding, exercise or disposition of the Rouleau Options or the shares of
Common Stock purchased thereunder.
The Rouleau Options granted under the Agreement are intended to be
nonqualified stock options. Nonqualified stock options generally will not
result in any taxable income to the optionee at the time of the grant, but
the holder thereof will realize ordinary income at the time of exercise of
the Rouleau Options if the shares are not subject to any substantial risk of
forfeiture (as defined in Section 83 of the Code). Under such circumstances,
the amount of ordinary income is measured by the excess of the fair market
value of the optioned shares at the time of exercise over the exercise price.
An optionee's tax basis in shares acquired upon the exercise of nonqualified
stock options is generally equal to the exercise price plus any amount
treated as ordinary income. If the exercise price of a nonqualified stock
option is paid for, in whole or in part, by the delivery of shares of Common
Stock previously owned by the optionee ("Previously Acquired Shares"), no
gain or loss will be recognized on the exchange of the Previously Acquired
Shares for a like number of shares of Common Stock. The optionee's basis in
the number of optioned shares received equal to the number of Previously
Acquired Shares surrendered would be the same as the optionee's basis in the
Previously Acquired Shares. However, the optionee would be treated as
receiving ordinary income equal to the fair market value (at the time of
exercise) of the number of shares of Common Stock received in excess of the
number of Previously Acquired Shares surrendered, and the optionee's basis in
such excess shares would be equal to their fair market value at the time of
exercise.
SPECIAL RULES APPLICABLE TO INSIDERS. In limited circumstances where the
sale of shares of Common Stock that are received as the result of the
exercise of the Rouleau Options could subject an officer or director to suit
under Section 16(b) of the Exchange Act, the tax consequences to the officer
or director may differ from the tax consequences described above. In these
circumstances, unless a special election has been made, the principal
difference usually will be to postpone valuation and taxation of the stock
received so long as the sale of the shares received could subject the officer
or director to suit under Section 16(b) of the Exchange Act, but not longer
than six months.
9
<PAGE>
GENERAL MATTERS APPLICABLE TO THE COMPANY. To the extent that an optionee
recognizes ordinary income in the circumstances described above, the Company
would be entitled to a corresponding deduction, provided in general that (i)
the amount is an ordinary and necessary business expense and such income
meets the test of reasonableness, (ii) the deduction is not disallowed
pursuant to the annual compensation limit set forth in Section 162(m) of the
Code and (iii) certain statutory provisions relating to so-called "excess
parachute payments" do not apply.
BECAUSE THE TAX CONSEQUENCES TO A HOLDER(S) OF THE ROULEAU OPTIONS, OR ANY
PORTION THEREOF, MAY VARY DEPENDING ON HIS OR HER INDIVIDUAL CIRCUMSTANCES,
THE HOLDER(S) OF THE ROULEAU OPTIONS, OR ANY PORTION THEREOF, SHOULD CONSULT
HIS OR HER PERSONAL TAX ADVISOR REGARDING THE FEDERAL AND ANY STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES TO HIM OR HER.
PLAN OF DISTRIBUTION
The Shares may be issued to the Selling Stockholders from time to time by
the Company upon exercise of Options. The Shares may be sold or otherwise
disposed of from time to time by any of the Selling Stockholders in one or
more transactions through any one or more of the following: (i) to purchasers
directly, (ii) in ordinary brokerage transactions and transactions in which
the broker solicits purchasers, (iii) through underwriters or dealers who may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Stockholders or from the purchasers of the
Shares for whom they may act as agent, (iv) the pledge of the Shares as
security for any loan or obligation, including pledges to brokers or dealers
who may, from time to time, themselves effect distributions of the Shares or
interests therein, (v) purchases by a broker or dealer as principal and
resale by such broker or dealer for its own account pursuant to this
Prospectus, (vi) a block trade in which the broker or dealer so engaged will
attempt to sell the Shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction and (vii) an exchange
distribution in accordance with the rules of such exchange, or in
transactions in the over the counter market including, without limitation,
the Nasdaq National Market System. Such sales may be made at prices and at
terms then prevailing or at prices related to the then current market price
or at negotiated prices and terms. In effecting sales, brokers or dealers may
arrange for other brokers or dealers to participate. The Selling
Stockholders or such successors in interest, and any underwriters, brokers,
dealers or agents that participate in the distribution of the Shares, may be
deemed to be "underwriters" within the meaning of the Securities Act, and any
profit on the sale of the Shares by them and any discounts, commissions or
concessions received by any such underwriters, brokers, dealers or agents may
be deemed to be underwriting commissions or discounts under the Securities
Act. In addition, any of the Shares covered by this Prospectus which qualify
for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant
to this Prospectus.
The Company will pay all of the expenses incident to the offering hereby
and sale of the Shares to the public other than underwriting discounts or
commissions, brokers' fees and the fees and expenses of any counsel to the
Selling Stockholders related thereto.
LEGAL MATTERS
Certain legal matters in connection with the validity of the Common Stock
offered hereby have been passed upon for the Company by Jones, Day, Reavis &
Pogue, Dallas, Texas. Michael C. French, a consultant to Jones, Day, Reavis
& Pogue, is a director of the Company.
EXPERTS
The consolidated financial statements of Michaels Stores, Inc. incorporated
by reference in the Company's Annual Report (Form 10-K) for the year ended
February 1, 1997, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report incorporated by reference therein and incorporated
by reference herein.
10
<PAGE>
Such consolidated financial statements are incorporated herein by reference
in reliance upon such report given upon the authority of such firm as experts
in accounting and auditing.
FORWARD-LOOKING INFORMATION
Certain statements contained in this Prospectus (including the documents
incorporated by reference herein) which are not historical facts are
forward-looking statements that involve risks and uncertainties, including,
but not limited to, customer demand and trends in the arts, crafts and
decorative items industry, related inventory risks due to shifts in customer
demand, the effect of economic conditions, the impact of competitors'
locations and pricing, the availability of acceptable real estate locations
for new stores, difficulties with respect to new technologies such as
point-of-sale systems, supply constraints or difficulties, the results of
financing efforts, the effect of the Company's accounting policies and other
risks detailed in this Prospectus (including the documents incorporated by
reference herein).
11
<PAGE>
NO PERSON HAS BEEN AUTHORIZED IN
CONNECTION WITH THE OFFERING HEREBY
TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION NOT CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR 1,450,000 SHARES
MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT MICHAELS STORES, INC.
CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES TO ANY PERSON OR BY ANYONE
IN ANY JURISDICTION WHERE SUCH OFFER
OR SOLICITATION WOULD BE UNLAWFUL. COMMON STOCK
NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY ----------
CIRCUMSTANCES, CREATE ANY IMPLICATION PROSPECTUS
THAT THE INFORMATION CONTAINED HEREIN ----------
IS CORRECT AS OF ANY DATE SUBSEQUENT
TO THE DATE HEREOF.
---------- JUNE __, 1997
TABLE OF CONTENTS
Page
----
Available Information. . . . . . . . 2
Incorporation of Certain Documents
by Reference . . . . . . . . . . . 2
The Company. . . . . . . . . . . . . 2
Use of Proceeds. . . . . . . . . . . 3
Selling Stockholders . . . . . . . . 3
1994 Non-Statutory Stock
Option Plan. . . . . . . . . . . . 5
Stock Option Agreement . . . . . . . 8
Plan of Distribution . . . . . . . . 10
Legal Matters. . . . . . . . . . . . 10
Experts. . . . . . . . . . . . . . . 10
Forward-Looking Information. . . . . 11
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses to be incurred in connection with the issuance and
distribution of the Common Stock covered by this Registration Statement, all
of which will be paid by the Registrant, are as follows:
Registration Fee. . . . . . . . . . . . . . . . .$ 7,343
Printing, Engraving and Filing Expenses . . . . .$ 3,000
Accounting Fees and Expenses. . . . . . . . . . .$ 5,000
Legal Fees and Expenses . . . . . . . . . . . . .$ 6,000
Miscellaneous . . . . . . . . . . . . . . . . . .$ 1,657
--------
Total . . . . . . . . . . . . . . . . . . . . . .$ 23,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers or former directors or officers and
to purchase insurance with respect to liability arising out of their capacity
or status as directors and officers. Such law provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any
other rights to which the directors and officers may be entitled under a
corporation's certificate of incorporation, bylaws, any agreement or
otherwise.
Reference is made to Article Nine of the Company's Restated Certificate of
Incorporation, as amended, which appears as Exhibit 4.1 to this Registration
Statement, which provides for indemnification of directors and officers.
Reference is made to Article IX of the Company's amended Bylaws which
appear as Exhibit 4.2 to this Registration Statement, which provides for
indemnification of directors and officers.
In addition, the Company has entered into Indemnity Agreements with certain
of its executive officers and directors.
The Company has procured insurance that purports (i) to insure it against
certain costs of indemnification that may be incurred by it pursuant to the
provisions referred to above or otherwise and (ii) to insure the directors
and officers of the Company against certain liabilities incurred by them in
the discharge of their functions as directors and officers except for
liabilities arising from their own malfeasance.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been advised that in
the opinion of the Commission such indemnification is against public policy
as expressed in the Securities Act and is therefore unenforceable.
ITEM 16. EXHIBITS.
The following is a list of all exhibits filed as a part of this Registration
Statement on Form S-3, including those incorporated herein by reference.
Exhibit
Number Description of Exhibit
- --------- ----------------------
4.1 Restated Certificate of Incorporation of the Registrant. (1)
4.2 Bylaws of the Registrant, as amended and restated. (2)
II-1
<PAGE>
Exhibit
Number Description of Exhibit
- --------- ----------------------
4.3 Form of Common Stock Certificate. (2)
5.1 Opinion of Jones, Day, Reavis & Pogue. (3)
23.1 Consent of Ernst & Young LLP. (3)
23.2 Consent of Jones, Day, Reavis & Pogue is contained in the opinion
filed as Exhibit 5.1 hereto.
24.1 Power of attorney. (Included on Signature Page hereof.)
99.1 Michaels Stores, Inc. Amended and Restated 1994 Non-Statutory
Stock Option Plan. (4)
99.2 Form of Michaels Stores, Inc. Stock Option Agreement, dated June 6,
1997, between the Company and R. Michael Rouleau. (3)
- ---------------
(1) Previously filed as an Exhibit to the Registrant's Registration Statement
on Form S-8 (No. 33-54726) and incorporated herein by reference.
(2) Previously filed as an Exhibit to the Registrant's Annual Report on Form
10-K for the year ended January 30, 1994 and incorporated herein by
reference.
(3) Filed herewith.
(4) Previously filed as an Exhibit to the Registrant's Registration Statement
on Form S-8 (No. 333-21635) and incorporated herein by reference.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of a prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20% change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) of this Section do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
II-2
<PAGE>
filed by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this Registration
Statement.
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof; and
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
undersigned Company's annual report pursuant to Section 13(a) or Section
15(d) of the Exchange Act that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer, or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irving, State of Texas on June 17, 1997.
MICHAELS STORES, INC.
By: /s/ Bryan M. DeCordova
--------------------------------------
Bryan M. DeCordova
Executive Vice President -
Chief Financial Officer
Each person whose signature appears below authorizes R. Michael Rouleau,
Bryan M. DeCordova and Mark V. Beasley, each of whom may act without joinder
of the other, to execute in the name of each such person who is then an
officer or director of the Registrant and to file any amendments to this
Registration Statement necessary or advisable to enable the Registrant to
comply with the Securities Act of 1933, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission, in
respect thereof, in connection with the registration of the securities which
are the subject of this Registration Statement, which amendments may make
such changes in the Registration Statement as such attorney may deem
appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated.
Signatures Title
- ----------- -----
Chairman of the June 17, 1997
- ------------------------------ Board of Directors
Sam Wyly
/s/ Charles J. Wyly, Jr. Vice Chairman of the June 17, 1997
- ------------------------------ Board of Directors
Charles J. Wyly, Jr.
/s/ R. Michael Rouleau President and June 17, 1997
- ------------------------------ Chief Executive Officer
R. Michael Rouleau (Principal Executive Officer)
/s/ Bryan M. DeCordova Executive Vice President- June 17, 1997
- ------------------------------ Chief Financial Officer
Bryan M. DeCordova (Principal Financial and
Accounting Officer)
/s/ Evan A. Wyly Managing Director June 17, 1997
- ------------------------------
Evan A. Wyly
/s/ Donald R. Miller, Jr. Managing Director and June 17, 1997
- ------------------------------ Vice President-Market
Donald R. Miller, Jr. Development
/s/ Michael C. French Managing Director June 17, 199
- ------------------------------
Michael C. French
/s/ Dr. F. Jay Taylor Director June 17, 199
- ------------------------------
Dr. F. Jay Taylor
/s/ Richard E. Hanlon Director June 17, 199
- ------------------------------
Richard E. Hanlon
II-4
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
- ------- ----------------------
4.1 Restated Certificate of Incorporation of the Registrant. (1)
4.2 Bylaws of the Registrant, as amended and restated. (2)
4.3 Form of Common Stock Certificate. (2)
5.1 Opinion of Jones, Day, Reavis & Pogue. (3)
23.1 Consent of Ernst & Young LLP. (3)
23.2 Consent of Jones, Day, Reavis & Pogue is contained in the opinion
filed as Exhibit 5.1 hereto.
24.1 Power of attorney. (Included on Signature Page hereof.)
99.1 Michaels Stores, Inc. Amended and Restated 1994 Non-Statutory
Stock Option Plan. (4)
99.2 Form of Michaels Stores, Inc. Stock Option Agreement, dated June
6, 1997, between the Company and R. Michael Rouleau. (3)
- ---------------
(1) Previously filed as an Exhibit to the Registrant's Registration Statement
on Form S-8 (No. 33-54726) and incorporated herein by reference.
(2) Previously filed as an Exhibit to the Registrant's Annual Report on Form
10-K for the year ended January 30, 1994 and incorporated herein by
reference.
(3) Filed herewith.
(4) Previously filed as an Exhibit to the Registrant's Registration Statement
on Form S-8 (No. 333-21635) and incorporated herein by reference.
II-5
<PAGE>
EXHIBIT 5.1
JONES, DAY, REAVIS & POGUE
2300 TRAMMELL CROW CENTER
2001 ROSS AVENUE
DALLAS, TEXAS 75201
June 17, 1997
Michaels Stores, Inc.
8000 Bent Branch Drive
Irving, Texas 75063
Re: Registration on Form S-3 of 1,450,000 Shares of Common Stock,
par value $0.10 per share, of Michaels Stores, Inc.
-------------------------------------------------------------
Ladies and Gentlemen:
We are acting as counsel to Michaels Stores, Inc., a Delaware
corporation (the "Company"), in connection with the registration pursuant to
the Company's Registration Statement on Form S-3 (the "Registration
Statement") of (i) the offer and sale by the Company of up to an aggregate of
940,000 shares (the "Primary Shares") of Common Stock, par value $0.10 per
share (the "Common Stock"), of the Company, 740,000 of which are issuable
upon exercise of options (the "1994 Options") granted or to be granted
pursuant to the Company's Amended and Restated 1994 Non-Statutory Stock
Option Plan (the "Plan"), and the remaining 200,000 of which are issuable
upon exercise of options (the "Rouleau Options") granted to R. Michael
Rouleau ("Rouleau") pursuant to the Stock Option Agreement, dated June 6,
1997 (the "Agreement"), between the Company and Rouleau (collectively, the
1994 Options and the Rouleau Options are referred to herein as the
"Options"); and (ii) the subsequent offer and resale of the Primary Shares by
certain holders of Options granted pursuant to the Plan or the Agreement,
and up to an additional 510,000 shares of Common Stock (together with the
Primary Shares, the "Shares") acquired or to be acquired by persons or
entities upon the exercise of other options granted pursuant to the Plan or
the Agreement.
We have examined such documents, records, and matters of law as we
have deemed necessary for purposes of this opinion. Based on such
examination and on the assumptions set forth below, we are of the opinion
that the Shares are duly authorized and, when issued and delivered in
accordance with the provisions of the Plan or the Agreement, as the case may
be, against payment of the consideration therefor as provided in the Plan or
the Agreement, and having a value not less than the par value thereof, will
be validly issued, fully paid, and nonassessable.
In rendering the foregoing opinion, we have relied as to certain
factual matters upon certificates of officers of the Company and public
officials, and we have not independently checked or verified the accuracy of
the statements contained therein. In addition, our examination of matters of
law has been limited to the General Corporation Law of the State of Delaware
and the federal laws of the United States of America, in each case as in
effect on the date hereof.
We hereby consent to the filing of this opinion as Exhibit 5.1 to
the Registration Statement and to the reference to us in the Prospectus under
the caption "Legal Matters."
Very truly yours,
/s/ Jones, Day, Reavis & Pogue
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference of our firm under the caption "Experts" in
the Registration Statement (Form S-3) and related Prospectus for the
registration of 1,450,000 shares of its common stock pertaining to the
Michaels Stores, Inc. Amended and Restated 1994 Non-Statutory Stock Option
Plan and that certain Michaels Stores, Inc. Stock Option Agreement, dated
June 6, 1997, between Michaels Stores, Inc. and R. Michael Rouleau, and to
the incorporation by reference therein of our report dated March 12, 1997,
with respect to the consolidated financial statements of Michaels Stores,
Inc. incorporated by reference in its Annual Report (Form 10-K) for the year
ended February 1, 1997, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
--------------------------------------
Ernst & Young LLP
Dallas, Texas
June 12, 1997
<PAGE>
MICHAELS STORES, INC.
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") is entered into by and
between Michaels Stores, Inc., a Delaware corporation (the "Company"), and R.
Michael Rouleau, an employee or other advisor of the Company or one of its
subsidiaries (the "Participant"). The Company and the Participant agree as
follows:
1. GRANT OF OPTION. Pursuant to a duly adopted resolution of the Board
of Directors of the Company (the "Board"), the Company grants to the Participant
an option (an "Option") to purchase from the Company a total of 500,000 shares
of the Company's Common Stock, par value $.10 per share ("Common Stock"), at an
exercise price per share of $12.50 (the "Exercise Price"), in the amounts,
during the periods and upon the terms and conditions set forth herein. The date
of grant of the Option is April 2, 1996. The Exercise Price reflects the fair
market value of Common Stock on March 4, 1996, the date on which the Company
agreed to grant the Option to Participant in connection with his employment with
the Company.
2. TIME OF EXERCISE. Subject to the other terms hereof, the Option may
be exercised, in whole or in part, according to the following schedule:
Percentage Exercisable Date
---------------------- ----
40% April 2, 1996
20% April 2, 1997
20% April 2, 1998
20% April 2, 1999
The unexercised portion of the Option from one period may be carried over to a
subsequent period or periods and the right of the Participant to exercise the
Option as to such unexercised portion will continue for the entire term. In no
event may the Option be exercised in whole or in part, however, after the
expiration of the term described in Section 3 below.
3. TERM. Subject to the other terms hereof, the Option and all rights
incident thereto will terminate on April 1, 2000.
4. RESTRICTIONS ON EXERCISE. The Option:
(a) May be exercised only with respect to full shares and no
fractional shares of Common Stock will be issued upon exercise of the Option;
and
<PAGE>
(b) May be exercised in whole or in part, but no certificates
representing shares subject to the Option will be delivered if any requisite
registration with, clearance by, or consent, approval or authorization of, any
governmental authority of any kind having jurisdiction over the exercise of the
Option, or issuance of securities upon such exercise, has not been taken or
secured.
5. MANNER OF EXERCISE. The Option may be exercised by written notice to
the Company of the number of shares being purchased and the aggregate Exercise
Price to be paid, accompanied by the following:
(a) (i) Full payment of the aggregate Exercise Price in United States
Dollars, or in shares of Common Stock then owned by the Participant, or in any
other form of valid consideration, (ii) a copy of irrevocable instructions from
the Participant to a broker or dealer, reasonably acceptable to the Company, to
sell certain of the shares purchased upon exercise of the Option or pledge them
as collateral for a loan and promptly deliver to the Company the amount of sale
or loan proceeds necessary to pay the aggregate Exercise Price, or (iii) a
combination of any of the foregoing as required by the Board in its discretion;
and
(b) An undertaking to furnish or execute such documents as the
Company in its discretion deems necessary (i) to evidence such exercise of the
Option, (ii) to determine whether registration is then required under the
Securities Act of 1933, as then in effect and (iii) to comply with or satisfy
the requirements of the Securities Act of 1933, or any other federal, state or
local law, as then in effect.
If Common Stock is to constitute all or any portion of the Exercise Price, it
will be valued at its fair market value, as determined by the Board on the basis
of such factors as the Board deems appropriate; provided that if at the time the
determination of fair market value is made, the shares of Common Stock are
admitted to trading on a national securities exchange for which sales prices are
regularly reported, the fair market value of the shares will not be less than
the lower of (i) the mean between the closing bid and asked prices reported for,
or (ii) the closing trade price of, the Common Stock on that exchange on the
date or most recent trading day preceding the date on which the Option is
exercised. For purposes of the preceding sentence, the term "national
securities exchange" will include without limitation the National Association of
Securities Dealers Automated Quotation System, the NASDAQ National Market System
and the over-the-counter market. Any federal, state or local taxes required to
be paid or withheld at the time of exercise will be paid or withheld in full
prior to any delivery of shares upon exercise. Upon due exercise of the Option,
the Company will issue such shares registered in the name of the person
exercising the Option or as directed by such person in writing reasonably
acceptable to the Company.
6. TRANSFERABILITY OF OPTION. This Option may be transferred by the
holder hereof upon five (5) days prior written notice to the Company.
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7. RIGHTS OF STOCKHOLDER. Neither the Participant nor any of the
Participant's beneficiaries will be deemed to have any rights as a stockholder
with respect to any shares covered by the Option until the issuance of a
certificate to the Participant for such shares.
8. CAPITAL ADJUSTMENTS. If the outstanding shares of Common Stock are
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities through merger, consolidation, combination, exchange of
shares, other reorganization, recapitalization, reclassification, stock
dividend, stock split or reverse stock split, an appropriate and proportionate
adjustment will be made changing the number or kind of shares allocated to
unexercised portions of the Option. Any such adjustment will be made without
change in the aggregate Exercise Price applicable to the unexercised portions of
the Option, but with a corresponding adjustment in the Exercise Price for each
share covered by such unexercised portions. Except as otherwise specifically
provided herein, no adjustment will be made for dividends or other rights for
which the record date is prior to the issuance of the certificate or
certificates representing shares issued pursuant to the Option.
9. RIGHTS IN EVENT OF DEATH OF PARTICIPANT. If the Participant dies
prior to termination of the Participant's rights to exercise the Option in
accordance with the provisions of this Agreement without having exercised the
Option as to all shares covered thereby, the Option may be fully exercised as to
the unexercised portion thereof and subject to all other conditions of this
Agreement by the Participant's estate or a person who acquired the right to
exercise the Option by bequest or inheritance or by reason of the death of the
Participant, provided the period during which the Option may be so exercised
will not continue beyond the expiration of the Option or one year from the date
of the Participant's death, whichever date first occurs.
10. STOCK PURCHASE FOR INVESTMENT. Unless the shares are covered by a
then current and effective registration statement under the Securities Act of
1933, as then in effect, the Participant, by accepting the Option, represents,
warrants, covenants and agrees on behalf of the Participant and the
Participant's transferees that all shares of Common Stock purchased upon the
exercise of the Option will be acquired for investment and not for resale or
distribution, and that upon each exercise of any portion of the Option, the
person entitled to exercise the same will furnish evidence satisfactory to the
Company (including a written and signed representation) to the effect that the
shares are being acquired in good faith for investment and not for resale or
distribution. The Participant understands and agrees that all certificates
evidencing any of the shares purchased upon the exercise of the Option will bear
a legend, prominently stamped or printed thereon, reading substantially as
follows:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
or the securities law of any state (a "State Act"). The shares have
been acquired for investment and may not be transferred or otherwise
disposed of unless such shares are then registered under the Act and
any applicable State Act or
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the issuer has received an opinion of counsel, satisfactory to the
issuer, that such transfer does not require registration under the Act
or any State Act.
11. NOTICES. Each notice relating to this Agreement must be in writing
and delivered in person or by certified mail to the proper address. Each notice
will be deemed to have been given on the date it is received. Each notice to
the Company must be addressed to it at its principal office, now 8000 Bent
Branch Drive, Irving, Texas 75063, Attention: Secretary. Each notice to the
Participant or other person or persons then entitled to exercise the Option will
be addressed to the Participant or such other person or persons at the
Participant's address specified below. Anyone to whom a notice may be given
under this Agreement may designate a new address by notice to that effect.
12. NO OBLIGATION TO EXERCISE OPTION. This Agreement does not impose any
obligation upon the Participant to exercise the Option.
13. EMPLOYMENT. This Agreement does not confer upon the Participant any
right to be employed or to continue in the employ or service of the Company or
any of its subsidiaries, nor does it in any way interfere with the right of the
Company or any such subsidiary to terminate the employment or service of the
Participant at any time.
14. LAW GOVERNING. This Agreement is intended to be performed in the
State of Texas and is to be construed and enforced in accordance with and
governed by the internal laws of such State, except as to matters of corporate
law, which will be governed by the laws of the State of Delaware.
15. MULTIPLE COUNTERPARTS. This Agreement is executed simultaneously in
multiple counterparts, each of which is deemed an original, but all of which
together constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and the Participant have executed this
Agreement as of the 6th day of June, 1997.
MICHAELS STORES, INC.
By:
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Title:
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PARTICIPANT:
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Social Security Number
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