<PAGE>
As filed with the Securities and Exchange Commission on June 17, 1997.
Registration No. 333-______
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
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
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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)
- -------------------------------------------------------------------------------
Common Stock, par value
$0.10 per share............ 6,800,000 $20.75 $141,100,000 $42,758
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1. Represents shares issuable in connection with the exercise of options
available for grant under the Michaels Stores, Inc. 1997 Stock Option
Plan (the "Plan"). Pursuant to Rule 416, there are also registered
hereunder such indeterminate number of additional shares as may become
subject to awards under the Plan 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 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.
<PAGE>
Subject to Completion, Dated June 17, 1997
PROSPECTUS
6,800,000 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 6,800,000 shares (the "Shares") of the
Company's common stock, par value $0.10 per share (the "Common Stock"),
issuable by the Company upon exercise of options ("Options") to be granted
from time to time to eligible persons pursuant to the provisions of the
Michaels Stores, Inc. 1997 Stock Option Plan (the "Plan") and the subsequent
offer and sale 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 as a
result of the antidilution provisions contained therein.
Sales by the Selling Stockholders may be made through the Nasdaq National
Market System, on one or more exchanges, or 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
$58,000.
------------
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.
------------
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 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).
2
<PAGE>
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 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 6,800,000 Shares, plus such indeterminate number of additional shares of
Common Stock as may become subject to awards under the Plan 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 1997 Stock Option Committee of the Board (the
"1997 Stock Option Committee") will, among other things, determine from time to
time (i) the individuals, from among the executive officers, key employees,
advisors, consultants, and directors of the Company and its subsidiaries, to
whom Options will be granted, (ii) the number of shares of Common Stock to be
covered by each Option (provided the maximum aggregate number of shares of
Common Stock with respect to which Options may be granted to any participant
under the Plan may not exceed 1,500,000 shares during any single calendar year),
and (iii) the purchase price of Common Stock subject to each Option, which may
not be less than the fair market value of the Common Stock on the date of grant.
As of the date of this Prospectus, no Options had been granted pursuant to
the Plan. Information regarding the identity of the Selling Stockholders, the
number of Options granted and certain information relating to the Selling
Stockholders will be provided by supplement to this Prospectus.
1997 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.
3
<PAGE>
PURPOSE AND ADOPTION
The Plan is intended to provide incentive compensation to certain of the
Company's executive officers, key employees, directors, advisors and
consultants. The Plan is also intended to aid in attracting persons of
outstanding ability to serve, and remain in the service of, the Company. The
Board adopted the Plan effective as of June 6, 1997, 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 June 6, 1997.
SHARES COVERED
As of June 12, 1997, the total number of shares of Common Stock available
for issuance under the Plan was 6,800,000. No options had been granted pursuant
to the Plan as of such date. Under the terms of the Plan, if at the close of
business on the last day of any fiscal quarter of the Company, the sum of (i)
the total number of shares of Common Stock theretofore issued upon the exercise
of Options, (ii) the total number of shares of Common Stock then subject to
outstanding Options, and (iii) the total number of shares of Common Stock then
remaining available under the Plan to be made subject to future grants of
Options (such sum being the "Company Actual Number"), is less than 20% of the
total number of shares of Common Stock then outstanding on a fully diluted basis
(the "Company Target Number"), the number of shares of Common Stock available
for issuance under the Plan will automatically be increased to a number that
will result in the Company Actual Number being equal to the Company Target
Number.
OPTIONS
The Plan authorizes the grant of 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 Options are more fully
described under "- Description of Awards" below.
ADMINISTRATION
The Plan is administered by the 1997 Stock Option Committee and the Board,
which have the authority, subject to certain restrictions set forth in the Plan,
to determine from time to time the individuals to whom Options will be granted;
to determine the number of shares to be covered by each Option; to determine the
time or times at which Options will be granted; and to interpret and construe
the provisions of the Plan and the instruments by which Options will be
evidenced; PROVIDED that the 1997 Stock Option Committee has exclusive authority
with respect to Options intended to comply with Section 162(m) of the Code.
All of the members of the 1997 Stock Option 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.
Any interpretation, construction or determination by the 1997 Stock Option
Committee or the Board, as applicable, will be final and conclusive; PROVIDED
that in the event the 1997 Stock Option Committee disagrees with the Board with
respect to such interpretation, construction or determination, the Board's
determination will be final and conclusive.
ELIGIBILITY
Executive officers, key employees, directors, advisors and consultants of
the Company and its subsidiaries, are eligible to receive grants of Options.
TRANSFERABILITY
Options granted under the Plan may be subject to such transfer
restrictions, if any, as the 1997 Stock Option Committee or the Board, as
applicable, may determine.
4
<PAGE>
ADJUSTMENTS
The 1997 Stock Option Committee or the Board may make or provide for such
adjustments in the maximum number of shares available under the Plan, in the
number of shares of Common Stock covered by outstanding Options, in the purchase
price per share of Common Stock covered by Options, and/or in the kind of shares
covered thereby (including shares of another issuer), as the 1997 Stock Option
Committee or the Board, as applicable, in its sole discretion, exercised in good
faith, may determine is equitably required to prevent dilution or enlargement of
the rights of Plan participants that otherwise would result from any stock
divided, stock split, combination of shares, recapitalization or other change in
the capital structure of the Company, merger, consolidation, spin-off,
reorganization, partial or complete liquidation, issuance of rights or warrants
to purchase securities or any other corporate transaction or event having an
effect similar to any of the foregoing.
VESTING OF CERTAIN OPTIONS UPON A CHANGE IN CONTROL
The stock option agreement evidencing any Option may provide for the
earlier exercise of such Option in the event of a change in control of the
Company (as defined in such stock option agreement or in any agreement
referenced in such stock option agreement) or in the event of any other similar
transaction or event.
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 does not confer upon any Plan participant any right with respect
to continuance of employment or other service with the Company or any of its
subsidiaries and does not interfere in any way with any right that the Company
or any of its subsidiaries would otherwise have to terminate a Plan
participant's employment or other service at any time.
TERMINATION AND AMENDMENT
The Plan may be terminated at any time by action of the Board. The
termination of the Plan will not adversely affect the terms of any outstanding
Options. The Plan may be amended by the Board or any duly authorized committee
thereof. 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, or in the event Rule 16b-3 is amended or supplemented or any
of the rules under Section 16 of the Act are amended or supplemented, in either
event to permit the Company to remove or lessen any restrictions on or with
respect to Options, the 1997 Stock Option Committee or the Board may amend the
Plan to the extent of any such requirement, amendment, or supplement, and all
Options then outstanding will be subject to such amendment.
DESCRIPTION OF AWARDS
The Plan does not specify a maximum term for Options granted thereunder.
The exercise price of Common Stock subject to an Option granted pursuant to the
Plan shall be no less than the fair market value per share of the Common Stock
on the date determined as the grant date in accordance with the authorization of
the 1997 Stock Option Committee or the Board, as the case may be. The maximum
aggregate number of shares of Common Stock with respect to which Options may be
granted to any participant in the Plan during the term of the Plan shall not
exceed 1,500,000 shares of Common Stock during any single calendar year. A
grant of Options may provide for the deferred payment of the exercise price from
the proceeds of sales through a bank or broker on the exercise date of some or
all of the shares of Common Stock to which such exercise
5
<PAGE>
relates. The 1997 Stock Option Committee or the Board may, without the
consent of the holder of an Option, amend any option agreement in various
respects, including acceleration of the time at which the Option may be
exercised, extension of the expiration date, reduction of the purchase price
and waiver of other conditions or restrictions.
Payment for Common Stock purchased upon the exercise of an Option may be
made in cash or by check acceptable to the Company, by the actual or
constructive transfer to the Company of nonforfeitable, unrestricted shares of
Common Stock already owned by the Plan participant having an actual or
constructive value as of the time of exercise equal to the total exercise
price, by any other legal consideration, or a combination of any of the
foregoing, as required or approved by the Board or the 1997 Stock Option Plan
Committee, as applicable, in its discretion. The Plan does not require that a
participant hold shares received upon the exercise of Options for a specified
period and would permit immediate sequential exercises of Options with the
exercise price therefor being paid in shares of Common Stock, including shares
acquired as a result of prior exercises of Options.
FEDERAL INCOME TAX CONSEQUENCES
The following summary of certain federal income tax consequences of the
grant or award of 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 an
Option or the shares of Common Stock purchased thereunder.
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 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 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 an 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 or
a subsidiary, as the case may be, 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. Awards granted under the
Plan may be subject to acceleration in the event of a change in control of the
Company. Therefore, it is possible that these change-in-
6
<PAGE>
control features may affect whether amounts realized upon the receipt or
exercise of Options will be deductible by the Company under the "excess
parachute payments" provisions of the Code.
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.
PLAN OF DISTRIBUTION
The Shares may be issued to the Selling Shareholders from time to time by
the Company upon the 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. 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.
7
<PAGE>
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).
8
<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 MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER 6,800,000 SHARES
TO BUY ANY SECURITIES TO ANY PERSON OR BY
ANYONE IN ANY JURISDICTION WHERE SUCH OFFER
OR SOLICITATION WOULD BE UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY MICHAELS STORES, INC.
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------------
COMMON STOCK
TABLE OF CONTENTS
Page
----
Available Information................... 2
-------------
Incorporation of Certain Documents
by Reference........................... 2 PROSPECTUS
The Company............................. 3 -------------
Use of Proceeds......................... 3
Selling Stockholders.................... 3
1997 Stock Option Plan.................. 3 JUNE __, 1997
Plan of Distribution.................... 7
Legal Matters........................... 7
Experts................................. 7
Forward-Looking Information............. 8
<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............................. $42,758
Printing, Engraving and Filing Expense....... $ 3,000
Accounting Fees and Expense.................. $ 5,000
Legal Fees and Expense....................... $ 6,000
Miscellaneous................................ $ 1,242
-------
Total........................................ $58,000
=======
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. (3)
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 (Included in Exhibit 5.1).
24.1 Power of attorney. (Included on Signature Page hereof.)
99.1 Michaels Stores, Inc. 1997 Stock Option Plan. (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.
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 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
II-2
<PAGE>
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
Sam Wyly Board of Directors June 17, 1997
/s/ Charles J. Wyly, Jr.
- ------------------------------ Vice Chairman of the June 17, 1997
Charles J. Wyly, Jr. Board of Directors
/s/ R. Michael Rouleau
- ------------------------------ President and June 17, 1997
R. Michael Rouleau Chief Executive Officer
(Principal Executive Officer)
/s/ Bryan M. DeCordova
- ------------------------------ Executive Vice President - June 17, 1997
Bryan M. DeCordova Chief Financial Officer
(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
Donald R. Miller, Jr. Vice President -
Market Development
/s/ Michael C. French
- ------------------------------ Managing Director June 17, 1997
Michael C. French
/s/ Dr. F. Jay Taylor
- ------------------------------ Director June 17, 1997
Dr. F. Jay Taylor
/s/ Richard E. Hanlon
- ------------------------------ Director June 17, 1997
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. (3)
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 (Included in Exhibit 5.1).
24.1 Power of attorney. (Included on Signature Page hereof.)
99.1 Michaels Stores, Inc. 1997 Stock Option Plan. (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.
II-5
<PAGE>
EXHIBIT 4.3
[An intertwining line design [An intertwining line design
appears on the left border of appears on the right border of
the stock certificate, with the stock certificate, with
the certificate number appearing the number of shares appearing
at the top of the border and the at the top of the border and
Company's logo at the bottom of the Company's seal appearing at
the border] the bottom of the border]
COMMON STOCK COMMON STOCK
PAR VALUE $.10 PAR VALUE $.10
[A sketch of a woman in a draped gown, with a city skyline in the background,
appears directly above the Company's logo on the stock certificate]
CUSIP 594087 10 8
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFICATE IS TRANSFERABLE IN INCORPORATED UNDER THE LAWS
NEW YORK, NEW YORK; DALLAS, TEXAS; OF THE STATE OF DELAWARE
OR CLEVELAND, OHIO.
MICHAELS-R-
STORES, INC.
[Company name listed above appears in form of logo]
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
MICHAELS STORES, INC. (HEREINAFTER REFERRED TO AS THE "CORPORATION")
TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON OR
BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY
ENDORSED. THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE ISSUED UNDER
AND SHALL BE SUBJECT TO ALL OF THE PROVISIONS OF THE CERTIFICATE OF
INCORPORATION OF THE CORPORATION AND ANY AMENDMENTS THERETO, COPIES OF WHICH ARE
ON FILE WITH THE CORPORATION AND THE TRANSFER AGENT, TO ALL OF WHICH THE HOLDER,
BY ACCEPTANCE HEREOF, ASSENTS. THIS CERTIFICATE IS NOT VALID UNLESS
COUNTERSIGNED BY A TRANSFER AGENT AND REGISTERED BY A REGISTRAR.
WITNESS THE SEAL OF THE CORPORATION AND THE SIGNATURES OF ITS DULY
AUTHORIZED OFFICERS.
Dated:
Countersigned and Registered:
SOCIETY NATIONAL BANK
Transfer Agent
/s/ Jack E. Bush /s/ Mark V. Beasley By: and Registrar
President Secretary
Authorized Signature
<PAGE>
MICHAELS-R-
STORES, INC.
[Company name listed above appears in form of logo]
---------------------------------------
Michaels Stores, Inc. will furnish to the record holder
of this certificate without charge on written request to
such corporation at its principal place of business a full
statement of the powers, designations, preferences and
relative, participating, optional or other special rights of
each class of stock or series thereof which such corporation
is authorized to issue and the qualifications, limitations
or restrictions of such preferences and/or rights.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ______ Custodian _______
TEN ENT -- as tenants by the (Cust) (Minor)
entireties Under Uniform Gifts to Minors Act
JT TEN -- as joint tenants with
right of survivorship ---------------------------------
and not as tenants in (State)
common
Additional abbreviations may also be used though not in the above list.
For value received, _________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------
| |_____________________________________________
--------------------------------
_______________________________________________________________________________
Please print or typewrite name and address including
postal zip code of assignee.
_______________________________________________________________________________
_______________________________________________________________________________
__________________________________________________________________________Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint_____________________________________________
_______________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated,
------------------------------
X
--------------------------------------
NOTICE: (SIGNATURE)
THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRES-
POND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE -->
CERTIFICATE IN EVERY PARTICU-
LAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY
CHANGE WHATEVER. X
--------------------------------------
(SIGNATURE)
-------------------------------------------------------
| THE SIGNATURE(S) MUST BE GUARANTEED BY AN "ELIGIBLE|
|GUARANTOR INSTITUTION" AS DEFINED IN RULE 17Ad-15 UNDER|
| THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED.|
-------------------------------------------------------
|SIGNATURE(S) GUARANTEED BY: |
| |
| |
| |
| |
| |
| |
-------------------------------------------------------
<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 6,800,000 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 6,800,000
shares (the "Shares") of Common Stock, par value $0.10 per share (the "Common
Stock"), of the Company upon exercise of options to be granted pursuant to
the Company's 1997 Stock Option Plan (the "Plan") and (ii) the subsequent
offer and resale by certain holders of options granted pursuant to the Plan
of the Shares acquired or to be acquired by such holders upon the exercise of
such options.
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 against payment of the consideration therefor as
provided in the Plan 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
6,800,000 shares of its common stock pertaining to the Michaels Stores, Inc.
1997 Stock Option Plan, 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>
EXHIBIT 99.1
MICHAELS STORES, INC.
1997 STOCK OPTION PLAN
Michaels Stores, Inc., a Delaware corporation (the "Company"), hereby
establishes the Michaels Stores, Inc. 1997 Stock Option Plan (the "Plan"),
effective as of June 6, 1997.
1. PURPOSE. The purpose of the Plan is to attract and retain the best
available talent and encourage the highest level of performance by executive
officers, key employees, directors, advisors and consultants, and to provide
them with incentives to put forth maximum efforts for the success of the
Company's business, in order to serve the best interests of the Company and its
stockholders. All options granted under the Plan are intended to be
nonstatutory stock options.
2. DEFINITIONS. The following terms, when used in the Plan with initial
capital letters, will have the following meanings:
(a) "Act" means the Securities Exchange Act of 1934 as in effect from
time to time.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as in effect from
time to time.
(d) "Common Stock" means the common stock, par value $.10 per share,
of the Company or any security into which such common stock may be changed
by reason of any transaction or event of the type described in Paragraph 7.
(e) "Date of Grant" means the date specified by the Stock Option
Committee or the Board, as applicable, on which a grant of Stock Options
will become effective (which date will not be earlier than the date on
which such committee or the Board takes action with respect thereto).
(f) "Market Value per Share" means the fair market value per share of
the Common Stock on the Date of Grant as determined by the Stock Option
Committee or the Board, as applicable.
(g) "Option Price" means the purchase price per share payable on
exercise of a Stock Option.
(h) "Participant" means a person who is selected by the Stock Option
Committee or the Board, as applicable, to receive Stock Options under
Paragraph 5
<PAGE>
of the Plan and who is at that time (i) an executive officer or other key
employee of the Company or any Subsidiary, (ii) an advisor or consultant
to the Company or any Subsidiary, or (iii) a member of the Board.
(i) "Rule 16b-3" means Rule 16b-3 under Section 16 of the Act as such
Rule is in effect from time to time.
(j) "Stock Option Committee" means the 1997 Stock Option Plan
Committee, which is a committee of the Board whose members are appointed by
the Board from time to time. All of the members of the Special Stock
Option Committee, which may not be less than two, are intended at all times
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;
PROVIDED, HOWEVER, that the failure of a member of such committee to so
qualify shall not be deemed to invalidate any Stock Option granted by such
committee.
(k) "Stock Option" means the right to purchase one or more shares of
Common Stock upon exercise of an option granted pursuant to Paragraph 5.
(l) "Subsidiary" means any corporation, partnership, joint venture or
other entity in which the Company owns or controls, directly or indirectly,
not less than 50% of the total combined voting power or equity interests
represented by all classes of stock issued by such corporation,
partnership, joint venture or other entity.
3. SHARES AVAILABLE UNDER PLAN. The shares of Common Stock which may be
issued under the Plan will not exceed in the aggregate 6,800,000 shares, subject
to adjustment as provided in this Paragraph 3. Such shares may be shares of
original issuance or treasury shares or a combination of the foregoing.
(a) Any shares of Common Stock which are subject to Stock Options
that are terminated unexercised, forfeited or surrendered or that expire
for any reason will again be available for issuance under the Plan.
(b) If, as of the close of business on the last day of each fiscal
quarter of the Company following the effective date of the Plan, the sum of
(i) the total number of shares of Common Stock previously issued upon the
exercise of Stock Options, (ii) the total number of shares of Common Stock
then subject to outstanding Stock Options, and (iii) the total number of
shares of Common Stock then remaining available for future Stock Option
grants under the Plan (such sum being the "Plan Shares") is less than 20%
of the total number of shares of Common Stock then outstanding computed on
a fully diluted basis (such total number being the "Outstanding Shares"),
the number of shares of Common Stock available for issuance under the Plan
will be increased (but not decreased) so that the number of Plan Shares
will be equal to 20% of the number of Outstanding Shares. For purposes of
the foregoing adjustment, all outstanding Stock Options and stock options
granted under other Company plans will be treated as fully exercised in
computing the
-2-
<PAGE>
number of outstanding shares of Common Stock on a fully diluted basis,
without regard to whether such stock options are then fully exercisable.
(c) The shares available for issuance under the Plan also will be
subject to adjustment as provided in Paragraph 7.
4. INDIVIDUAL LIMITATION ON STOCK OPTIONS. The maximum aggregate number
of shares of Common Stock with respect to which Stock Options may be granted to
any Participant during any single calendar year will not exceed 1,500,000
shares.
5. GRANTS OF STOCK OPTIONS. The Stock Option Committee or the Board may
from time to time authorize grants to any Participant of Stock Options upon such
terms and conditions as such committee or the Board, as applicable, may
determine in accordance with the provisions set forth below.
(a) Each grant will specify the number of shares of Common Stock to
which it pertains.
(b) Each grant will specify the Option Price, which will not be less
than 100% of the Market Value per Share on the Date of Grant.
(c) Successive grants may be made to the same Participant whether or
not any Stock Options previously granted to such Participant remain
unexercised.
(d) Each grant will specify the required period or periods (if any)
of continuous service by the Participant with the Company or any Subsidiary
and/or any other conditions to be satisfied before the Stock Options or
installments thereof will become exercisable, and any grant may provide, or
may be amended to provide, for the earlier exercise of the Stock Options in
the event of a change in control of the Company (as defined in the stock
option agreement evidencing such grant or in any agreement referred to in
such stock option agreement) or in the event of any other similar
transaction or event.
(e) Each Stock Option granted pursuant to this Paragraph 5 may be
made subject to such transfer restrictions as the Stock Option Committee or
the Board, as applicable, may determine.
(f) Each grant will be evidenced by a stock option agreement executed
on behalf of the Company by the Chief Executive Officer (or another officer
designated by the Stock Option Committee or the Board, as applicable) and
delivered to the Participant and containing such further terms and
provisions, consistent with the Plan, as such committee or the Board, as
applicable, may approve.
6. PAYMENT. The Option Price will be payable, as required by the Stock
Option Committee or the Board in such Committee's or the Board's sole
discretion, as applicable, (i) in cash or by check acceptable to the Company,
(ii) by the transfer to the Company of
-3-
<PAGE>
shares of Common Stock owned by the Participant for at least six months (or,
with the consent of the Stock Option Committee or the Board, as applicable,
for less than six months) having an aggregate fair market value per share at
the date of exercise equal to the aggregate Option Price, (iii) by
authorizing the Company to withhold a number of shares of Common Stock
otherwise issuable to the Participant having an aggregate fair market value
per share on the date of exercise equal to the aggregate Option Price, (iv)
in any other form of valid consideration or (v) by a combination of such
methods of payment; PROVIDED, HOWEVER, that the payment methods described in
clauses (ii) and (iii) will not be available at any time that the Company is
prohibited from purchasing or acquiring such shares of Common Stock. The
Stock Option Committee or the Board, as applicable, may permit deferred
payment of the Option Price from the proceeds of sale through a bank or
broker of some or all of the shares to which such exercise relates.
7 ADJUSTMENTS. The Stock Option Committee or the Board may make or
provide for such adjustments in the maximum number of shares specified in
Paragraph 3, in the number of shares of Common Stock covered by outstanding
Stock Options granted hereunder, in the Option Price applicable to any such
Stock Options, and/or in the kind of shares covered thereby (including shares of
another issuer), as such committee or the Board, as applicable, in its sole
discretion, exercised in good faith, may determine is equitably required to
prevent dilution or enlargement of the rights of Participants that otherwise
would result from any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company,
merger, consolidation, spin-off, reorganization, partial or complete
liquidation, issuance of rights or warrants to purchase securities or any other
corporate transaction or event having an effect similar to any of the foregoing.
In the event the Stock Option Committee shall disagree with the Board with
respect to the foregoing adjustments, the Board's determination will be final
and conclusive. Any fractional shares resulting from the foregoing adjustments
will be eliminated.
8 WITHHOLDING OF TAXES. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any benefit
realized by an optionee under the Plan, or is requested by an optionee to
withhold additional amounts with respect to such taxes, and the amounts
available to the Company for such withholding are insufficient, it will be a
condition to the realization of such benefit that the optionee make arrangements
satisfactory to the Company for payment of the balance of such taxes required or
requested to be withheld. In addition, if permitted by the Stock Option
Committee or the Board, an optionee may elect to have any withholding obligation
of the Company satisfied with shares of Common Stock that would otherwise be
transferred to the optionee on exercise of the Stock Option.
9. ADMINISTRATION OF THE PLAN. (a) The Plan will be administered by the
Stock Option Committee and the Board. For purposes of any action taken by the
Stock Option Committee or the Board, whichever is applicable, a majority of
the members will constitute a quorum, and the action of the members present
at any meeting at which a quorum is present, or acts unanimously approved in
writing, will be the acts of the Stock Option Committee or the Board.
-4-
<PAGE>
(b) The Stock Option Committee and the Board have the full authority
and discretion to administer the Plan and to take any action that is necessary
or advisable in connection with the administration of the Plan, including
without limitation the authority and discretion to interpret and construe any
provision of the Plan or of any agreement, notification or document evidencing
the grant of a Stock Option. The interpretation and construction by the Stock
Option Committee or the Board, as applicable, of any such provision and any
determination by the Stock Option Committee or the Board pursuant to any
provision of the Plan or of any such agreement, notification or document will be
final and conclusive; PROVIDED, that in the event the Stock Option Committee
shall disagree with the Board with respect to such interpretation, construction
or determination, the Board's determination will be final and conclusive. No
member of the Stock Option Committee or the Board will be liable for any such
action or determination made in good faith.
(c) Notwithstanding any provision of the Plan to the contrary, the
Stock Option Committee will have the exclusive authority and discretion to take
any action required or permitted to be taken under the provisions of
Paragraph 7, Paragraph 9(a), Paragraph 9(b), Paragraph 10(a) and Paragraph 10(b)
with respect to Stock Options granted under the Plan that are intended to comply
with the requirements of Section 162(m) of the Code.
10. AMENDMENTS, ETC. (a) The Stock Option Committee or the Board, as
applicable, may, without the consent of the optionee, amend any agreement
evidencing a Stock Option granted under the Plan, or otherwise take action, to
accelerate the time or times at which the Stock Option may be exercised, to
extend the expiration date of the Stock Option, to waive any other condition or
restriction applicable to such Stock Option or to the exercise of such Stock
Option, to reduce the exercise price of such Stock Option, to amend the
definition of a change in control of the Company (if such a definition is
contained in such agreement) to expand the events that would result in a change
in control of the Company and to add a change in control provision to such
agreement (if such provision is not contained in such agreement) and may amend
any such agreement in any other respect with the consent of the optionee.
(b) The Plan may be amended from time to time by the Board or any
duly authorized committee thereof. In the event any law, or any rule or
regulation issued or promulgated by the Internal Revenue Service, the Securities
and Exchange 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, or in
the event Rule 16b-3 is amended or supplemented (E.G., by addition of
alternative rules) or any of the rules under Section 16 of the Act are amended
or supplemented, in either event to permit the Company to remove or lessen any
restrictions on or with respect to Stock Options, the Stock Option Committee and
the Board each reserves the right to amend the Plan to the extent of any such
requirement, amendment or supplement, and all Stock Options then outstanding
will be subject to such amendment.
-5-
<PAGE>
(c) The Plan may be terminated at any time by action of the Board.
The termination of the Plan will not adversely affect the terms of any
outstanding Stock Option.
(d) The Plan will not confer upon any Participant any right with
respect to continuance of employment or other service with the Company or any
Subsidiary, nor will it interfere in any way with any right the Company or any
Subsidiary would otherwise have to terminate a Participant's employment or other
service at any time.
MICHAELS STORES, INC.
By /s/ R. Michael Rouleau
-------------------------------
Name: R. Michael Rouleau
Title: President and Chief
Executive Officer
-6-
