<PAGE>
As filed with the Securities and Exchange Commission on July 8, 1999
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
MICHAELS STORES, INC.
(Exact name of registrant as specified in its charter)
8000 BENT BRANCH DRIVE
IRVING, TEXAS 75063
P.O. BOX 619566
DALLAS, TEXAS 75261-9566
(972) 409-1300
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
DELAWARE 75-1943604
(State of incorporation) (I.R.S. Employer
Identification Number)
MICHAELS STORES, INC. DEFERRED COMPENSATION PLAN
(Full title of the plan)
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 A COPY 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
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================
Proposed Proposed
Maximum Maximum
Title of Amount Offering Aggregate Amount of
Securities to to be Price per Offering Registration
be Registered Registered Obligation Price (1) Fee
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deferred Compensation Obligations (2)....... $ 3,000,000 100% $ 3,000,000 $834
=====================================================================================================
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee.
(2) The Deferred Compensation Obligations are unsecured obligations of
Michaels Stores, Inc. to pay deferred compensation in the future in
accordance with the terms of the Michaels Stores, Inc. Deferred
Compensation Plan.
================================================================================
<PAGE>
PART I
The information called for by Part I of this Registration Statement on Form
S-8 (the "Registration Statement") is included in the description of the
Michaels Stores, Inc. Deferred Compensation Plan (the "Plan") to be delivered to
persons eligible to participate in the Plan. Pursuant to the Note to Part I of
Form S-8, this information is not being filed with or included in this
Registration Statement.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
Michaels Stores, Inc. (the "Company") hereby incorporates by reference into
this Registration Statement (i) the Company's Annual Report on Form 10-K for the
period ended January 30, 1999 and (ii) the Company's Quarterly Report on Form
10-Q for the three-month period ended May 1, 1999.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, prior to
the termination of the offering made hereby, shall be deemed to be incorporated
by reference in this Registration Statement and to be a part of this
Registration Statement from the date of the filing of such reports.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement 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 Registration
Statement.
ITEM 4. DESCRIPTION OF SECURITIES
Under the Plan, the Company will provide eligible employees and certain
directors and consultants (each, an "eligible person") the opportunity to defer
a specified percentage of their cash compensation. The obligations of the
Company under the Plan (the "Deferred Compensation Obligations") will be
unsecured general obligations of the Company to pay the deferred compensation,
any associated matching amounts, and any earnings thereon in the future in
accordance with the terms of the Plan, and will rank PARI PASSU with other
unsecured and unsubordinated indebtedness of the Company from time to time
outstanding. The following description of the Plan is qualified in its entirety
by reference to the Plan, a copy of which is filed as an exhibit to this
Registration Statement.
The amount of compensation to be deferred by each eligible person who
elects to participate in the Plan (a "participant") will be determined in
accordance with the Plan based on elections by the participant. Each Deferred
Compensation Obligation will be payable in accordance with the terms of the
Plan. Under the Plan, the Company will deposit the amount of each participant's
deferred compensation and associated matching amounts in a trust that qualifies
as a grantor trust under the Internal Revenue Code of 1986, as amended (the
"Code"). The Administrator appointed by the Board to administer the Plan (the
"Administrator") will direct the trustee to invest an amount equal to each
participant's deferred compensation, as elected by the participant, and any
associated matching amounts in one or more investment funds selected by the
Administrator. Each participant's account will be credited with compensation
that the participant elects to defer, associated matching amounts, and any gains
(or losses) deemed to be incurred thereon. All payments to participants in
respect of their Deferred Compensation Obligations will be subject to
withholding for applicable taxes.
A participant's right or the right of any other person to the Deferred
Compensation Obligations cannot be alienated, anticipated, commuted, pledged,
encumbered or assigned. The Deferred Compensation Obligations are not subject
to the debts, contracts, liabilities, engagements or torts of any person
entitled to receive benefits under the Plan.
-2-
<PAGE>
The Administrator or the Board of Directors of the Company may amend,
modify, suspend or terminate the Plan at any time and for any reason; provided
however, that no Plan amendment, modification, suspension or termination may
retroactively deprive any participant of any benefit vested under the Plan.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
The validity of the Deferred Compensation Obligations registered hereby
will be 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 and an employee of the Company.
ITEM 6. 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 and 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 and which provide 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 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8. EXHIBITS
4.1 Restated Certificate of Incorporation of the Registrant (1)
4.2 Bylaws of the Registrant, as amended and restated (2)
4.3 Michaels Stores, Inc. Deferred Compensation Plan
5.1 Opinion of Jones, Day, Reavis & Pogue
23.1 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
-3-
<PAGE>
24.1 Powers of Attorney
- ------------------
(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.
ITEM 9. UNDERTAKINGS
A. The 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 (A)(1)(i) and (A)(1)(ii) 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 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.
B. The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities 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.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant 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
-4-
<PAGE>
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer, or controlling person of the Registrant 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 Registrant 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.
-5-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on July 8, 1999.
MICHAELS STORES, INC.
By: *
-------------------------------------
R. Michael Rouleau
Chief Executive Officer
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 on July 8, 1999.
<TABLE>
<CAPTION>
Signatures Title
---------- -----
<S> <C>
* Chief Executive Officer
- -------------------------------- (Principal Executive Officer)
R. Michael Rouleau
* Executive Vice President and Chief
- -------------------------------- Financial Officer
Bryan M. DeCordova (Principal Financial and Accounting
Officer)
* Chairman of the Board; Director
- --------------------------------
Sam Wyly
* Vice Chairman of the Board; Director
- --------------------------------
Charles J. Wyly, Jr.
*
- -------------------------------- Director
Richard E. Hanlon
- -------------------------------- Director
Kelly Elliot
*
- -------------------------------- Director
Michael C. French
*
- -------------------------------- Director
Donald R. Miller
*
- -------------------------------- Director
F. Jay Taylor
*
- -------------------------------- Director
Evan A. Wyly
</TABLE>
*The undersigned, by signing his name hereto, does sign and execute this
Registration Statement pursuant to the Powers of Attorney executed on behalf of
the above-named officers and directors and filed herewith.
/s/ Mark V. Beasley
----------------------------------------
Mark V. Beasley
Attorney-in-Fact
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
4.1 Restated Certificate of Incorporation of the Registrant (1)
4.2 Bylaws of the Registrant, as amended and restated (2)
4.3 Michaels Stores, Inc. Deferred Compensation Plan
5.1 Opinion of Jones, Day, Reavis & Pogue
23.1 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
24.1 Powers of Attorney
</TABLE>
- ------------------
(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.
<PAGE>
MICHAELS STORES, INC.
DEFERRED COMPENSATION PLAN
(EFFECTIVE AS OF AUGUST 1, 1999)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE I.
TITLE AND DEFINITIONS
1.1 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE II.
PARTICIPATION
2.1 Participation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE III.
DEFERRED COMPENSATION
3.1 Elections to Defer Compensation. . . . . . . . . . . . . . . . . . . . . . .5
3.2 Matching Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.3 Discretionary Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.4 Investment Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE IV.
ACCOUNTS
4.1 Participant Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
4.2 Quarterly Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
ARTICLE V.
VESTING
5.1 Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
ARTICLE VI.
DISTRIBUTIONS
6.1 Form and Time of Payment . . . . . . . . . . . . . . . . . . . . . . . . . .9
6.2 Scheduled Early Distributions. . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Unscheduled Early Distributions. . . . . . . . . . . . . . . . . . . . . . 12
6.4 Death Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.5 Financial Hardship Withdrawals . . . . . . . . . . . . . . . . . . . . . . 13
6.6 Inability To Locate Participant. . . . . . . . . . . . . . . . . . . . . . 13
6.7 Directors and Consultants. . . . . . . . . . . . . . . . . . . . . . . . . 14
(i)
<PAGE>
6.8 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VII.
ADMINISTRATION
7.1 Administrative Committee.. . . . . . . . . . . . . . . . . . . . . . . . . 15
7.2 Committee Action.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.3 Powers and Duties of the Administrative Committee. . . . . . . . . . . . . 16
7.4 Construction and Interpretation. . . . . . . . . . . . . . . . . . . . . . 17
7.5 Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.6 Expenses and Indemnity.. . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VIII.
MISCELLANEOUS
8.1 Unsecured General Creditor.. . . . . . . . . . . . . . . . . . . . . . . . 18
8.2 Restriction Against Assignment.. . . . . . . . . . . . . . . . . . . . . . 18
8.3 Withholding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.4 Amendment, Modification, Suspension or Termination.. . . . . . . . . . . . 19
8.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.6 Receipt or Release.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.7 Payments on Behalf of Persons Under Incapacity.. . . . . . . . . . . . . . 19
8.8 Successors and Assigns.. . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.9 No Employment Rights.. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.10 Headings, etc. Not Part of Agreement.. . . . . . . . . . . . . . . . . . . 20
</TABLE>
(ii)
<PAGE>
MICHAELS STORES, INC.
DEFERRED COMPENSATION PLAN
Michaels Stores, Inc., a Delaware corporation (the "Company"), acting on
behalf of itself and its designated subsidiaries, hereby adopts the Michaels
Stores, Inc. Deferred Compensation Plan (the "Plan"), effective as of August 1,
1999.
RECITALS
1. The Plan is being established as an unfunded supplemental
retirement plan for the benefit of selected highly compensated employees,
directors and consultants and their respective beneficiaries. Benefits under
the Plan are to be paid by the Company from its general assets or from the
assets of the trust hereinafter described.
2. The Company intends to enter into a trust agreement with a trustee
and establish a trust (the "Trust") to hold and manage assets contributed by the
Company in connection with the Plan. It is intended that the Trust will qualify
as a "grantor trust" under the Internal Revenue Code of 1986, as amended, with
the principal and income of the Trust to be treated as assets and income of the
Company for federal and state income tax purposes.
3. The assets of the Plan held in the Trust will at all times be
subject to the claims of the general creditors of the Company.
<PAGE>
ARTICLE I.
TITLE AND DEFINITIONS
1.1 TITLE.
This Plan shall be known as the Michaels Stores, Inc. Deferred
Compensation Plan.
1.2 DEFINITIONS.
Whenever the following words and phrases are used in this Plan, with the
first letter capitalized, they shall have the meanings specified below.
(a) "ACCOUNT" means for each Participant the bookkeeping account
maintained by the Administrative Committee on the books of the Company that is
credited with amounts equal to (i) the portion of the Participant's Salary and
Incentive Bonus that he or she elects to defer, (ii) the matching amounts
determined pursuant to Section 3.2, (iii) discretionary amounts determined
pursuant to Section 3.3, and (iv) the deemed earnings on such amounts that are
determined pursuant to Section 4.1(iii).
(b) "ADMINISTRATIVE COMMITTEE" means the person or persons appointed
to administer the plan in accordance with Article VII.
(c) "BENEFICIARY" or "BENEFICIARIES" means the beneficiary or
beneficiaries last designated in writing by a Participant, in accordance with
procedures established by the Administrative Committee, to receive benefits
under the Plan in the event of the Participant's death. No beneficiary
designation shall become effective unless and until it is filed with the
Administrative Committee during the Participant's lifetime.
(d) "BOARD OF DIRECTORS" or "BOARD" means the Board of Directors of
Michaels Stores, Inc. Any determination or other action specified in this Plan
to be made, taken or effectuated by the Board may be made, taken or effectuated
by the Executive Committee of the Board.
(e) "CODE" means the Internal Revenue Code of 1986, as amended.
(f) "COMPANY" means Michaels Stores, Inc., a Delaware corporation, any
successor corporation to Michaels Stores, Inc. satisfying the requirements of
Section 8.8, Aaron Brothers, Inc., a wholly-owned subsidiary of Michaels Stores,
Inc., and any other entity that is directly or indirectly controlled by Michaels
Stores, Inc. or in which Michaels Stores, Inc. has a significant equity or
investment interest, as determined by the Administrative Committee.
(g) "DISTRIBUTABLE AMOUNT" means the balance of a Participant's
Account at any given time.
(h) "EFFECTIVE DATE" means August 1, 1999.
2
<PAGE>
(i) "ELIGIBLE INDIVIDUAL" for a Plan Year means (i) a common law
employee of the Company who is a United States citizen and whose Salary is paid
on a United States payroll in United States dollars and (A) whose annual Salary
during the Plan Year equals or exceeds the Threshold Amount or (B) who satisfies
any alternative eligibility criteria established by the Administrative Committee
pursuant to Section 7.3(iv); (ii) a member of the Board of Directors who is not
a common law employee of the Company or (iii) a consultant who is not a common
law employee of the Company and who is designated by the Administrative
Committee as eligible to participate in the Plan. Notwithstanding the
foregoing, the Administrative Committee may in its discretion determine in
writing that an otherwise Eligible Individual may not participate in this Plan
for one or more Plan Years. An individual other than a member of the Board who
is classified by the Company as an independent contractor whose compensation for
services is reported by the Company on a form other than Form W-2 or any
successor form for reporting wages paid to employees will not be an Eligible
Individual, unless the Administrative Committee specifically designates such
individual by name as an Eligible Individual pursuant to clause (iii) above.
(j) "FUND" or "FUNDS" means one or more of the investment funds or
contracts selected by the Administrative Committee pursuant to Section 7.3(i).
(k) "INCENTIVE BONUS" means any cash incentive compensation payable to
a Participant in addition to the Participant's Salary, computed before giving
effect to the Participant's salary reduction elections under Code Sections 125
or 401(k).
(l) "MICHAELS 401(k) PLAN" means the Michaels Stores, Inc. Employees
401(k) Plan.
(m) "NET EARNINGS" means, for any Fund and for any month, an amount
expressed as a percentage equal to the net rate of gain or loss on the assets of
such Fund during such month.
(n) "PARTICIPANT" means any Eligible Individual who elects to defer
Salary or Incentive Bonus in accordance with Section 3.1.
(o) "PLAN" means the Michaels Stores, Inc. Deferred Compensation Plan
set forth herein, as amended from time to time in accordance with Section 8.4.
(p) "PLAN YEAR" means the 12-consecutive month period beginning
January 1 and ending December 31 of each year, provided that the first Plan Year
shall be a short year beginning August 1, 1999 and ending December 31, 1999.
(q) "SALARY" means, for any calendar year, the annual base salary
payable to an Eligible Individual who is an employee, the annual retainer and
meeting fees payable to members of the Board and the fees payable to consultants
during the calendar year, computed before giving effect to the Eligible
Individual's salary reduction elections under Code Sections 125 or 401(k).
Salary excludes any other form of compensation such as Incentive Bonuses,
restricted stock, income from stock options or stock appreciation rights,
severance payments, moving
3
<PAGE>
expenses, car or other special allowances, reimbursements for taxes or any
other remuneration for personal services included in an Eligible Individual's
taxable income.
(r) "THRESHOLD AMOUNT" means, for the Plan Year beginning August 1,
1999, $80,000 and, for any subsequent Plan Year, such other amount as may be
determined by the Administrative Committee pursuant to Section 7.3(iv).
(s) "TRUST" means the trust established by the Trust Agreement.
(t) "TRUST AGREEMENT" means the agreement between the Company and the
Trustee that establishes a trust to hold and manage the assets contributed by
the Company in connection with the Plan.
(u) "TRUSTEE" means the one or more individuals or organizations that
have entered into the Trust Agreement as trustee(s), and any duly appointed
successors.
ARTICLE II.
PARTICIPATION
2.1 PARTICIPATION.
An Eligible Individual shall become a Participant in the Plan for a Plan
Year by electing to defer all or a portion of his or her Salary or Incentive
Bonus for such Plan Year in accordance with Section 3.1, by completing all
required applications for life insurance (as determined by the Administrative
Committee in its discretion), and by complying with any applicable medical
underwriting requirements of the issuer of any policy of insurance on the life
of the Eligible Individual.
ARTICLE III.
DEFERRED COMPENSATION
3.1 ELECTIONS TO DEFER COMPENSATION.
(a) ELECTIONS. For each Plan Year, an Eligible Individual may elect
to defer Salary by filing with the Administrative Committee one or more
elections that conform to the requirements of this Section 3.1, on a form
provided by the Administrative Committee (an "Election Form"), no later than the
last day of December of the immediately preceding Plan Year. Notwithstanding
the foregoing, (i) for the Plan Year beginning August 1, 1999, an Eligible
Individual may elect to defer Salary by filing an Election Form with the
Administrative Committee no later than July 31, 1999, and (ii) an Eligible
Individual who first becomes eligible to participate in the Plan on a
4
<PAGE>
date other than the first day of a Plan Year may elect to defer Salary for
such Plan Year by filing an Election Form with the Administrative Committee
no later than 60 days after the date such individual is notified that he or
she satisfies the eligibility criteria set forth in Section 1.2(i), and such
election will be effective to defer Salary earned after the Election Form is
filed with the Administrative Committee, as provided in subsection (d) below.
An Eligible Individual may also make a separate election to defer the
Incentive Bonus to be paid in a Plan Year by filing an Election Form with the
Administrative Committee on or before the last day of October of the
immediately preceding Plan Year. An Eligible Individual who does not elect
to defer Salary or Incentive Bonus for a Plan Year may become a Participant
with respect to a subsequent Plan Year by filing an Election Form with the
Administrative Committee on or before the last day of December (with respect
to elections to defer Salary) or the last day of October (with respect to
elections to defer Incentive Bonus) preceding the Plan Year for which the
election is to be effective, provided he or she is still an Eligible
Individual with respect to such Plan Year.
(b) SUPPLEMENTAL 401(k) PLAN DEFERRALS. In addition to the elections
described above, for each Plan Year an Eligible Individual may also elect to
defer that portion of his Salary or Incentive Bonus (or both Salary and
Incentive Bonus) that he is prevented from deferring under the Michaels 401(k)
Plan because of (i) the annual limitation on plan compensation described in Code
Section 401(a)(17), (ii) the annual dollar limit on elective deferrals described
in Code Section 402(g), (iii) the annual dollar limit on annual additions to an
individual's account described in Code Section 415(c), or (iv) the limits on
deferrals resulting from the application of the nondiscrimination test described
in Code Section 401(k). Such an election for a Plan Year must be filed with the
Administrative Committee on an Election Form (i) with respect to Salary on or
before the last day of December of the immediately preceding Plan Year, and
(ii) with respect to Incentive Bonus on or before the last day of October of the
immediately preceding Plan Year. Notwithstanding the foregoing, for the Plan
Year beginning August 1, 1999, an Eligible Individual may elect to defer Salary
under this subsection by filing an Election Form with the Administrative
Committee no later than July 31, 1999. An Eligible Individual may make an
election to defer Salary or Incentive Bonus under this subsection (b) without
making an election to defer Salary or Incentive Bonus under subsection (a)
above.
(c) AMOUNT OF DEFERRALS. An Eligible Individual may elect to defer
any whole percentage or whole dollar amount of his or her Salary up to 100% of
his or her Salary and any whole percentage or whole dollar amount of his or her
Incentive Bonus up to 100% of his or her Incentive Bonus; provided, however,
that if an Eligible Individual's deferral elections would reduce the Salary and
Incentive Bonus paid to the Eligible Individual to an amount that is less than
(i) the amount necessary to satisfy the Eligible Individual's portion of
applicable employment taxes for the Plan Year, (ii) amounts necessary to satisfy
any other benefit plan elections or loan repayments for the Plan Year under any
other plan sponsored by the Company and (iii) any income taxes payable with
respect to taxable compensation that is not eligible for deferral, then the
Eligible Individual's deferral elections shall be limited to the extent
necessary to permit the Company to satisfy its obligation to withhold such
taxes, implement such benefit plan elections or deduct such loan repayments. In
addition, a deferral election made by an Eligible Individual will not be
effective unless and until the Eligible Individual completes all required
applications for life insurance (as determined by the Administrative Committee
in its discretion).
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(d) EFFECT OF DEFERRAL ELECTIONS. An election to defer Salary or
Incentive Bonus shall be first effective with respect to Salary earned during
the first payroll period beginning on or after the first day of the Plan Year
(or in the case of a newly eligible individual, the first payroll period
beginning after the date on which the completed Election Form is filed with the
Administrative Committee) or as soon as administratively practicable thereafter,
and with respect to the Incentive Bonus payable in the Plan Year subsequent to
the Plan Year in which the election is made. Deferrals of Salary made in
accordance with subsection (a) above will be deducted during each payroll period
throughout the year. Deferrals of any portion of Incentive Bonus made in
accordance with subsection (a) above will be deducted in the payroll period(s)
when the Incentive Bonus would have otherwise been paid. Deferrals related to
the Michaels 401(k) Plan made in accordance with subsection (b) above will be
deducted in the payroll period(s) when the applicable limitation prevents
deferrals under the Michaels 401(k) Plan.
(e) DURATION OF DEFERRAL ELECTIONS. Any deferral elections made under
this Section 3.1 shall be irrevocable and shall apply only to the Salary payable
with respect to services performed during the Plan Year for which the election
is made and to the Incentive Bonus payable in the Plan Year subsequent to the
Plan Year in which the elections are made.
3.2 MATCHING AMOUNTS.
(a) ELIGIBILITY FOR MATCHING AMOUNTS. Each Participant will be
eligible to receive a matching amount for a Plan Year in the amount determined
under Section 3.2(b), provided, however, that a Participant who is a common law
employee of the Company will be eligible for a matching amount only if (i) he is
eligible to participate in the Michaels 401(k) Plan and (ii) he is deferring
under the Michaels 401(k) Plan the maximum amount permitted for such Plan Year
by the Administrative Committee of such 401(k) Plan.
(b) MATCHING PERCENTAGE. The Account of each such Participant will be
credited each payroll period with a matching amount equal to 50% of the
Participant's deferrals under this Plan during such payroll period but only to
the extent the Participant's deferral percentage elected under this Plan does
not exceed 6% of the Participant's Salary and Incentive Bonus for the payroll
period, such matching amount to be reduced by the matching contributions
credited to the Participant's account, if any, under the Michaels 401(k) Plan
for the same payroll period.
3.3 DISCRETIONARY AMOUNTS.
At any time and from time to time, the Company may elect to credit the
Account of one or more Participants with an additional discretionary amount.
The timing and amount of any additional amount credited under this Section 3.3
shall be determined in the sole discretion of the Administrative Committee and
may vary among Participants. The crediting of the Account of a Participant
under this Section 3.3 shall neither create nor imply any obligation on the part
of the Company to credit the Accounts of other Participants. Only a Participant
who is deferring compensation under Section 3.1 during a Plan Year and whose
deferrals have not been suspended under Section 6.3 for such Plan Year shall be
eligible for such discretionary amounts credited during the Plan Year.
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3.4 INVESTMENT ELECTIONS.
(a) INVESTMENT FUNDS. The Administrative Committee shall provide each
Participant with a list of Funds available for hypothetical investment and each
Participant may designate, on a form provided by the Administrative Committee,
one or more of such Funds in which the portion of his or her Account
attributable to deferrals, matching amounts or discretionary amounts credited to
his or her Account for such Plan Year will be deemed to be invested for purposes
of determining the amount of earnings or loss to be credited to such Account.
The Administrative Committee may in its discretion change from time to time the
Funds available for hypothetical investment, provided Participants are given at
least 30 days' prior written notice of the effective date of the deletion of any
Fund (including, without limitation, the deletion of a Fund in connection with
the substitution of a new Fund in its place); it being understood, however, that
where the deletion of a Fund is beyond the control of the Administrative
Committee, the Administrative Committee's obligation shall be to give
Participants written notice of the effective date of such deletion as promptly
as practicable after the Administrative Committee obtains knowledge thereof.
The Administrative Committee may in its discretion add new Funds at any time and
Participants shall be given written notice of such additions as promptly as
practicable after the Administrative Committee decides to add a new Fund.
(b) INVESTMENT DESIGNATIONS. In making an investment designation
pursuant to this Section 3.4, the Participant may specify that all, or any whole
percentage, of the portion of his or her Account attributable to a Plan Year
will be deemed to be invested in one or more of the Funds designated by the
Administrative Committee (with all such designations in the aggregate not to
exceed 100% of the Participant's Account balance). Effective as of the first
business day of any calendar month, a Participant may change the Fund
designations made under this Section 3.4 by filing a new designation, on a form
provided by the Administrative Committee, at least five days prior to the end of
the immediately preceding calendar month.
(c) FAILURE TO ELECT. If a Participant fails to elect a Fund under
this Section 3.4, or if the Participant's investment designation is less than
100% of his or her Account balance, for any portion of the Account balance for
which no investment designation has been made he or she shall be deemed to have
designated the Fund that the Administrative Committee determines in its sole
judgment to have the least risk of loss of principal.
(d) TEMPORARY INVESTMENT. Pending the initial establishment of Funds
or any change in the Funds available pursuant to Section 3.4(a), the Committee
may credit one or more Participant's Accounts with a money market rate of return
notwithstanding any Participant's investment election.
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ARTICLE IV.
ACCOUNTS
4.1 PARTICIPANT ACCOUNTS.
The Administrative Committee shall establish and maintain an Account for
each Participant under the Plan. Each Participant's Account shall be further
divided into separate subaccounts ("Investment Fund Subaccounts"), each of which
corresponds to a Fund elected by the Participant pursuant to Section 3.4. Under
procedures established by the Administrative Committee, a Participant's Account
shall be debited and credited as follows:
(i) The Administrative Committee shall credit the Investment
Fund Subaccounts of the Participant's Account with an amount equal to any
Salary and Incentive Bonus deferred by the Participant in accordance with
the Participant's elections; that is, the portion of the Participant's
deferred Salary and Incentive Bonus that the Participant has elected to
be deferred under this Plan (including amounts related to the Michaels
401(k) Plan as described in Section 3.1(b)) and deemed to be invested in
a certain Fund shall be credited to the Investment Fund Subaccount
corresponding to that Fund.
(ii) The Administrative Committee shall also credit the
Investment Fund Subaccounts of the Participant's Account with an amount
equal to the matching amounts determined under Section 3.2 and the
discretionary amounts under Section 3.3.
(iii) As of the last day of each month, each Investment Fund
Subaccount of a Participant's Account shall be credited with earnings or
loss in an amount determined by multiplying the balance credited to such
Investment Fund Subaccount as of the last day of the preceding month
(adjusted to reflect distributions from or additional credits to a
Participant's Account during such month) by the Net Earnings for the
corresponding Fund for the then current month. To the extent any such
Net Earnings is negative in any month (due to a net loss in the
applicable Fund), the applicable Investment Fund Subaccount will be
debited in the same manner.
(iv) As of the first day of each calendar month, each Investment
Fund Subaccount will be debited or credited to appropriately reflect any
change in Fund designations made by Participants pursuant to Section 3.4.
4.2 QUARTERLY STATEMENTS.
Under procedures established by the Administrative Committee, a
Participant shall receive a statement with respect to such Participant's Account
on a quarterly basis.
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ARTICLE V.
VESTING
5.1 ACCOUNT.
A Participant's interest in the portion of his or her Account
attributable to deferrals under Section 3.1 and matching amounts under
Section 3.2, and earnings and losses credited thereon, shall be 100% vested at
all times. A Participant's vested interest in the portion of his or her Account
attributable to discretionary amounts under Section 3.3 and earnings and losses
credited thereon will be determined in accordance with the vesting schedule(s)
established by the Administrative Committee in connection with the
Administrative Committee's determination of any such discretionary amounts.
Notwithstanding the foregoing, a Participant's interest in his or her entire
Account shall become 100% vested upon the Participant's death while employed by
the Company.
ARTICLE VI.
DISTRIBUTIONS
6.1 FORM AND TIME OF PAYMENT.
(a) PAYMENT FORM ELECTIONS. Each Participant shall elect, at the time
of his or her election to defer Salary and Incentive Bonus under the Plan for a
Plan Year, to have that portion of his or her Distributable Amount attributable
to his or her deferral elections for such Plan Year paid either in quarterly
installments or in a lump sum payment. Except as provided in Section 6.2,
quarterly installments shall be paid over a period of 5, 10, 15 or 20 years, as
the Participant shall elect. All Participants will be required to elect a form
of payment; however, except as provided in Section 6.2 or otherwise permitted by
the Administrative Committee, a Participant electing to have any portion of the
Distributable Amount paid in quarterly installments will be so paid with respect
to such portion only if the Participant terminates employment with the Company
(i) at or after attaining age 55; (ii) as a result of a long-term disability, as
defined in the Company's then-existing long-term disability plan in which the
Participant is eligible to participate; or (iii) as a result of the
Participant's death. In the event a Participant fails to make a payment election
with respect to a deferral of Salary or Incentive Bonus for a Plan Year as
provided in this subsection (a) and is otherwise eligible for installment
payments at termination of employment, the Participant's Distributable Amount
attributable to such deferral election will be paid to the Participant (or the
Participant's Beneficiary, if the Participant terminates employment by reason of
death) in the form of payment described on the most recent election filed by the
Participant, or in the absence of any such election, in quarterly installments
payable over a period of 10 years. The Distributable Amount payable to
Participants in all other circumstances will be paid in a lump sum payment,
unless the Participant requests in writing within 30 days after such termination
that the Administrative Committee
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permit the payment of his or her Distributable Amount in quarterly
installments over a period of 5, 10, 15 or 20 years. The Administrative
Committee shall have the full discretion and authority to grant or deny any
such request. For purposes of this Plan, any portion of a Participant's
Incentive Bonus that the Participant elects to defer will be attributable to
the Plan Year in which the Incentive Bonus would otherwise have been paid to
the Participant.
(b) PAYMENT COMMENCEMENT DATE. Unless a Participant receives an early
distribution with respect to the Distributable Amount for a Plan Year pursuant
to Section 6.2, Section 6.3 or Section 6.5, such Distributable Amount (or
remaining portion thereof) will be paid after the Participant terminates
employment with the Company. Lump sum payments will be paid as soon as
practicable following the Participant's termination of employment but in no
event later than 90 days after the date of such termination. Quarterly
installment payments will begin on the first business day of the second month of
the calendar quarter following the calendar quarter in which the Participant
terminates employment and will continue to be made on the first business day of
each subsequent calendar quarter until the applicable portion of the
Distributable Amount has been fully distributed. Each quarterly installment
payment will be made pro rata from the Participant's Investment Fund Subaccounts
according to the portion of the balances in such Subaccounts which are
attributable to the deferrals for the Plan Year which are subject to the
installment payment election. During the period in which quarterly installment
payments are being made, the Participant's Account will continue to be credited
monthly with earnings pursuant to Section 4.1(iii), the Participant (or his or
her Beneficiary) may continue to change Fund designations pursuant to
Section 3.4, and quarterly installment payments will be adjusted annually to
reflect earnings, gains and losses until all amounts credited to his or her
Account under the Plan have been distributed. To the fullest extent
practicable, but subject to such annual adjustments, quarterly installment
payments shall be comparable in amount over the entire distribution period.
(c) CHANGE IN PAYMENT ELECTION. A Participant who has not terminated
employment with the Company may change his or her form of payment with respect
to the portion of the Distributable Amount attributable to one or more Plan
Years to one of the payment forms permitted by the Plan, provided the
Participant files a written election with the Administrative Committee to change
such payment form at least one year prior to the date that payment of such
portion of his or her Distributable Amount would otherwise be made. In
addition, a Participant who has elected scheduled early distributions pursuant
to Section 6.2 may defer the scheduled distribution dates in accordance with
Section 6.2. A Participant's payment election with respect to a given Plan Year
may not be changed after payment of that portion of the Distributable Amount
attributable to such Plan Year has been made or has begun.
(d) EXCEPTION FOR SMALL BENEFITS. Notwithstanding the foregoing
provisions of this Section 6.1 or of Section 6.4, if a Participant's
Distributable Amount does not exceed $25,000, the Distributable Amount shall
automatically be distributed in the form of a lump sum payment.
6.2 SCHEDULED EARLY DISTRIBUTIONS.
Participants may elect to have the Distributable Amount attributable to
Salary or Incentive Bonus deferred for a given Plan Year be paid in a future
calendar year while still
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employed, either in a lump sum payment or in quarterly installments (over a
period of 2, 3, 4 or 5 years, as the Participant shall elect), provided such
election is made at the time of the Participant's election to defer Salary or
Incentive Bonus and provided, further, the payment year is at least two years
after the last day of such Plan Year. Notwithstanding the foregoing, if the
portion of a Participant's Distributable Amount scheduled to be paid pursuant
to this Section 6.2 does not exceed $25,000 as of the scheduled date of
payment, such amount shall automatically be distributed in the form of a lump
sum payment. Payments under this Section 6.2 will be paid or begin to be
paid in January of the elected payment year, or as soon as practicable
thereafter. A Participant may elect a different payment date for the portion
of his Distributable Amount attributable to deferrals for each Plan Year. In
addition, payment dates elected pursuant to this Section 6.2 may be deferred
by at least one year, by filing with the Administrative Committee written
notice at least 12 months prior to the payment date to be deferred, but in no
event may a Participant make more than three such deferral elections with
respect to deferrals for any Plan Year without the written approval of the
Administrative Committee. A distribution pursuant to this Section 6.2 of
less than the Participant's entire interest in the Plan shall be made pro
rata from his or her Investment Fund Subaccounts according to the portion of
the balances in such Subaccounts which are attributable to the deferrals for
the Plan Year which are subject to the early distribution election.
Notwithstanding the foregoing, if a Participant terminates employment with
the Company (i) at or after attaining age 55; (ii) as a result of a long-term
disability, as defined in the Company's then-existing long-term disability
plan in which the Participant is eligible to participate; or (iii) as a
result of the Participant's death, and such termination of employment is
prior to the date on which a lump sum payment is scheduled to be made or
installments are scheduled to begin pursuant to this Section 6.2, the
Participant's Distributable Amount attributable to Salary and Incentive Bonus
that would have been paid pursuant to this Section 6.2 will be paid following
the Participant's termination of employment based on the Participant's
election pursuant to Section 6.1. If a Participant terminates employment
with the Company for any other reason prior to the date on which payments are
scheduled to be made or begin pursuant to this Section 6.2, the Participant's
Distributable Amount attributable to Salary and Incentive Bonus that would
have been paid pursuant to this Section 6.2 will be paid following the
Participant's termination of employment in the form of a lump sum payment.
6.3 UNSCHEDULED EARLY DISTRIBUTIONS.
Subject to paragraph (vi) below, Participants shall be permitted to
request to withdraw amounts from their Accounts at any time ("Early
Distributions"). Upon receiving a withdrawal request, the Administrative
Committee shall determine, in its sole discretion, whether to permit any such
withdrawal and the amount, if any, to be withdrawn, subject to the following
restrictions:
(i) The election to take an Early Distribution shall be made by
filing a form provided by and filed with the Administrative Committee.
(ii) The maximum amount payable to a Participant in connection
with an Early Distribution shall in all cases equal 90% of the amount
requested by the Participant (which requested amount must be not less
than $10,000 or the Participant's entire
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Distributable Amount if less than $10,000) or approved by the
Administrative Committee; provided, however, that the maximum amount
payable to a Participant in connection with an Early Distribution shall
be 90% of the Distributable Amount as of the end of the calendar month
in which the Early Distribution request is received by the Administrative
Committee.
(iii) The amount described in paragraph (ii) above shall be paid
in a single lump sum by the end of the calendar month next following the
calendar month in which the Early Distribution request is received by the
Administrative Committee. A distribution pursuant to this Section 6.3 of
less than the Participant's entire interest in the Plan will be made pro
rata from his or her Investment Fund Subaccounts according to the
balances in such Subaccounts.
(iv) If a Participant receives an Early Distribution, the
remaining portion of the requested or approved amount, as applicable, in
excess of the amount payable under paragraph (ii) above (I.E., 10% of
such amount), shall be permanently forfeited and the Company shall have
no obligation to the Participant or his or her Beneficiary with respect
to such forfeited amount. Forfeiture of such amount shall be made pro
rata from the Participant's Investment Fund Subaccounts according to the
balances in such Subaccounts.
(v) If a Participant receives an Early Distribution, the
Participant shall be ineligible to participate in the Plan for the
balance of the Plan Year in which the Early Distribution occurs and for
the immediately following Plan Year.
(vi) A Participant shall be limited to a maximum of two Early
Distributions during all of his or her periods of Plan participation.
6.4 DEATH BENEFITS.
If a Participant dies while employed by the Company or after termination
of employment, the Participant's Distributable Amount shall be paid to the
Participant's Beneficiary in the same form and in accordance with the same
payment schedule under which the Distributable Amount was being or would have
been paid to the Participant. In addition to the foregoing, if a Participant
with an undistributed Account balance dies while employed by the Company, the
Participant's Beneficiary shall be paid a single sum benefit of $100,000,
provided that coverage under any policy of insurance on the life of the
Participant which is required by the Administrative Committee is in effect at
the Participant's death.
6.5 FINANCIAL HARDSHIP WITHDRAWALS.
The Administrative Committee may, pursuant to rules or policies from time
to time adopted and applied in a consistent manner, accelerate the date of
distribution of all or any portion of a Participant's Account balance because of
a financial hardship. A financial hardship means an unforeseeable, severe
financial emergency resulting from (a) a sudden and unexpected illness or
accident of the Participant or his or her dependents (as defined in
Section 152(a) of the
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Code); (b) loss of the Participant's property due to casualty; or (c) other
similar extraordinary and unforeseeable circumstances arising out of events
beyond the control of the Participant, which may not be relieved through
other available resources of the Participant, as determined by the
Administrative Committee in accordance with such rules and policies. A
distribution pursuant to this Section 6.5 of less than the Participant's
entire interest in the Plan shall be made pro rata from his or her Investment
Fund Subaccounts according to the balances in such Subaccounts. Subject to
the foregoing, payment of any amount with respect to which a Participant has
filed a request under this Section 6.5 shall be made as soon as practicable
after approval of such request by the Administrative Committee.
Distributions made pursuant to this Section 6.5 shall be without penalty.
6.6 INABILITY TO LOCATE PARTICIPANT.
(a) FORFEITURE OF ACCOUNT. In the event that the Administrative
Committee is unable to locate a Participant or, with respect to a Participant
who has died, any Beneficiary within two years following the date on which any
payment of the Participant's Distributable Amount is scheduled to be made or
begin, the amount allocated to the Participant's Account shall be forfeited.
Following the date of forfeiture, the Participant's Account which is forfeited
shall be invested in the Fund offering the least risk of loss of principal or
conservative money market funds. If, after such forfeiture and prior to the
escheat of the Participant's Account as provided in Section 6.6(b), the
Participant or Beneficiary later claims such benefit and establishes to the
reasonable satisfaction of the Administrative Committee such Participant's or
Beneficiary's right to receive same, such Account shall be reinstated at its
balance at the date of forfeiture without additional interest, earnings, gains
or losses from the date of forfeiture through the date of reinstatement. The
Participant's restored Account balance will be invested in the manner that the
Participant or Beneficiary elects pursuant to Section 3.4 and will be
distributed to the Participant or Beneficiary in accordance with the
Participant's payment elections made pursuant to this Article VI. In addition,
any installment payments that were scheduled to have been made during the period
in which the Participant or Beneficiary could not be located will be made to the
Participant or Beneficiary in a lump sum catch-up payment as soon as
administratively practicable.
(b) ESCHEAT OF ACCOUNT. The Administrative Committee, in its
discretion, may escheat, or may cause the Trustee to escheat, to the state of
Texas (or such other state as the Administrative Committee, in its discretion,
determines is appropriate) any Participant's Account which was forfeited if
either (i) the Administrative Committee has been unable to locate the
Participant or Beneficiary for a period of five years (or such other period as
may be specified by applicable law) following the date on which any payment of
the Participant's Distributable Amount is scheduled to be made or begin or
(ii) the Plan is terminated and the Administrative Committee has been unable to
locate the Participant or Beneficiary for a period of two years (or such other
period as may be specified by applicable law) following the date on which any
payment of the Participant's Distributable Amount is scheduled to be made or
begin. Upon the escheat of the Participant's Account, the Participant or
Beneficiary shall have no further right to any benefits or payments under the
Plan, and neither the Company, the Administrative Committee nor the Trustee
shall have any liability to such Participant or Beneficiary for the amount of
the Participant's Account.
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6.7 DIRECTORS AND CONSULTANTS.
For purposes of the preceding sections of this Article VI, a Participant
who is a member of the Board or a consultant, but who is not an employee of the
Company, will be deemed to be employed by the Company as long as he or she is a
director or is engaged as a consultant and will be deemed to have terminated
employment when he or she is no longer a director or is no longer engaged as a
consultant and is not then an employee of the Company.
6.8 CLAIMS PROCEDURE.
(a) CLAIM FOR BENEFITS. If a Participant or Beneficiary does not
receive the benefits which the Participant or Beneficiary believes he or she is
entitled to receive under the Plan, the Participant or Beneficiary may file a
claim for benefits with the Administrative Committee. All claims shall be made
in writing and shall be signed by the claimant. If the claimant does not
furnish sufficient information to enable the Administrative Committee to process
the claim, the Administrative Committee will indicate to the claimant any
additional information which is required.
(b) NOTIFICATION BY THE ADMINISTRATIVE COMMITTEE. Each claim will be
approved or disapproved by the Administrative Committee within 90 days following
the receipt of the information necessary to process the claim. In the event the
Administrative Committee denies a claim for benefits in whole or in part, the
Administrative Committee will notify the claimant in writing of the denial of
the claim. Such notice by the Administrative Committee will also set forth, in
a manner calculated to be understood by the claimant, the specific reason for
such denial, the specific Plan provisions on which the denial is based, a
description of any additional material or information necessary for the claim to
be approved, if possible, with an explanation of why such material or
information is necessary, and an explanation of the Plan's claim review
procedure as set forth in subsection (c). If no action is taken by the
Administrative Committee on a claim within such 90 day period, the claim will be
deemed to be denied for purposes of the review procedure.
(c) REVIEW PROCEDURE. A claimant may appeal a denial of his or her
claim by requesting a review of the decision by the Administrative Committee or
a person designated by the Administrative Committee. An appeal must be
submitted in writing within 60 days after receipt by the claimant of written
notification of the denial and must (i) request a review of the claim for
benefits under the Plan, (ii) set forth all of the grounds upon which the
claimant's request for review is based and any facts in support thereof, and
(iii) set forth any issues or comments which the claimant deems pertinent to the
appeal. The Administrative Committee or the person designated by the
Administrative Committee will make a full and fair review of each appeal and any
written materials submitted in connection with the appeal. The Administrative
Committee or the person designated by the Administrative Committee will act upon
each appeal within 60 days after receipt thereof unless special circumstances
require an extension of the time for processing, in which case a decision will
be rendered as soon as possible but not later than 120 days after the appeal is
received. The claimant will be given the opportunity to review documents or
materials directly pertinent to the appeal upon submission of a reasonable
written
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request to the Administrative Committee or person designated by the
Administrative Committee, provided the Administrative Committee or person
designated by the Administrative Committee in its reasonable judgment finds
the requested documents or materials are directly pertinent to the appeal.
On the basis of its review, the Administrative Committee or person designated
by the Administrative Committee will make an independent determination of the
claimant's eligibility for benefits under the Plan. The decision of the
Administrative Committee or person designated by the Administrative Committee
on any claim for benefits will be final and conclusive upon all parties
thereto. In the event the Administrative Committee or person designated by
the Administrative Committee denies an appeal in whole or in part, it will
give written notice of the decision to the claimant, which notice will set
forth in a manner calculated to be understood by the claimant the specific
reasons for such denial and which will make specific reference to the
pertinent Plan provisions on which the decision was based.
ARTICLE VII.
ADMINISTRATION
7.1 ADMINISTRATIVE COMMITTEE.
The Administrative Committee for the Plan shall be appointed by, and
serve at the pleasure of, the Board. The number of members comprising such
committee shall be determined by the Board, which may from time to time vary the
number of members, and may determine that such committee will consist of a
single individual. A member of such committee may resign by delivering a
written notice of resignation to the Board. The Board may remove any member of
such committee with or without cause. Vacancies in the membership of such
committee shall be filled as soon as practicable by the Board.
7.2 COMMITTEE ACTION.
The Administrative Committee shall act at meetings by affirmative vote of
a majority of the members of the committee. Any action permitted to be taken at
a meeting may be taken without a meeting if, a written consent to the action is
signed by all members of the committee. A member of the committee shall not
vote or act upon any matter which relates solely to himself or herself as a
Participant. Any members of the committee may execute any certificate or other
written direction on behalf of the committee.
7.3 POWERS AND DUTIES OF THE ADMINISTRATIVE COMMITTEE.
The Administrative Committee shall administer the Plan in accordance with
its terms and shall have all powers, authority and discretion necessary to
accomplish its purposes, including, but not by way of limitation, the authority
and discretion to:
(i) select the Funds and change the Funds from time to time
pursuant to Section 3.4;
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(ii) appoint a representative, delegate or any other agent, and
delegate to them such powers and duties in connection with the
administration of the Plan as the Administrative Committee may from time
to time prescribe;
(iii) resolve all questions relating to the eligibility of
employees, directors and consultants to be or become Eligible Individuals
or Participants;
(iv) determine the Threshold Amount applicable to any Plan Year
after the first Plan Year and establish alternative criteria, consistent
with the purpose of the Plan to provide benefits to a select group of
management or highly compensated employees, for what shall constitute an
employee of the Company or an Eligible Individual with respect to any
given Plan Year, in addition to or in lieu of the eligibility criteria
set forth in Section 1.2(i);
(v) determine the amount of benefits payable to Participants or
their Beneficiaries under this Plan, and determine the time and manner in
which such benefits are to be paid;
(vi) authorize and direct all disbursements by the Trustee from
the Trust;
(vii) engage any administrative, legal, accounting, clerical, or
other services it deems appropriate in administering the Plan or the
Trust Agreement;
(viii) construe and interpret this Plan and the Trust Agreement,
supply omissions from, correct deficiencies in, and resolve ambiguities
in the language of this Plan and the Trust Agreement, and adopt rules for
the administration of this Plan and the Trust Agreement that are not
inconsistent with the terms of such documents;
(ix) compile and maintain all records it determines to be
necessary, appropriate or convenient in connection with the
administration of this Plan and of benefit payments hereunder;
(x) determine the disposition of assets in the Trust in the
event this Plan is terminated;
(xi) review the performance of the Trustee with respect to the
Trustee's administrative duties, responsibilities and obligations under
this Plan and the Trust Agreement, report to the Board regarding such
administrative performance of the Trustee, and recommend to the Board, if
necessary, the removal of the Trustee and the appointment of a successor
Trustee; and
(xii) resolve all questions and make all factual determinations
relating to any matter for which it has administrative responsibility.
7.4 CONSTRUCTION AND INTERPRETATION.
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The Administrative Committee shall have full authority and discretion to
construe and interpret the terms and provisions of this Plan, which
interpretation or construction shall be final and binding on all parties,
including but not limited to the Company and any Eligible Individual,
Participant or Beneficiary. The Administrative Committee shall administer the
Plan in a consistent and nondiscriminatory manner and in full accordance with
any and all laws applicable to the Plan.
7.5 INFORMATION.
To enable the Administrative Committee to perform its functions, the
Company shall supply full and timely information to the Administrative Committee
on all matters relating to the Salary and Incentive Bonus of all Participants,
their death or other cause of termination, and such other pertinent facts as the
Administrative Committee may reasonably require.
7.6 EXPENSES AND INDEMNITY.
(a) EXPENSES. All expenses and fees incurred in connection with the
administration of the Plan and the Trust shall be paid by the Company.
(b) INDEMNIFICATION. To the fullest extent permitted by applicable
law, the Company shall indemnify and save harmless the Administrative Committee,
the Board and any delegate of the Administrative Committee who is an employee of
the Company and any officers and employees of the Company against any and all
expenses, liabilities and claims, including legal fees to defend against such
liabilities and claims, arising out of their discharge in good faith of
responsibilities under or incident to the Plan, other than expenses and
liabilities arising out of willful misconduct. Without limiting the generality
of the foregoing, the Company shall, promptly upon request, advance funds to
persons entitled to indemnification hereunder to the extent necessary to defray
legal and other expenses incurred in the defense of such liabilities and claims,
as and when incurred. This indemnity shall not preclude such further
indemnities as may be available under insurance purchased by the Company or
provided by the Company under any bylaw, agreement or otherwise.
ARTICLE VIII.
MISCELLANEOUS
8.1 UNSECURED GENERAL CREDITOR.
Participants and their Beneficiaries, heirs, successors, and assigns
shall have no legal or equitable rights, claims, or interests in any property or
assets of the Company or the Trust. No assets of the Company shall be held as
collateral security for the obligations of the Company under this Plan. Any and
all assets of the Trust shall be and shall remain unpledged and unencumbered.
The Company's obligation under the Plan shall be merely that of an unfunded and
unsecured promise of the Company to pay money in the future, and the rights of
the
17
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Participants and Beneficiaries shall be no greater than those of unsecured
general creditors. The Company shall maintain the Trust at all times during
the term of the Plan. All assets of the Company and the Trust shall be
subject to the claims of the Company's creditors.
8.2 RESTRICTION AGAINST ASSIGNMENT.
The Company or the Trustee shall pay all amounts payable hereunder only
to the person or persons designated pursuant to the Plan and not to any other
person or entity. No part of a Participant's Account shall be liable for the
debts, contracts, or engagements of any Participant, his or her Beneficiary, or
successors in interest, nor shall a Participant's Account be subject to
execution by levy, attachment, or garnishment or by any other legal or equitable
proceeding, nor shall any such person have any right to alienate, anticipate,
commute, pledge, encumber, or assign any benefits or payments hereunder in any
manner whatsoever, without the prior written consent of the Administrative
Committee, which may be withheld in its sole discretion. If any Participant,
Beneficiary or successor in interest is adjudicated bankrupt or purports to
anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any
distribution or payment from the Plan, voluntarily or involuntarily, the
Administrative Committee, in its discretion, may cancel such distribution or
payment (or any part thereof) to or for the benefit of such Participant,
Beneficiary or successor in interest in such manner as the Administrative
Committee shall direct.
8.3 WITHHOLDING.
There shall be deducted from each payment made under the Plan all taxes
which are required to be withheld by the Company in respect to such payment.
8.4 AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION.
(a) The Administrative Committee or the Board may amend, modify,
suspend or terminate the Plan for any reason, in whole or in part, provided that
(i) no amendment, modification, suspension or termination shall have any
retroactive effect that would directly or indirectly reduce any amounts
allocated to a Participant's Account or otherwise deprive any Participant of any
benefits already vested under the Plan; and (ii) any amendment, modification,
suspension or termination of the Plan that will significantly increase costs to
the Company shall be approved by the Board.
(b) In the event that this Plan is terminated in accordance with this
Section 8.4, the balance of each Participant's Account shall be distributed to
the Participant (or, in the event of the death of the Participant, to the
Participant's Beneficiary) in a lump sum payment as soon as administratively
feasible and in any event within 90 days of such termination.
8.5 GOVERNING LAW.
THE PLAN WILL BE CONSTRUED AND GOVERNED IN ALL RESPECTS IN ACCORDANCE
WITH APPLICABLE FEDERAL LAW AND, TO THE EXTENT NOT PREEMPTED BY SUCH FEDERAL
LAW, IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, INCLUDING WITHOUT
LIMITATION, THE TEXAS STATUTE OF LIMITATIONS, BUT WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAWS OF SUCH STATE.
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8.6 RECEIPT OR RELEASE.
Any payment to a Participant or the Participant's Beneficiary in
accordance with the provisions of the Plan shall, to the extent thereof, be in
full satisfaction of all claims against the Administrative Committee and the
Company with respect to the amount paid. The Administrative Committee may
require such Participant or Beneficiary, as a condition precedent to such
payment, to execute a receipt and release to such effect.
8.7 PAYMENTS ON BEHALF OF PERSONS UNDER INCAPACITY.
In the event that any amount becomes payable under the Plan to a person
who, in the sole judgment of the Administrative Committee, is considered by
reason of physical or mental condition to be unable to give a valid receipt
therefor, the Administrative Committee may direct that such payment be made to
any person found by the Administrative Committee, in its sole judgment, to have
assumed the care of such person. Any payment made pursuant to such
determination shall, to the extent thereof, constitute a full release and
discharge of the Administrative Committee and the Company with respect to the
amount paid.
8.8 SUCCESSORS AND ASSIGNS.
The Company may not assign its obligations under this Plan, whether by
contract, merger, operation of law or otherwise, unless the assignment is to an
assignee or successor entity (in either case, hereafter called a "Successor")
that has stockholders' equity or the closest equivalent thereto (as measured by
the most recent audited financial statements of such Successor) equal to or
greater than the stockholders' equity of the Company (as measured immediately
prior to the event that causes such entity to become a Successor to the
Company). The provisions of this Section 8.8 shall be binding upon each and
every Successor to the Company.
8.9 NO EMPLOYMENT RIGHTS.
Participation in this Plan shall not confer upon any person any right to
be employed by the Company nor any other right not expressly provided hereunder.
8.10 HEADINGS, ETC. NOT PART OF AGREEMENT.
Headings and subheadings in this Plan are inserted for convenience of
reference only and are not to be considered in the construction of the
provisions hereof.
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IN WITNESS WHEREOF, the Company has caused this document to be executed
by its duly authorized officer as of the 7th day of July, 1999.
MICHAELS STORES, INC.
By: /s/ R. Michael Rouleau
------------------------------------
Name: R. Michael Rouleau
Title: Chief Executive Officer
20
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EXHIBIT 5.1
Jones, Day, Reavis & Pogue
2300 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
July 8, 1999
Michaels Stores, Inc.
8000 Bent Branch Drive
Irving, Texas 75063
P.O. Box 619566
DFW, Texas 75261-9566
Re: REGISTRATION STATEMENT ON FORM S-8
Ladies and Gentlemen:
We are acting as special counsel to Michaels Stores, Inc., a Delaware
corporation (the "Company"), in connection with the registration of the deferred
compensation payment obligations ("Deferred Compensation Obligations") arising
under the Michaels Stores, Inc. Deferred Compensation Plan (the "Plan").
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 (i) when
issued in accordance with the provisions of the Plan, the Deferred Compensation
Obligations will be valid and binding obligations of the Company, enforceable in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally and
subject to general equity principles, and (ii) the terms of the Plan comply with
the applicable provisions of Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
For purposes of the foregoing opinion, we have assumed, without having
made any independent investigation, that all of the employees eligible to
participate in the Plan constitute a select group of management or highly
compensated employees and the Plan will therefore be exempt from the provisions
of ERISA, except for the provisions of Title I of ERISA relating to reporting
and disclosure and to administration and enforcement. 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
laws of the State of Texas, 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
Company's Registration Statement on Form S-8 with respect to the Deferred
Compensation Obligations.
Very truly yours,
/s/ Jones, Day, Reavis & Pogue
Jones, Day, Reavis & Pogue
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8) of Michaels Stores, Inc. (the "Company"), pertaining to the Michaels
Stores, Inc. Deferred Compensation Plan of our report dated March 3, 1999, with
respect to the consolidated financial statements of the Company included in its
Annual Report (Form 10-K) for the year ended January 30, 1999, filed with the
Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Dallas, Texas
July 7, 1999
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, on behalf of Michaels
Stores, Inc., a Delaware corporation (the "Corporation"), hereby constitutes and
appoints Mark V. Beasley, James F. Carey, Robert L. Estep, and Quentin C. Faust
the true and lawful attorney-in-fact, with full power of substitution and
resubstitution, for the Corporation to sign on the Corporation's behalf one or
more Registration Statements on Form S-8 or any other appropriate form (the
"Registration Statement"), pursuant to the Securities Act of 1933, as amended,
with respect to the Michaels Stores, Inc. Deferred Compensation Plan and to sign
any or all amendments and any or all post-effective amendments to the
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney or attorneys-in-fact, each of them with
or without the others, full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as it might or could do in person, hereby
ratifying and confirming all that said attorney or attorneys-in-fact or any of
them or their substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
MICHAELS STORES, INC.
By: /s/ R. Michael Rouleau
----------------------------------------
R. Michael Rouleau
Chief Executive Officer and President
Dated: December 21, 1998
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Mark V. Beasley, James F. Carey, Robert L. Estep, and Quentin C. Faust
the true and lawful attorney-in-fact, with full power of substitution and
resubstitution, for him and in his name, place and stead, to sign on his behalf,
as a director or officer, or both, as the case may be, of Michaels Stores, Inc.,
a Delaware corporation (the "Corporation"), one or more Registration Statements
on Form S-8 or any other appropriate form (the "Registration Statement"),
pursuant to the Securities Act of 1933, as amended, with respect to the Michaels
Stores, Inc. Deferred Compensation Plan and to sign any or all amendments and
any or all post-effective amendments to the Registration Statement, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney or attorneys-in-fact, each of them with or without the others, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorney or attorneys-in-fact or any of them or their
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Dated: December 21, 1998
/s/ Sam Wyly /s/ F. Jay Taylor
- ------------------------------ ----------------------------------
Sam Wyly F. Jay Taylor
/s/ Charles J. Wyly, Jr. /s/ Evan A. Wyly
- ------------------------------ ----------------------------------
Charles J. Wyly, Jr. Evan A. Wyly
/s/ R. Michael Rouleau /s/ Michael C. French
- ------------------------------ ----------------------------------
R. Michael Rouleau Michael C. French
/s/ Bryan M. DeCordova
- ------------------------------ ----------------------------------
Bryan M. DeCordova Kelly Elliot
/s/ Richard E. Hanlon /s/ Donald R. Miller, Jr.
- ------------------------------ ----------------------------------
Richard E. Hanlon Donald R. Miller, Jr.
