Exhibit 10.1

 

THE MICHAELS COMPANIES, INC.
SECOND  AMENDED AND RESTATED 2014 OMNIBUS LONG-TERM INCENTIVE PLAN

1. DEFINED TERMS

Exhibit A, which is incorporated by reference, defines the terms used in the
Plan and sets forth certain operational rules related to those terms.

2. PURPOSE

The Plan is an amendment and restatement of the 2006 Plan, effective as of the
Date of Adoption with respect to Awards granted prior to, on or after such date,
subject only to Section 9 of the 2006 Plan, and is further amended and restated
effective as of the Second Restatement Date; provided, for the avoidance of
doubt, that as to Stock Options granted prior to the Date of Adoption, no
provision of this amendment and restatement shall have effect to the extent it
would result (as determined by the Administrator) in a deemed new grant for
purposes of Sections 409A or 422 of the Code.  The Plan has been established to
advance the interests of the Company by providing for the grant to Participants
of Stock-based and other incentive Awards.

3. ADMINISTRATION

The Administrator has discretionary authority, subject only to the express
provisions of the Plan, to interpret the Plan; determine eligibility for and
grant Awards; determine, modify or waive the terms and conditions of any Award;
prescribe forms, rules and procedures relating to the Plan; and otherwise do all
things necessary or appropriate to carry out the purposes of the
Plan.  Determinations of the Administrator made under the Plan will be
conclusive and will bind all parties.

4. LIMITS ON AWARDS UNDER THE PLAN

(a) Number of Shares.  The maximum number of shares of Stock that may be
delivered in satisfaction of Awards under the Plan (including, for the avoidance
of doubt, Awards granted prior to, on or after the Second Restatement Date) is
28,553,765.  Up to the total number of shares available for Awards to employee
Participants may be issued in satisfaction of ISOs, but nothing in this Section
4(a) will be construed as requiring that any, or any fixed number of, ISOs be
awarded under the Plan.  For purposes of this Section 4(a), the number of shares
of Stock delivered in satisfaction of Awards will be determined by treating (i)
as not having been delivered any shares of Stock underlying the portion of an
Award that is settled in cash or the portion of any Award that expires,
terminates or is forfeited prior to the issuance of Stock thereunder, and (ii)
as having been delivered any shares of Stock withheld by the Company from any
Award in payment of the exercise price of any Award requiring exercise or in
satisfaction of the tax withholding requirements with respect to any Award.

(b) Type of Shares.  Stock delivered by the Company under the Plan may be
authorized but unissued Stock or previously issued Stock acquired by the
Company.  No fractional shares of Stock will be delivered under the Plan.

(c) Section 162(m) Limits.  The following additional limits will apply to Awards
of the specified type granted, or in the case of Cash Awards payable, to any
person in any calendar year:

(1) Stock Options:  5,000,000 shares of Stock.

(2) SARs:  5,000,000 shares of Stock.

(3) Awards other than Stock Options, SARs or Cash Awards:  5,000,000 shares of
Stock.

(4) Cash Awards:  $10,000,000.

1

--------------------------------------------------------------------------------

 

In applying the foregoing limits, (i) all Awards of the specified type granted
to the same person in the same calendar year will be aggregated and made subject
to one limit; (ii) the limits applicable to Stock Options and SARs refer to the
number of shares of Stock subject to those Awards; (iii) the share limit under
clause (3) refers to the maximum number of shares of Stock that may be
delivered, or the value of which could be paid in cash or other property, under
an Award or Awards of the type specified in clause (3) assuming a maximum
payout; and (iv) the dollar limit under clause (4) refers to the maximum dollar
amount payable under an Award or Awards of the type specified in clause (4)
assuming a maximum payout.  The foregoing provisions will be construed in a
manner consistent with Section 162(m), including, without limitation, where
applicable, the rules under Section 162(m) pertaining to permissible deferrals
of exempt awards.

(d) Other Limitations.  (i) No portion of any grant of Restricted Stock may be
scheduled to vest prior to the date that is one year following the date the
Restricted Stock is granted; (ii) no portion of any grant of a Stock Option or
SAR may be scheduled to become exercisable prior to the date that is one year
following the date the Stock Option or SAR is granted; (iii) no portion of any
grant of a Restricted Stock Unit, Performance Award or Cash Award may be
scheduled to vest or be settled, paid or distributed prior to the date that is
one year following the date the applicable Restricted Stock Unit, Performance
Award or Cash Award is granted; provided, however, that Awards that result in
the issuance (as determined in accordance with the rules set forth in Section
4(a)) of an aggregate of up to five percent of the shares of Stock reserved for
issuance under Section 4(a) may be granted to eligible persons without regard to
the minimum vesting, exercisability, settlement, payment and distribution
provisions of this Section 4(d).

5. ELIGIBILITY AND PARTICIPATION

The Administrator will select Participants from among key Employees of,
directors of, and consultants and advisors to, the Company and its
Affiliates.  Eligibility for ISOs is limited to individuals described in the
first sentence of this Section 5 who are employees of the Company or of a
“parent corporation” or “subsidiary corporation” of the Company as those terms
are defined in Section 424 of the Code.  Eligibility for Stock Options other
than ISOs is limited to individuals described in the first sentence of this
Section 5 who are providing direct services on the date of grant of the Stock
Option to the Company or to a subsidiary of the Company that would be described
in the first sentence of Treas. Regs. §1.409A-1(b)(5)(iii)(E).

6. RULES APPLICABLE TO AWARDS

(a) All Awards.

(1) Award Provisions.  The Administrator will determine the terms of all Awards,
subject to the terms and limitations provided herein.  By accepting (or, under
such rules as the Administrator may prescribe, being deemed to have accepted) an
Award, the Participant will be deemed to have agreed to the terms of the Award
and the Plan.  Notwithstanding any provision of this Plan to the contrary,
awards of an acquired company that are converted, replaced or adjusted in
connection with the acquisition may contain terms and conditions that are
inconsistent with the terms and conditions specified herein, as determined by
the Administrator.

(2) Term of Plan.  No Awards may be made after ten years from the Date of
Adoption, but previously granted Awards may continue beyond that date in
accordance with their terms.

(3) Transferability.  Neither ISOs nor, except as the Administrator otherwise
expressly provides in accordance with the second sentence of this Section
6(a)(3), other Awards may be transferred other than by will or by the laws of
descent and distribution.  During a Participant’s lifetime, ISOs (and, except as
the Administrator otherwise expressly provides in accordance with the second
sentence of this Section 6(a)(3), SARs and NSOs) may be exercised only by the
Participant.  The Administrator may permit the gratuitous transfer (i.e.,
transfer not for value) of Awards other than ISOs to any transferee eligible to
be covered by the provisions of Form S-8 (under the Securities Act of 1933),
subject to such limitations and exceptions as the Administrator may impose.

(4) Vesting, etc.   The Administrator will determine the time or times at which
an Award will vest or become exercisable and the terms on which a Stock Option
or SAR will remain exercisable.  Without limiting the foregoing, the
Administrator may at any time accelerate the vesting or exercisability of an
Award, regardless of any adverse or potentially adverse tax or other
consequences resulting from such acceleration.  Unless the Administrator
expressly provides otherwise, however, the following rules will apply if a
Participant’s Employment ceases:

2

--------------------------------------------------------------------------------

 

(A) Immediately upon the cessation of the Participant’s Employment and except as
provided in (B) and (C) below, each Stock Option and SAR that is then held by
the Participant or by the Participant’s permitted transferees, if any, will
cease to be exercisable and will terminate and all other Awards that are then
held by the Participant or by the Participant’s permitted transferees, if any,
to the extent not already vested will be forfeited.

(B) Subject to (C) and (D) below, all Stock Options and SARs held by the
Participant or the Participant’s permitted transferees, if any, immediately
prior to the cessation of the Participant’s Employment, to the extent then
exercisable, will remain exercisable for the lesser of (i) a period of sixty
(60) days or (ii) the period ending on the latest date on which such Stock
Option or SAR could have been exercised without regard to this Section 6(a)(4),
and will thereupon immediately terminate.

(C) All Stock Options and SARs held by a Participant or the Participant’s
permitted transferees, if any, immediately prior to the Participant’s death or
Disability, to the extent then exercisable, will remain exercisable for the
lesser of (i) the one-year period ending with the first anniversary of the
Participant’s death or Disability, as the case may be, or (ii) the period ending
on the latest date on which such Stock Option or SAR could have been exercised
without regard to this Section 6(a)(4), and will thereupon immediately
terminate.

(D) All Stock Options and SARs (whether or not exercisable) held by a
Participant or the Participant’s permitted transferees, if any, immediately
prior to the cessation of the Participant’s Employment will immediately
terminate upon such cessation of Employment if the termination is for Cause or
occurs in circumstances that in the sole determination of the Administrator
would have constituted grounds for the Participant’s Employment to be terminated
for Cause.

(5) Additional Restrictions.  The Administrator may cancel, rescind, withhold or
otherwise limit or restrict any Award at any time if the Participant is not in
compliance with all applicable provisions of the Award agreement and the Plan,
or if the Participant breaches any agreement with the Company or its Affiliates
with respect to non-competition, non-solicitation or confidentiality.  Without
limiting the generality of the foregoing, the Administrator may recover Awards
made under the Plan and payments under or gain in respect of any Award to the
extent required to comply with Section 10D of the Securities Exchange Act of
1934, as amended, or any stock exchange or similar rule adopted under said
Section.

(6) Taxes.  The delivery, vesting and retention of Stock, cash or other property
under an Award are conditioned upon full satisfaction by the Participant of all
tax withholding requirements with respect to the Award.  The Administrator will
prescribe such rules for the withholding of taxes as it deems necessary.  The
Administrator may, but need not, hold back shares of Stock from an Award or
permit a Participant to tender previously owned shares of Stock in satisfaction
of tax withholding requirements (but not in excess of the minimum withholding
required by law).

(7) Dividend Equivalents, Etc.  The Administrator may provide for the payment of
amounts (on terms and subject to conditions established by the Administrator) in
lieu of cash dividends or other cash distributions with respect to Stock subject
to an Award whether or not the holder of such Award is otherwise entitled to
share in the actual dividend or distribution in respect of such Award; provided,
however, that (A) dividends or dividend equivalents relating to an Award that,
at the dividend payment date, remains unvested or otherwise subject to a risk of
forfeiture (whether service-based or performance-based) shall be subject to the
same risk of forfeiture as applies to the underlying Award, and (B) no dividends
or dividend equivalents shall be payable with respect to Options or SARs.  Any
entitlement to dividend equivalents or similar entitlements will be established
and administered either consistent with an exemption from, or in compliance
with, the requirements of Section 409A. 

(8) Rights Limited.  Nothing in the Plan will be construed as giving any person
the right to continued employment or service with the Company or its Affiliates,
or any rights as a stockholder except as to shares of Stock actually issued
under the Plan.  The loss of existing or potential profit in Awards will not
constitute an element of damages in the event of termination of Employment for
any reason, even if the termination is in violation of an obligation of the
Company or any Affiliate to the Participant.

3

--------------------------------------------------------------------------------

 

(9) Section 162(m).  In the case of any Performance Award (other than a Stock
Option or SAR) intended to qualify for the performance-based compensation
exception under Section 162(m), the Administrator will establish the applicable
Performance Criterion or Criteria in writing no later than ninety (90) days
after the commencement of the period of service to which the performance relates
(or at such earlier time as is required to qualify the Award as
performance-based under Section 162(m)) and, prior to the event or occurrence
(grant, vesting or payment, as the case may be) that is conditioned on the
attainment of such Performance Criterion or Criteria, will certify whether it or
they have been attained.  The preceding sentence will not apply to an Award
eligible (as determined by the Administrator) for exemption from the limitations
of Section 162(m) by reason of the post-initial public offering transition
relief in Section 1.162-27(f) of the Treasury Regulations.

(10) Coordination with Other Plans.   Awards under the Plan may be granted in
tandem with, or in satisfaction of or substitution for, other Awards under the
Plan or awards made under other compensatory plans or programs of the Company or
its Affiliates.  For example, but without limiting the generality of the
foregoing, awards under other compensatory plans or programs of the Company or
its Affiliates may be settled in Stock (including, without limitation,
Unrestricted Stock) if the Administrator so determines, in which case the shares
delivered will be treated as awarded under the Plan (and will reduce the number
of shares thereafter available under the Plan in accordance with the rules set
forth in Section 4).  In any case where an award is made under another plan or
program of the Company or its Affiliates and such award is intended to qualify
for the performance-based compensation exception under Section 162(m), and such
award is settled by the delivery of Stock or another Award under the Plan, the
applicable Section 162(m) limitations under both the other plan or program and
under the Plan will be applied to the Plan as necessary (as determined by the
Administrator) to preserve the availability of the Section 162(m)
performance-based compensation exception with respect thereto.

(11) Section 409A.  Each Award will contain such terms as the Administrator
determines, and will be construed and administered, such that the Award either
qualifies for an exemption from the requirements of Section 409A or satisfies
such requirements.

(12) Fair Market Value.   In determining the fair market value of any share of
Stock under the Plan, the Administrator will make the determination in good
faith consistent with the rules of Section 422 and Section 409A to the extent
applicable.

(b) Stock Options and SARs.

(1) Time And Manner Of Exercise.   Unless the Administrator expressly provides
otherwise, no Stock Option or SAR will be deemed to have been exercised until
the Administrator receives a notice of exercise (in form acceptable to the
Administrator), which may be an electronic notice, signed (including electronic
signature in form acceptable to the Administrator) by the appropriate person and
accompanied by any payment required under the Award.  A Stock Option or SAR
exercised by any person other than the Participant will not be deemed to have
been exercised until the Administrator has received such evidence as it may
require that the person exercising the Award has the right to do so.

(2) Exercise Price.  The exercise price (or the base value from which
appreciation is to be measured) of each Award requiring exercise will be no less
than 100% (or in the case of an ISO granted to a ten-percent shareholder within
the meaning of subsection (b)(6) of Section 422, 110%) of the fair market value
of the Stock subject to the Award, determined as of the date of grant, or such
higher amount as the Administrator may determine in connection with the
grant.  Except in connection with a corporate transaction involving the Company
(which term shall include, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, or exchange of shares), the
terms of outstanding Awards may not be amended to reduce the exercise prices of
outstanding Stock Options or the base values from which appreciation under
outstanding SARs are to be measured, nor may the Company cancel, exchange,
substitute, buyout or surrender outstanding Stock Options or SARs in exchange
for cash, Stock Options with an exercise price that is less than the exercise
price of the original Stock Options, SARs with a base value that is less than
the base value of the original SARs, or other Awards, other than in accordance
with the stockholder approval requirements of The Nasdaq Global Select
Market.  Fair market value will be determined by the Administrator consistent
with the applicable requirements of Section 422 and Section 409A.

4

--------------------------------------------------------------------------------

 

(3) Payment Of Exercise Price.  Where the exercise of an Award is to be
accompanied by payment, payment of the exercise price will be by cash or check
acceptable to the Administrator or by such other legally permissible means, if
any, as may be acceptable to the Administrator.

(4) Maximum Term.  Stock Options and SARs will have a maximum term not to exceed
ten (10) years from the date of grant (or five (5) years from the date of grant
in the case of an ISO granted to a ten-percent shareholder described in Section
6(b)(2) above); provided, however, that, if a Participant still holding an
outstanding but unexercised NSO or SAR ten (10) years from the date of grant
(or, in the case of an NSO or SAR with a maximum term of less than ten (10)
years, such maximum term) is prohibited by applicable law or a written policy of
the Company applicable to similarly situated employees from engaging in any
open-market sales of Stock, and if at such time the Stock is publicly traded (as
determined by the Administrator), the maximum term of such Award will instead be
deemed to expire on the thirtieth (30th) day following the date the Participant
is no longer prohibited from engaging in such open market sales.

7. EFFECT OF CERTAIN TRANSACTIONS

(a) Mergers, etc.    Except as otherwise provided in an Award agreement, the
following provisions will apply in the event of a Covered Transaction:

(1) Assumption or Substitution.  If the Covered Transaction is one in which
there is an acquiring or surviving entity, the Administrator may (but, for the
avoidance of doubt, need not) provide (i) for the assumption or continuation of
some or all outstanding Awards or any portion thereof or (ii) for the grant of
new awards in substitution therefor by the acquirer or survivor or an affiliate
of the acquirer or survivor.

(2) Cash-Out of Awards.   Subject to Section 7(a)(5) below the Administrator may
(but, for the avoidance of doubt, need not) provide for payment (a “cash-out”),
with respect to some or all Awards or any portion thereof, equal in the case of
each affected Award or portion thereof to the excess, if any, of (A) the fair
market value of one share of Stock (as determined by the Administrator in its
reasonable discretion) times the number of shares of Stock subject to the Award
or such portion, over (B) the aggregate exercise or purchase price, if any,
under the Award or such portion (in the case of an SAR, the aggregate base value
above which appreciation is measured), in each case on such payment terms (which
need not be the same as the terms of payment to holders of Stock) and other
terms, and subject to such conditions, as the Administrator determines.

(3) Acceleration of Certain Awards.   Subject to Section 7(a)(5) below, the
Administrator may (but, for the avoidance of doubt, need not) provide that any
Award requiring exercise will become exercisable, in full or in part and/or that
the delivery of any shares of Stock remaining deliverable under any outstanding
Award of Stock Units (including Restricted Stock Units and Performance Awards to
the extent consisting of Stock Units) will be accelerated in full or in part, in
each case on a basis that gives the holder of the Award a reasonable
opportunity, as determined by the Administrator, following exercise of the Award
or the delivery of the shares, as the case may be, to participate as a
stockholder in the Covered Transaction.

(4) Termination of Awards Upon Consummation of Covered Transaction.  Except as
the Administrator may otherwise determine in any case, each Award will
automatically terminate (and in the case of outstanding shares of Restricted
Stock, will automatically be forfeited) upon consummation of the Covered
Transaction, other than Awards assumed pursuant to Section 7(a)(1) above.

(5) Additional Limitations.  Any share of Stock and any cash or other property
delivered pursuant to Section 7(a)(2) or Section 7(a)(3) above with respect to
an Award may, in the discretion of the Administrator, contain such restrictions,
if any, as the Administrator deems appropriate to reflect any performance or
other vesting conditions to which the Award was subject and that did not lapse
(and were not satisfied) in connection with the Covered Transaction.  For
purposes of the immediately preceding sentence, a cash-out under Section 7(a)(2)
above or acceleration under Section 7(a)(3) above will not, in and of itself, be
treated as the lapsing (or satisfaction) of a performance or other vesting
condition.  In the case of Restricted Stock that does not vest and is not
forfeited in connection with the Covered Transaction, the Administrator may
require that any amounts delivered, exchanged or otherwise paid in respect of
such Stock in connection with the Covered Transaction be placed in escrow or
otherwise made subject to such restrictions as the Administrator deems
appropriate to carry out the intent of the Plan.

5

--------------------------------------------------------------------------------

 

(b) Changes in and Distributions With Respect to Stock.

(1) Basic Adjustment Provisions.  In the event of a stock dividend, stock split
or combination of shares (including a reverse stock split), recapitalization or
other change in the Company’s capital structure that constitutes an equity
restructuring within the meaning of FASB ASC 718, the Administrator will make
appropriate adjustments to the maximum number of shares specified in Section
4(a) that may be delivered under the Plan and to the maximum share limits
described in Section 4(c), and will also make appropriate adjustments to the
number and kind of shares of stock or securities subject to Awards then
outstanding or subsequently granted, any exercise prices relating to Awards and
any other provision of Awards affected by such change.

(2) Certain Other Adjustments.  The Administrator may also make adjustments of
the type described in Section 7(b)(1) above to take into account distributions
to stockholders other than those provided for in Section 7(a) and 7(b)(1), or
any other event, if the Administrator determines that adjustments are
appropriate to avoid distortion in the operation of the Plan, having due regard
for the qualification of ISOs under Section 422, the requirements of Section
409A, and for the performance-based compensation rules of Section 162(m), where
applicable.

(3) Continuing Application of Plan Terms.  References in the Plan to shares of
Stock will be construed to include any stock or securities resulting from an
adjustment pursuant to this Section 7.

8. LEGAL CONDITIONS ON DELIVERY OF STOCK

The Company will not be obligated to deliver any shares of Stock pursuant to the
Plan or to remove any restriction from shares of Stock previously delivered
under the Plan until: (i) the Company is satisfied that all legal matters in
connection with the issuance and delivery of such shares have been addressed and
resolved; (ii) if the outstanding Stock is at the time of delivery listed on any
stock exchange or national market system, the shares to be delivered have been
listed or authorized to be listed on such exchange or system upon official
notice of issuance; and (iii) all conditions of the Award have been satisfied or
waived.  The Company may require, as a condition to exercise of the Award, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of the Securities Act of 1933 or any applicable
state or non-U.S. securities law.  Any Stock required to be issued to
Participants under the Plan will be evidenced in such manner as the
Administrator may deem appropriate, including book-entry registration or
delivery of stock certificates.  In the event that the Administrator determines
that Stock certificates will be issued to Participants under the Plan, the
Administrator may require that certificates evidencing Stock issued under the
Plan bear an appropriate legend reflecting any restriction on transfer
applicable to such Stock, and the Company may hold the certificates pending
lapse of the applicable restrictions.

9. AMENDMENT AND TERMINATION

The Administrator may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, and may at any
time terminate the Plan as to any future grants of Awards; provided, that except
as otherwise expressly provided in the Plan the Administrator may not, without
the Participant’s consent, alter the terms of an Award so as to affect
materially and adversely the Participant’s rights under the Award, unless the
Administrator expressly reserved the right to do so at the time the Award was
granted.  Any amendments to the Plan will be conditioned upon stockholder
approval only to the extent, if any, such approval is required by law (including
the Code and applicable stock exchange requirements), as determined by the
Administrator.

10. OTHER COMPENSATION ARRANGEMENTS

The existence of the Plan or the grant of any Award will not in any way affect
the Company’s right to Award a person bonuses or other compensation in addition
to Awards under the Plan.

11. MISCELLANEOUS

(a) Arbitration.  The Company agrees, and each Participant agrees as a condition
to accepting an Award hereunder, to attempt in good faith to resolve any
controversy or claim arising out of or relating to this Plan or any Award
hereunder promptly by negotiations between themselves or their representatives
who have authority to settle the controversy.  If the matter has not been
resolved within sixty (60) days of the initiation of such procedure, the
applicable Participant or the Company may require that the matter be submitted
to final and binding arbitration under the

6

--------------------------------------------------------------------------------

 

Employment Arbitration Rules and Mediation Procedures of American Arbitration
Association (the “AAA”).  The arbitration shall be held before a single
arbitrator mutually agreed upon by the Parties, and if no agreement can be
reached within thirty (30) days after names of potential arbitrators have been
proposed by the AAA, then before a single arbitrator having reasonable
experience in corporate incentive plans of the type provided for in this Plan
and who is chosen by the AAA.  The arbitration shall be governed by the Federal
Arbitration Act, 9 U.S.C. Section 1, et seq. (the “FAA”), and judgment upon the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof.  Any award of the arbitrator shall be final and binding upon such
Parties (subject only to judicial review of the award under and in accordance
with the FAA).  The place of arbitration shall be Dallas, Texas, or any other
location mutually agreed to between the applicable Parties.  The arbitrator
shall state, in writing, the reasoning on which the award rests.  Arbitration
under this paragraph shall be the sole and exclusive remedy for any disputes
arising out of relating to this Plan or any Award hereunder; provided, however,
that this paragraph shall not preclude any Party from pursuing a court action
for the sole purpose of obtaining a temporary restraining order or a preliminary
or permanent injunction with respect to the enforcement of obligations of
non-competition, non-solicitation, confidentiality and/or similar
restrictions.  As a condition to accepting an Award hereunder, each Participant
expressly waives any rights he or she may have to bring any claim arising out of
or relating to this Plan or any Award hereunder to arbitration on a class or
collective basis and agrees that an arbitrator will not have the authority to
consolidate any such claims in a single proceeding.

(b) Limitation of Liability.  Notwithstanding anything to the contrary in the
Plan, neither the Company, nor any Affiliate, nor the Administrator, nor any
person acting on behalf of the Company, any Affiliate, or the Administrator,
will be liable to any Participant or to the estate or beneficiary of any
Participant or to any other holder of an Award by reason of any acceleration of
income, or any additional tax (including any interest and penalties), asserted
by reason of the failure of an Award to satisfy the requirements of Section 422
or Section 409A or by reason of Section 4999 of the Code, or otherwise asserted
with respect to the Award; provided, that nothing in this Section 11(c) will
limit the ability of the Administrator or the Company, in its discretion, to
provide by separate express written agreement with a Participant for any payment
in connection with any such acceleration of income or additional tax.

12. ESTABLISHMENT OF SUB-PLANS

The Administrator may from time to time establish one or more sub-plans under
the Plan for purposes of satisfying applicable blue sky, securities or tax laws
of various jurisdictions.  The Administrator will establish such sub-plans by
adopting supplements to the Plan setting forth (i) such limitations on the
Administrator’s discretion under the Plan as it deems necessary or desirable and
(ii) such additional terms and conditions not otherwise inconsistent with the
Plan as it deems necessary or desirable.  All supplements so established will be
deemed to be part of the Plan, but each supplement will apply only to
Participants within the affected jurisdiction (as determined by the
Administrator).

13. GOVERNING LAW

(a) Certain Requirements of Corporate Law.  Awards will be granted and
administered consistent with the requirements of applicable Delaware law
relating to the issuance of stock and the consideration to be received therefor,
and with the applicable requirements of the stock exchanges or other trading
systems on which the Stock is listed or entered for trading, in each case as
determined by the Administrator.

(b) Other Matters.  Except as otherwise provided by the express terms of an
Award agreement, under a sub-plan described in Section 12 or as provided in
Section 13(a) above, the provisions of the Plan and of Awards under the Plan and
all claims or disputes arising out of our based upon the Plan or any Award under
the Plan or relating to the subject matter hereof or thereof will be governed by
and construed in accordance with the domestic substantive laws of the State of
Texas without giving effect to any choice or conflict of laws provision or rule
that would cause the application of the domestic substantive laws of any other
jurisdiction.

(c) Jurisdiction.  By accepting an Award, each Participant will be deemed to (a)
have submitted irrevocably and unconditionally to the jurisdiction of the
federal and state courts located within the geographic boundaries of  the United
States District Court for the Northern District of Texas for the purpose of any
suit, action or other proceeding arising out of or based upon the Plan or any
Award; (b) agree not to commence any suit, action or other proceeding arising
out of or based upon the Plan or an Award, except in the federal and state
courts located within the geographic boundaries of the United States District
Court for the Northern District of Texas; and (c)  waive, and agree not to
assert, by way of motion as a defense or otherwise, in any such suit, action or
proceeding, any claim that it is not

7

--------------------------------------------------------------------------------

 

subject personally to the jurisdiction of the above-named courts that its
property is exempt or immune from attachment or execution, that the suit, action
or proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that the Plan or an Award or the subject
matter thereof may not be enforced in or by such court.

 

 

8

--------------------------------------------------------------------------------

 

EXHIBIT A

Definition of Terms

The following terms, when used in the Plan, will have the meanings and be
subject to the provisions set forth below:

“2006 Plan”: The Plan (formerly known as The Michaels Stores, Inc. 2006 Equity
Incentive Plan and later renamed The Michaels Companies, Inc. Equity Incentive
Plan) as in effect from time to time prior to the Date of Adoption.

“Administrator”: The Compensation Committee, except that the Compensation
Committee may delegate (i) to one or more of its members (or one or more other
members of the Board (including the full Board)) such of its duties, powers and
responsibilities as it may determine; (ii) to one or more officers of the
Company the power to grant Awards to the extent permitted by Section 157(c) of
the Delaware General Corporation Law; and (iii) to such Employees or other
persons as it determines such ministerial tasks as it deems appropriate.  In the
event of any delegation described in the preceding sentence, the term
“Administrator” will include the person or persons so delegated to the extent of
such delegation.

“Affiliate”: Any corporation or other entity that stands in a relationship to
the Company that would result in the Company and such corporation or other
entity being treated as one employer under Section 414(b) and Section 414(c) of
the Code.

“Award”: Any or a combination of the following:

(i) Stock Options.

(ii) SARs. 

(iii) Restricted Stock.

(iv) Unrestricted Stock.

(v) Stock Units, including Restricted Stock Units.

(vi) Performance Awards.

(vii) Cash Awards.

(viii) Awards (other than Awards described in (i) through (vii) above) that are
convertible into or otherwise based on Stock.

“Board”:  The Board of Directors of the Company.

“Cash Award”:  An Award denominated in cash.

“Cause”: With respect to any Participant, the following events or conditions, as
determined by the Administrator in its reasonable judgment:  (i) the refusal or
failure to perform (other than by reason of disability), or material negligence
in the performance of such Participant’s duties and responsibilities to the
Company or any of its Affiliates, or refusal or failure to follow or carry out
any reasonable direction of the Board, and the continuance of such refusal,
failure or negligence for a period of 10 days after written notice delivered by
the Company to such Participant that specifically identifies the manner in which
the Participant has refused or failed to perform, or been negligent in
performing, his or her duties; (ii) the material breach by such Participant of
any provision of any material agreement between such Participant and the Company
or any of its Affiliates; (iii) fraud, embezzlement, theft or other dishonesty
by such Participant with respect to the Company or any of its Affiliates; (iv)
the conviction of, or a plea of nolo contendere by, such Participant to any
felony or any other crime involving dishonesty or moral turpitude; and (v) any
other conduct that involves a breach of fiduciary duty to the Company on the
part of such Participant.

“Change of Control”:  (i) Whenever used in an Award granted prior to the Date of
Adoption, a “Change of Control” as defined in the Amended and Restated
Stockholders Agreement among Michaels Stores, Inc. and Certain Stockholders of
Michaels Stores, Inc., originally dated as of October 31, 2006 and as amended
from time to time and in effect (unless otherwise defined in the documentation
specifying the terms of such Award, in which case such other definition shall
control), and (ii) in every other case, a “Change of Control” as defined in the
relevant Award documentation.

A-1

--------------------------------------------------------------------------------

 

“Code”:  The U.S. Internal Revenue Code of 1986 as from time to time amended and
in effect, or any successor statute as from time to time in effect.

“Compensation Committee”: The Compensation Committee of the Board.

“Company”:  The Michaels Companies, Inc.

“Covered Transaction”: Any of (i) a consolidation, merger, or similar
transaction or series of related transactions, including a sale or other
disposition of stock, in which the Company is not the surviving corporation or
which results in the acquisition of all or substantially all of the Company’s
then outstanding common stock by a single person or entity or by a group of
persons and/or entities acting in concert, (ii) a sale or transfer of all or
substantially all the Company’s assets, or (iii) a dissolution or liquidation of
the Company.  Where a Covered Transaction involves a tender offer that is
reasonably expected to be followed by a merger described in clause (i) (as
determined by the Administrator), the Covered Transaction will be deemed to have
occurred upon consummation of the tender offer.

“Date of Adoption”:  May 20, 2014

“Disability”:  In the case of any Participant who is a party to an employment or
severance-benefit agreement that contains a definition of “Disability,” (or
words with similar or correlative meanings) the definition set forth in such
agreement will apply with respect to such Participant under the Plan.  In the
case of any other Participant, “Disability” will mean a disability that would
entitle a Participant to long-term disability benefits under the Company’s
long-term disability plan to which the Participant
participates.  Notwithstanding the foregoing, in any case in which a benefit
that constitutes or includes “nonqualified deferred compensation” subject to
Section 409A would be payable by reason of Disability, the term “Disability”
will mean a disability described in Treas. Regs. Section 1.409A-3(i)(4)(i)(A).

“Employee”: Any person who is employed by the Company or an Affiliate.

“Employment”:  A Participant’s employment or other service relationship with the
Company and its Affiliates.  Employment will be deemed to continue, unless the
Administrator expressly provides otherwise, so long as the Participant is
employed by, or otherwise is providing services in a capacity described in
Section 5 to the Company or an Affiliate.  If a Participant’s employment or
other service relationship is with an Affiliate and that entity ceases to be an
Affiliate, the Participant’s Employment will be deemed to have terminated when
the entity ceases to be an Affiliate unless the Participant transfers Employment
to the Company or its remaining Affiliates.  Notwithstanding the foregoing and
the definition of “Affiliate” above, in construing the provisions of any Award
relating to the payment of “nonqualified deferred compensation” (subject to
Section 409A) upon a termination or cessation of Employment, references to
termination or cessation of employment, separation from service, retirement or
similar or correlative terms will be construed to require a “separation from
service” (as that term is defined in Section 1.409A-1(h) of the Treasury
Regulations) from the Company and from all other corporations and trades or
businesses, if any, that would be treated as a single “service recipient” with
the Company under Section 1.409A-1(h)(3) of the Treasury Regulations.  The
Company may, but need not, elect in writing, subject to the applicable
limitations under Section 409A, any of the special elective rules prescribed in
Section 1.409A-1(h) of the Treasury Regulations for purposes of determining
whether a “separation from service” has occurred.  Any such written election
will be deemed a part of the Plan.

“ISO”: A Stock Option intended to be an “incentive stock option” within the
meaning of Section 422.  Each Stock Option granted pursuant to the Plan will be
treated as providing by its terms that it is to be an NSO unless, as of the date
of grant, it is expressly designated as an ISO.

“NSO”:  A Stock Option that is not intended to be an “incentive stock option”
within the meaning of Section 422. 

“Participant”: A person who is granted an Award under the Plan.

“Performance Award”:  An Award subject to Performance Criteria.  The
Administrator in its discretion may grant Performance Awards that are intended
to qualify for the performance-based compensation exception under Section 162(m)
and Performance Awards that are not intended so to qualify.

“Performance Criteria”:  Specified criteria, other than the mere continuation of
Employment or the mere passage of time, the satisfaction of which is a condition
for the grant, exercisability, vesting, payment or full enjoyment of an
Award.  For purposes of Awards that are intended to qualify for the
performance-based compensation exception under Section 162(m), a Performance
Criterion will mean an objectively determinable measure or objectively
determinable measures of performance relating to any or any combination of the
following (measured absolutely, by reference to an index or indices, or relative
to a peer group, and determined either on a consolidated basis or, as the
context permits, on a divisional, subsidiary, line of business, project or
geographical basis or in

A-2

--------------------------------------------------------------------------------

 

combinations thereof): sales; net sales; comparable store sales; sales by
location or store type; revenues; assets; expenses; earnings before or after
deduction for all or any portion of interest, taxes, depreciation, and/or
amortization, whether or not on a continuing operations or an aggregate or per
share basis; return on equity, investment, capital or assets; one or more
operating ratios; borrowing levels, leverage ratios or credit rating; market
share; capital expenditures; cash flow; operating efficiencies; operating
income; stock price; stockholder return; sales of particular products or
services; customer acquisition or retention; buyer contribution; acquisitions
and divestitures (in whole or in part); joint ventures and strategic alliances;
spin-offs, split-ups and the like; reorganizations; or recapitalizations,
restructurings, financings (issuance of debt or equity) or refinancings.  A
Performance Criterion and any targets with respect thereto determined by the
Administrator need not be based upon an increase, a positive or improved result
or avoidance of loss.  To the extent consistent with the requirements for
satisfying the performance-based compensation exception under Section 162(m),
the Administrator may provide in the case of any Award intended to qualify for
such exception that one or more of the Performance Criteria applicable to such
Award will be adjusted in an objectively determinable manner to reflect events
(for example, but without limitation, acquisitions or dispositions) occurring
during the performance period that affect the applicable Performance Criterion
or Criteria.

“Plan”:  The Michaels Companies, Inc. 2014 Omnibus Long-Term Incentive Plan as
from time to time amended and in effect.

“Restricted Stock”: Stock subject to restrictions requiring that it be
redelivered or offered for sale to the Company if specified conditions are not
satisfied.

“Restricted Stock Unit”: A Stock Unit that is, or as to which the delivery of
Stock or cash in lieu of Stock is, subject to the satisfaction of specified
performance or other vesting conditions.

“SAR”:  A right entitling the holder upon exercise to receive an amount (payable
in cash or in shares of Stock of equivalent value) equal to the excess of the
fair market value of the shares of Stock subject to the right over the base
value from which appreciation under the SAR is to be measured.

“Second Restatement Date”:  June 7, 2017.

“Section 409A”: Section 409A of the Code.

“Section 422”: Section 422 of the Code.

“Section 162(m)”: Section 162(m) of the Code.

“Stock”: Common stock of the Company, par value $0.10 per share.

“Stock Option”: An option entitling the holder to acquire shares of Stock upon
payment of the exercise price.

“Stock Unit”: An unfunded and unsecured promise, denominated in shares of Stock,
to deliver Stock or cash measured by the value of Stock in the future.

“Unrestricted Stock”:  Stock not subject to any restrictions under the terms of
the Award.

 

 

A-3

--------------------------------------------------------------------------------