EXHIBIT 10.2

 

THE MICHAELS COMPANIES, INC.

 

FORM OF STOCK OPTION AGREEMENT

 

Optionee:                                 

 

This Option and any securities issued upon exercise of this Option are subject
to restrictions on voting and transfer and other provisions as set forth in the
Amended and Restated Stockholders Agreement among The Michaels Companies, Inc.
and certain investors, originally dated as of October 31, 2006, as amended and
restated on February 16, 2007, as amended on July 22, 2013, and amended from
time to time thereafter (the “Stockholders Agreement”), and the terms of the
Registration Rights Agreement referred to therein (the “Registration Rights
Agreement”).  This Option and any securities issued upon exercise of this Option
constitute an Option and Shares, respectively, as defined in the Stockholders
Agreement.

 

This Stock Option Agreement (this “Agreement”) is hereby entered into between
The Michaels Companies, Inc., a Delaware corporation (the “Company”), and the
Optionee named above pursuant to the Company’s Equity Incentive Plan, as amended
from time to time (the “Plan”).  For the purpose of this Agreement, the “Grant
Date” shall mean           , 201    .

 

1.                                      Grant of Option.  This Agreement
evidences the grant by the Company on the Grant Date to the Optionee of an
option (the “Option”) to purchase, in whole or in part, on the terms provided
herein and in the Plan, a total of                    shares of Common Stock of
the Company, par value $.10 per share (the “Shares”), at $           per Share.

 

The Option evidenced by this Agreement is not intended to qualify as an
incentive stock option under Section 422 of the Internal Revenue Code (the
“Code”).

 

2.                                      Vesting.  During the Optionee’s
Employment, the Option will vest and become exercisable (i) with respect to 25%
of the Shares on each of the first through fourth anniversaries of the Grant
Date or (ii) if earlier, with respect to any unvested portion of the Option,
upon a Change of Control (as defined in the Stockholders Agreement).

 

3.                                      Exercise of Option.

 

(a)                                 Details of Exercise.  Each election to
exercise this Option shall be subject to the terms and conditions of the Plan
and shall be in writing, signed by the Optionee or by his or her executor or
administrator or by the Person or Persons to whom this Option is transferred by
will or the applicable laws of descent and distribution (the “Legal
Representative”), and made pursuant to and in accordance with the terms and
conditions set forth in the Plan.  The latest date on which this Option may be
exercised is               , 202   , subject to earlier termination in
accordance with the terms and provisions of the Plan and this Agreement.

 

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(b)                                 Payment of Exercise Price.  The following
are permitted forms of payment for the exercise of this Option and for the
remittance of withholding taxes pursuant to Section 8: (a) cash or check
acceptable to the Administrator, (b) actual or constructive transfer to the
Company of shares of Stock owned by the Optionee for at least six months (or,
with the consent of the Administrator, for less than six months) having an
aggregate Fair Market Value at the date of exercise equal to the aggregate
exercise price of the Award, (c) authorization by the Optionee of the Company to
withhold a number of shares of Stock otherwise issuable to the Optionee under
this Option having an aggregate Fair Market Value on the date of exercise equal
to the aggregate exercise price of this Option and, if applicable, the amount of
any withholding tax, (d) at such time, if any, as the Stock is publicly traded
through a broker-assisted “cashless” exercise program acceptable to the
Administrator, and (e) by a combination of such methods of payment.

 

4.                                      Effect of Certain Transactions.  In the
event of a Corporate Transaction (as defined in the Plan) or a Change of Control
(as defined in the Stockholders Agreement), the terms of Article 7 of the Plan
shall control.

 

5.                                      Representations and Warranties of
Optionee.

 

The Optionee represents and warrants that:

 

(a)                                 Authorization.  The Optionee has full legal
capacity, power, and authority to execute and deliver this Agreement and to
perform the Optionee’s obligations hereunder.  This Agreement has been duly
executed and delivered by the Optionee and is the legal, valid, and binding
obligation of the Optionee enforceable against the Optionee in accordance with
the terms hereof.

 

(b)                                 No Conflicts.  The execution, delivery, and
performance by the Optionee of this Agreement and the consummation by the
Optionee of the transactions contemplated hereby will not, with or without the
giving of notice or lapse of time, or both (i) violate any provision of law,
statute, rule or regulation to which the Optionee is subject, (ii) violate any
order, judgment or decree applicable to the Optionee, or (iii) conflict with, or
result in a breach of default under, any term or condition of any agreement or
other instrument to which the Optionee is a party or by which the Optionee is
bound.

 

(c)                                  Thorough Review, etc.  The Optionee has
thoroughly reviewed the Plan, this Agreement, the Stockholders Agreement and the
Registration Rights Agreement in their entirety.  The Optionee has had an
opportunity to obtain the advice of counsel (other than counsel to the Company
or its Affiliates) prior to executing this Agreement, and fully understands all
provisions of the Plan and this Agreement.

 

(d)                                 Knowledge.  The Optionee has been advised
that neither this Option or the Shares received upon this Option’s exercise have
been registered under the Securities Act or any state securities laws and,
therefore, none of those securities can be resold unless they are registered
under the Securities Act and applicable state securities laws or unless an
exemption from such registration requirements is available.  Except to the
extent provided in the Stockholders Agreement and the Registration Rights
Agreement, the Optionee is aware that the Company is under no obligation to
effect any such registration with respect to any such securities or to file for
or comply with any exemption from registration.  The Optionee is acquiring and
holding the Option and any Shares received upon the Option’s exercise for its
own account and not with a view to, or for resale in connection with, the
distribution thereof in violation of the Securities Act.  The Optionee is either
an “accredited investor” as defined in Regulation D under the Securities Act or
possesses such knowledge and experience in financial and business matters that
he or she is capable of evaluating the merits and risks of an investment in the
securities of the Company described in this Agreement.

 

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6.                                      Non-Competition/Non-Solicitation.  The
Optionee hereby acknowledges that the Company and its Affiliates have invested
and continue to invest considerable resources in developing Company Information
(as defined below) and trade secrets, and in establishing and maintaining
relationships with customers, employees, and vendors.  The Optionee hereby
further acknowledges that the Option is being furnished to the Optionee as good
and valuable consideration, among other consideration, in exchange for the below
covenants, which are necessary to protect the Company Information, trade
secrets, and goodwill of the Company and its Affiliates:

 

(a)                                 Non-Competition.  The Optionee covenants and
agrees that during the Optionee’s Employment and for a period of twelve (12)
months (and such period shall be tolled on a day-to-day basis for each day
during which the Optionee participates in any activity in violation of the
restrictions set forth in this Section 6(a)) following the Optionee’s
termination of Employment, whether such termination occurs at the insistence of
the Company or its Affiliates or the Optionee (for whatever reason), the
Optionee will not, directly or indirectly, alone or in association with others,
anywhere in the Territory, own, manage, operate, control or participate in the
ownership, management, operation or control of, or be connected as an officer,
employee (in a position or at a level similar to or above that performed by the
Optionee during his/her Employment), investor, principal, joint venturer,
shareholder, partner, director, consultant, agent or otherwise with, or have any
financial interest (through stock or other equity ownership, investment of
capital, the lending of money or otherwise) in, any business, venture or
activity that directly or indirectly competes, or is in planning, or has
undertaken any preparation, to compete, with the Business of the Company or any
of its Immediate Affiliates (a “Competitor”), except that nothing contained in
this Section 6(a) shall prevent the Optionee’s wholly passive ownership of two
percent (2%) or less of the equity securities of any Competitor that is a
publicly-traded company.  For purposes of this Section 6(a), the “Business of
the Company or any of its Immediate Affiliates” is that of arts and crafts
specialty retailer providing materials, ideas and education for creative
activities; provided, that the term “Competitor” shall not include any business,
venture or activity whose gross receipts derived from the retail sale of arts
and crafts products (aggregated with the gross receipts derived from the retail
sale of arts and crafts projects of any related business, venture or activity)
are less than ten percent (10%) of the aggregate gross receipts of such
businesses, ventures or activities. For purposes of this Section 6(a), the
“Territory” is comprised of those states within the United States and those
provinces of Canada in which the Company or any of its Immediate Affiliates was
doing business at any time during the Optionee’s Employment, or with respect to
the Optionee’s obligations following his or her termination of Employment the
twelve (12) months immediately preceding the Optionee’s termination of
Employment.  For purposes of this Section, “Immediate Affiliates” means those
Affiliates which are one of the following: (i) a direct or indirect subsidiary
of the Company, (ii) a parent to the Company or (iii) a direct or indirect
subsidiary of such a parent.

 

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(b)                                 Non-Solicitation. The Optionee covenants and
agrees that during the Optionee’s Employment and for a period of twelve (12)
months (and such period shall be tolled on a day-to-day basis for each day
during which the Optionee participates in any activity in violation of the
restrictions set forth in this Section 6(b)) after the termination of the
Optionee’s Employment, whether such termination occurs at the insistence of the
Company or the Optionee (for whatever reason), the Optionee shall not, and shall
not assist any other person to, (i) hire or solicit for hire any employee of the
Company or any of its Immediate Affiliates or seek to persuade any employee of
the Company or any of its Immediate Affiliates to discontinue employment or
(ii) solicit or encourage any independent contractor providing services to the
Company or any of its Immediate Affiliates to terminate or diminish its
relationship with them; provided, however, that after termination of the
Optionee’s Employment, these restrictions shall apply only with respect to
employees of, and independent contractors providing services to, the Company or
one of its Immediate Affiliates who were such on the date that the Optionee’s
Employment terminated or at any time during the nine (9) months immediately
preceding such termination date.

 

(c)                                  Goodwill and Company Information. The
Optionee acknowledges the importance to the Company and its Affiliates of
protecting their legitimate business interests, including without limitation the
valuable Company Information and goodwill that they have developed or acquired
at considerable expense.  The Optionee acknowledges and agrees that in the
course of the Optionee’s Employment, the Optionee has acquired: (i) confidential
information including without limitation information received by the Company (or
any of its Affiliates) from third parties, under confidential conditions,
(ii) other technical, product, business, financial or development information
from the Company (or any of its Affiliates), the use or disclosure of which
reasonably might be construed to be contrary to the interest of the Company (or
any of its Affiliates), or (iii) any other proprietary information or data,
including but not limited to identities, responsibilities, contact information,
performance and/or compensation levels of employees, costs and methods of doing
business, systems, processes, computer hardware and software, compilations of
information, third-party IT service providers and other Company or its
Affiliates’ vendors, records, sales reports, sales procedures, financial
information, customer requirements and confidential negotiated terms, pricing
techniques, customer lists, price lists, information about past, present,
pending and/or planned Company or its Affiliates’ transactions not publically
disclosed and other confidential information which the Optionee may have
acquired during the Optionee’s Employment (hereafter collectively referred to as
“Company Information”) which are owned by the Company or  its Affiliates and
regularly used in the operation of its business, and as to which precautions are
taken to prevent dissemination to persons other than certain directors, officers
and employees and if disclosed, would assist in competition against the Company
or any of its Affiliates.  Optionee understands and agrees that such Company
Information was and will be disclosed to Optionee in confidence and for use only
in performing work for the Company or its Affiliates.  Optionee understands and
agrees that Optionee: (x) will keep such Company Information confidential at all
times, (y) will not disclose or communicate Company Information to any third
party, and (z) will not make use of Company Information on Optionee’s own
behalf, or on behalf of any third party.  In view of the nature of Optionee’s
Employment and the nature of Company Information Optionee receives during the
course of Optionee’s Employment, Optionee agrees that any unauthorized
disclosure to third parties of Company Information would cause irreparable
damage to the confidential or trade secret status of Company Information.
Optionee further acknowledges and agrees that the restrictions on my activities
set forth above are necessary to protect the goodwill, Company Information and
other legitimate interests of the Company and its Affiliates and that Optionee’s
acceptance of these restrictions is a condition of receipt of the Award, to
which Optionee would not otherwise be entitled, and the Award is good and
sufficient consideration to support Optionee’s agreement to and compliance with
these covenants.

 

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(d)                                 Remedies.  In the event of a breach or
threatened breach by the Optionee of any of the covenants contained in
Section 6(a), 6(b) or 6(c):

 

(i)                                     any vested portion of the Option that is
unexercised, shall be forfeited effective as of the date of such breach or
threatened breach, unless sooner terminated by operation of another term or
condition of this Agreement or the Plan;

 

(ii)                                  the Optionee hereby consents and agrees
that the Company shall be entitled to a “claw back” of (x) shares of Stock
issued upon exercise of the Option, and (y) the cash gain value received by
Optionee pursuant to any sale of shares of Stock issued upon exercise of the
Option; and

 

(iii)                               the Optionee hereby consents and agrees that
the Company shall be entitled to seek, in addition to other available remedies,
a temporary or permanent injunction or other equitable relief against such
breach or threatened breach from any court of competent jurisdiction, without
the necessity of showing any actual damages or that money damages would not
afford an adequate remedy, and without the necessity of posting any bond or
other security. The aforementioned equitable relief shall be in addition to, not
in lieu of, legal remedies, monetary damages or other available forms of relief.

 

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(e)                                  General.  Optionee agrees that the above
restrictive covenants are completely severable and independent agreements
supported by good and valuable consideration and, as such, shall survive the
termination of this Agreement for whatever reason.  The Company and Optionee
agree that any invalidity or unenforceability of any one or more of such
restrictions on competition shall not render invalid or unenforceable any
remaining restrictive covenants. Should a court of competent jurisdiction
determine that the scope of any provision of this Section 6 is too broad to be
enforced as written, the Company and Optionee intend that the court reform the
provision to such narrower scope as it determines to be reasonable and
enforceable.

 

7.                                      Other Agreements.  Optionee acknowledges
and agrees that the Shares received upon exercise of this Option will be subject
to the Stockholders Agreement and to the Registration Rights Agreement and the
transfer and other restrictions, rights, and obligations set forth in those
agreements.  By executing this Agreement, the Optionee hereby becomes a party to
and bound by the Stockholders Agreement and the Registration Rights Agreement as
a Manager (as such term is defined in those agreements), without any further
action on the part of the Optionee, the Company or any other Person.

 

8.                                      Legends.  Certificates evidencing any
Shares issued upon exercise of the Option granted hereby may bear the following
legends, in addition to any legends which may be required by the Stockholders
Agreement or by the Registration Rights Agreement:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A PRIVATE
PLACEMENT, WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE ACT COVERING THE TRANSFER OR
AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER, THAT REGISTRATION UNDER THE
ACT IS NOT REQUIRED.”

 

9.                                      Withholding.  No Shares will be issued,
sold or transferred pursuant to the exercise of this Option unless and until the
Person exercising this Option shall have remitted to the Company an amount
sufficient to satisfy any federal, state, or local withholding tax requirements,
or shall have made other arrangements satisfactory to the Company with respect
to such taxes.

 

10.                               Nontransferability of Option.  This Option is
not transferable by the Optionee other than by will or the applicable laws of
descent and distribution, and is exercisable during the Optionee’s lifetime only
by the Optionee.

 

11.                               Status Change.  Upon the termination of the
Optionee’s Employment, this Option shall continue or terminate as, and to the
extent, provided in the Plan.

 

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12.                               Effect on Employment.  Neither the grant of
this Option, nor the issuance of Shares upon exercise of this Option, will give
the Optionee any right to be retained in the employ of the Company or its
Affiliates, affect the right of the Company or its Affiliates to discharge or
discipline the Optionee at any time, or affect any right of the Optionee to
terminate his or her Employment at any time.

 

13.                               Indemnity.  Optionee hereby indemnifies and
agrees to hold the Company harmless from and against all losses, damages,
liabilities and expenses (including without limitation reasonable attorneys fees
and charges) resulting from any breach of any representation, warranty, or
agreement of the Optionee in this Agreement or any misrepresentation of the
Optionee in this Agreement.

 

14.                               Provisions of the Plan.  This Agreement is
subject in its entirety to the provisions of the Plan, which are incorporated
herein by reference.  A copy of the Plan as in effect on the Grant Date has been
furnished to the Optionee.  By exercising all or any part of this Option, the
Optionee agrees to be bound by the terms of the Plan and this Agreement.  In the
event of any conflict between the terms of this Agreement and the Plan, the
terms of this Agreement shall control.

 

15.                               Definitions.  Initially capitalized terms not
otherwise defined herein have the meaning provided in the Plan.

 

16.                               Governing Law; Jurisdiction.  Notwithstanding
anything to the contrary in the Plan, Section 6 of this Agreement shall be
governed by and construed in accordance with the laws of the State of Texas,
without giving any effect to any choice or conflict of law provision or
rule that would cause the application of the laws of any other jurisdiction,
except where preempted by federal law. Both parties hereby consent and submit to
the jurisdiction of the state and federal courts in Dallas County, Texas in all
questions and controversies arising out of this Agreement.

 

17.                               General.  For purposes of this Agreement and
any determinations to be made by the Administrator hereunder, the determinations
by the Administrator shall be binding upon the Optionee and any transferee.

 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer.

 

 

DATED:

 

 

 

 

 

 

THE MICHAELS COMPANIES, INC.

 

 

 

 

 

By:

 

 

 

Michael J. Veitenheimer

 

 

Senior Vice President and Secretary

 

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The undersigned acknowledges and agrees to the terms of this Stock Option
Agreement and acknowledges and agrees that by the undersigned’s execution below,
the undersigned is also joining and becoming a party to the Amended and Restated
Stockholders Agreement and the Registration Rights Agreement.

 

 

 

 

[NAME]

 

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