**Exhibit 10.3**

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|   |           |
|--------|----------------|
|   | John B. Menzer |

 

**MICHAELS STORES, INC.**

**2006 EQUITY INCENTIVE PLAN**

 

Restricted Stock Award Agreement

 

MichaelsStores, Inc.8000 Bent Branch DriveIrving, Texas 75063

 

Attn:      MichaelJ. Veitenheimer

 

Ladiesand Gentlemen:

 

Theundersigned (i) acknowledges that he or she has received an award (the “Award”)of restricted stock from Michaels Stores, Inc. (the “Company”) under theMichaels Stores, Inc. 2006 Equity Incentive Plan (the “Plan”), subject tothe terms set forth below and in the Plan; (ii) further acknowledgesreceipt of a copy of the Plan as in effect on the date hereof; and (iii) agreeswith the Company as follows:

 

1.              *Effective Date*.  ThisAgreement shall take effect as of June 2, 2009, which is the date of grantof the Award.

 

2.              *Shares Subject to Award*. The Award consists of 500,000 shares (the “Shares”) of common stock of theCompany (“Stock”).  The undersigned’s rights to the Shares are subject tothe restrictions described in this Agreement and the Plan (which isincorporated herein by reference with the same effect as if set forth herein infull) in addition to such other restrictions, if any, as may be imposed by law.

 

3.              *Meaning of Certain Terms*. Except as otherwise expressly provided, all terms used herein shall have thesame meaning as in the Plan.  The term “vest” as used herein with respectto any Share means the lapsing of the restrictions described herein withrespect to such Share.

 

4.              *Nontransferability of Shares*. The Shares acquired by the undersigned pursuant to this Agreement shall not besold, transferred, pledged, assigned or otherwise encumbered or disposed ofexcept as provided below and in the Plan.

 

5.              *Vesting of Shares*. The shares acquired hereunder shall vest in accordance with the provisions ofthis Paragraph 5 and applicable provisions of the Plan, as follows: 125,000Shares on each of the second through fifth anniversary of April 6,2009.  Notwithstanding the foregoing, no shares shall vest on any vestingdate specified above unless the undersigned is then, and since the date ofgrant has continuously been, employed by the Company or itssubsidiaries.   In the event that the undersigned’s employment isterminated before April 6, 2011, due to his death, by the Company otherthan for “Cause” or for Disability, or by the undersigned for “Good Reason”(all terms as defined in the Agreement dated March 6, 2009, between theundersigned and the Company, as amended), 133,333 then outstanding and unvestedShares acquired by the undersigned hereunder shall automatically andimmediately vest.  Any remainingoutstanding and unvested Shares shall be forfeited in accordance with theprovisions of paragraph 6 below.

 

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6.              *Forfeiture Risk*. Except as provided in Paragraph 5 above, if the undersigned ceases to beemployed by the Company and its subsidiaries for any reason, any thenoutstanding and unvested Shares acquired by the undersigned hereunder shall beautomatically and immediately forfeited.  The undersigned hereby (i) appointsthe Company as the attorney-in-fact of the undersigned to take such actions asmay be necessary or appropriate to effectuate a transfer of the recordownership of any such shares that are unvested and forfeited hereunder, (ii) agreesto deliver to the Company, as a precondition to the issuance of any certificateor certificates with respect to unvested Shares hereunder, one or more stockpowers, endorsed in blank, with respect to such Shares, and (iii) agreesto sign such other powers and take such other actions as the Company mayreasonably request to accomplish the transfer or forfeiture of any unvestedShares that are forfeited hereunder.

 

7.              *Retention of Certificates*. Any certificates representing unvested Shares shall be held by theCompany.  If unvested Shares are held in book entry form, the undersignedagrees that the Company may give stop transfer instructions to the depositoryto ensure compliance with the provisions hereof.

* *

*8.             Effect of Certain Transactions*.  In the event of aChange of Control (as defined in the Stockholders Agreement), all thenoutstanding and unvested Shares acquired by the undersigned hereunder shallautomatically and immediately vest.

 

9.              *Joinder to Agreements*. The undersigned acknowledges and agrees that the Shares acquired hereunder willbe subject to the Stockholders Agreement and to the Registration RightsAgreement and the transfer and other restrictions, rights, and obligations setforth in those agreements.  By executing this Agreement, the undersignedhereby becomes a party to and bound by the Stockholders Agreement and theRegistration Rights Agreement as a Manager (as such term is defined in thoseagreements), without any further action on the part of the undersigned, theCompany or any other Person.

 

10.         *Legend*.  Any certificatesrepresenting unvested Shares shall be held by the Company, and any suchcertificate shall contain a legend substantially in the following form:

 

THETRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBYARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF THE MICHAELSSTORES, INC. 2006 EQUITY INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENTENTERED INTO BETWEEN THE REGISTERED OWNER AND MICHAELS STORES, INC. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE IN THE OFFICES OF MICHAELSSTORES, INC.

 

Assoon as practicable following the vesting of any such Shares the Company shallcause a certificate or certificates covering such Shares, without the aforesaidlegend, to be issued and delivered to the undersigned.  If any Shares areheld in book-entry form, the Company may take such steps as it deems necessaryor appropriate to record and manifest the restrictions applicable to suchShares.

 

11.         *Dividends, etc.*.  The undersignedshall be entitled to (i) receive any and all dividends or otherdistributions paid with respect to those Shares of which he is the record owneron the record date for such dividend or other distribution, and (ii) voteany Shares of which he is the record owner on the record date for such vote; *provided, however*, that any property(other 

 

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thancash) distributed with respect to a share of Stock (the “associated share”)acquired hereunder, including without limitation a distribution of Stock byreason of a stock dividend, stock split or otherwise, or a distribution ofother securities with respect to an associated share, shall be subject to therestrictions of this Agreement in the same manner and for so long as theassociated share remains subject to such restrictions, and shall be promptlyforfeited if and when the associated share is so forfeited; * and further provided*, that theAdministrator may require that any cash distribution with respect to the Sharesother than a normal cash dividend be placed in escrow or otherwise made subjectto such restrictions as the Administrator deems appropriate to carry out theintent of the Plan.  References in this Agreement to the Sharesshall refer, *mutatis mutandis*,to any such restricted amounts.

 

12.         *Sale of Vested Shares. *Theundersigned understands that he will be free to sell any Share once it hasvested, subject to (i) satisfaction of any applicable tax withholdingrequirements with respect to the vesting or transfer of such Share; (ii) thecompletion of any administrative steps (for example, but without limitation,the transfer of certificates) that the Company may reasonably impose; (iii) applicablerequirements of federal and state securities laws, (iv) the StockholdersAgreement and (v) the Registration Rights Agreement.

 

13.         *Certain Tax Matters*.  Theundersigned expressly acknowledges the following:

 

a.    The undersigned has beenadvised to confer promptly with a professional tax advisor to consider whetherthe undersigned should make a so-called “83(b) election” with respect tothe Shares.  Any such election, to be effective, must be made inaccordance with applicable regulations and within thirty (30) days followingthe date of this Award.  The Company has made no recommendation to theundersigned with respect to the advisability of making such an election.

 

b.    The award or vesting of theShares acquired hereunder, and the payment of dividends with respect to suchShares, may give rise to “wages” subject to withholding.  The undersignedexpressly acknowledges and agrees that his rights hereunder are subject to hispromptly paying to the Company in cash (or by such other means as may beacceptable to the Company in its discretion, including, if the Administrator sodetermines, by the delivery of previously acquired Stock or shares of Stockacquired hereunder or by the withholding of amounts from any payment hereunder)all taxes required to be withheld in connection with such award, vesting orpayment.

 
|   | Very  truly yours,  |
|--------|---------------------|
|   |                |
|   |                |
|   | /s/  John B. Menzer |
|   | John  B. Menzer     |

 

Dated: June 2, 2009

 

Theforegoing Restricted Stock Award Agreement is hereby accepted:

** **

**MICHAELS STORES, INC.**

 
| By:    | /s/  Michael J. Veitenheimer                                |   |
|--------|-------------------------------------------------------------|--------|
|   | Michael  J. Veitenheimer                                    |
|   | Senior  Vice President — General Counsel and Secretary |

 

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