Exhibit 10.1


 


MICHAELS STORES, 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 Michaels
Stores, Inc. and certain investors, originally dated as of October 31,
2006, as amended and restated on February 16, 2007, 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
Michaels Stores, Inc., a Delaware corporation (the “Company”), and the
Optionee named above pursuant to the Company’s 2006 Equity Incentive Plan, as
amended from time to time (the “Plan”). 
For the purpose of this Agreement, the “Grant Date” shall mean
            ,
20    .


 


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 the following prices per Share:


 


	
  [With respect to the following Shares in which you
  are immediately vested (the “Vested Option”)]

  
	
   

  	
   

  	
   

  
	
  (a)

  	
   

  	
  [          
  Shares at $15.00 per Share, with an expiration date of
            ,
  20    ];

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  [          
  Shares at $15.00 per Share, with an expiration date of
            ,
  20    ];

  
	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  [          
  Shares at $22.50 per Share, with an expiration date of
            ,
  20    ]; and

  
	
   

  	
   

  	
   

  
	
  (d)

  	
   

  	
  [          
  Shares at $22.50 per Share, with an expiration date of
            ,
  20    ].

  
	
   

  	
   

  	
   

  
	
  With
  respect to the following Shares subject to vesting as set forth below (the
  “Unvested Option”)

  
	
   

  	
   

  	
   

  
	
  (e)

  	
   

  	
  Shares at $7.50 per
  Share (the “Tranche 0 Option”);

  
	
   

  	
   

  	
   

  
	
  (f)

  	
   

  	
  Shares at $15.00 per
  Share (the “Tranche 1 Option”); and

  
	
   

  	
   

  	
   

  
	
  (g)

  	
   

  	
  Shares at $22.50 per
  Share (the “Tranche 2 Option”).

  



 


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 Unvested Option
will vest and become exercisable (i) with respect to 20% of the Shares
subject to each of the Tranche 0 Option, Tranche 1 Option and Tranche 2 Option
on each of the first through fifth anniversaries of the Grant Date or (ii) if
earlier, with respect to any unvested portion of the Unvested 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 [(i) with respect to the Vested Option is set forth in Section 1
above, and (ii)] with respect to the Unvested Option is
              ,
20    , subject to earlier termination in accordance with
the terms and provisions of the Plan and this Agreement.


 


(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.


 


Optionee
represents and warrants that:


 


(a)                                  Authorization. 
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.


 


2

















 


(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. 
Optionee has thoroughly reviewed the Plan, this Agreement, the
Stockholders Agreement and the Registration Rights Agreement in their
entirety.  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.  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.  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.  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.


 


6.                                      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.


 


7.                                      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


 


3

















 


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.”


 


8.                                      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.


 


9.                                      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.


 


10.                               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.


 


11.                               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.


 


12.                               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.


 


13.                               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.


 


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


 


15.                               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.


 


4

















 


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


 


 


	
  DATED:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MICHAELS STORES,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Michael J.
  Veitenheimer

  
	
   

  	
   

  	
  Senior Vice
  President — General Counsel and Secretary

  



 


 


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 of Optionee]

  



 


5