exv10w1



 






Exhibit 10.1




MICHAELS STORES, INC.

SECOND AMENDED AND RESTATED

2001 GENERAL STOCK OPTION PLAN




     This Michaels Stores, Inc. Second Amended and Restated 2001 General Stock
Option Plan (the “Plan”) of Michaels Stores, Inc., a Delaware corporation (the
“Company”), sets forth the Michaels Stores, Inc. General Stock Option Plan
(which became effective as of October 5, 2001), as amended effective as of
September 27, 2004.



     1. Purpose. The purpose of the Plan is to attract and retain the best
available talent and encourage the highest level of performance by Directors
(as defined below) and executive officers and other employees of the Company
and its Subsidiaries (as defined below) and to provide them with incentives to
put forth maximum efforts for the success of the Company’s business, in order
to serve the best interests of the Company and its stockholders. All options
granted under the Plan are intended to be nonstatutory stock options.



     2. Definitions. The following terms, when used in the Plan with initial
capital letters, will have the following meanings:




     (a) “Act” means the Securities Exchange Act of 1934, as in effect
from time to time.




     (b) “Board” means the Board of Directors of the Company.




     (c) “Change of Control” means the first to occur of the events
described in (i) through (v) below, unless a majority of the Directors in
office immediately prior to such event has adopted a resolution prior to
or promptly following the occurrence of any such event stipulating,
conditionally, temporarily or otherwise, that any such event will not
result in a “Change of Control”:




     (i) the Company enters into an agreement providing for the
merger, consolidation or reorganization of the Company into or with
another corporation or other entity, and the consummation of such
merger, consolidation or reorganization would result in less than
2/3 of the total combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors
or persons who serve similar functions of the surviving or
resulting entity (“Voting Stock”) of such corporation or entity
immediately after such transaction being held in the aggregate by
the holders of Voting Stock of the Company immediately prior to
such event;




     (ii) the Company enters into an agreement to sell or otherwise
transfer all or substantially all of its assets to another
corporation, entity or person, and, if such transfer is to another
corporation or entity, the consummation of such sale or transfer
would result in less than 2/3 of the total combined voting power of
the then-outstanding Voting Stock of such corporation or entity
immediately after such sale or transfer being held in the aggregate
by the holders of Voting Stock of the Company immediately prior to
such event;



 









 






     (iii) there is a report filed on Schedule 13D or Schedule TO
(or any successor schedule, form or report), each as promulgated
pursuant to the Act, disclosing that any person (as the term
“person” is used in Section 13(d)(3) or Section 14(d)(2) of the
Act) has become the beneficial owner (as the term “beneficial
owner” is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Act) of securities representing
1/3 or more of the total combined voting power of the
then-outstanding Voting Stock of the Company;




     (iv) the Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Act disclosing
in response to Form 8-K or Schedule 14A (or any successor schedule,
form or report or item therein) that a change of control of the
Company has occurred or will occur in the future pursuant to any
then-existing contract or transaction; or




     (v) if, during any period of two consecutive years,
individuals who at the beginning of any such period constitute the
Directors of the Company cease for any reason to constitute at
least a majority thereof; provided, however, that for purposes of
this Paragraph 2(c)(v) each Director who is first elected, or first
nominated for election by the Company’s stockholders, by a vote of
at least 2/3 of the Directors of the Company then still in office
who were Directors at the beginning of any such period will be
deemed to have been a Director at the beginning of such period.




	 	 	Notwithstanding the foregoing provisions of Paragraph 2(c)(iii) or
Paragraph 2(c)(iv), unless otherwise determined in a specific case by
majority vote of the Board, a “Change of Control” will not be deemed to
have occurred for purposes of Paragraph 2(c)(iii) or Paragraph 2(c)(iv)
solely because (A) the Company, (B) a Subsidiary or (C) any employee
benefit plan of the Company or any Subsidiary, either files or becomes
obligated to file a report or a proxy statement under or in response to
Schedule 13D, Schedule TO, Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) under the Act disclosing
beneficial ownership by it of shares of Voting Stock of the Company,
whether in excess of 1/3 of the total combined voting power of the
then-outstanding Voting Stock of the Company or otherwise, or because the
Company reports that a change of control of the Company has occurred or
will occur in the future by reason of such beneficial ownership or any
increase or decrease thereof.






     (d) “Code” means the Internal Revenue Code of 1986, as in effect
from time to time.




     (e) “Common Stock” means the common stock, par value $.10 per share,
of the Company or any security into which such common stock may be
changed by reason of any transaction or event of the type described in
Paragraph 7.




     (f) “Date of Grant” means the date specified by the Stock Option
Committee on which a grant of Stock Options will become effective (which
date will not be earlier than the date on which such committee takes
action with respect thereto).



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     (g) “Director” means a member of the Board.




     (h) “Employee Termination Date” has the meaning ascribed to such
term in Paragraph 5(b)(iii).




     (i) “Guidelines” has the meaning ascribed to such term in Paragraph
5(b)(i).




     (j) “Market Value per Share” means




     (i) if the principal market for the Common Stock is a national
securities exchange or The Nasdaq Stock Market, Inc., then the
reported closing sale price of the Common Stock on that date on the
principal exchange or market on which the Common Stock is then
listed or admitted to trading (rounded as may be appropriate for
administrative convenience);




     (ii) if the closing sale price is not available or if the
principal market for the Common Stock is not a national securities
exchange and the Common Stock is not quoted on The Nasdaq Stock
Market, Inc., then the average between the highest bid and lowest
asked prices for the Common Stock on such date as reported on the
Nasdaq OTC Bulletin Board Service or by the National Quotation
Bureau, Incorporated or a comparable service (rounded as may be
appropriate for administrative convenience);




     (iii) if the date is not a business day and, as a result,
Paragraphs 2(j)(i) and 2(j)(ii) above are inapplicable, then the
Market Value per Share will be determined as of the immediately
preceding business day (rounded as may be appropriate for
administrative convenience); and




     (iv) if Paragraphs 2(j)(i) and 2(j)(ii) above are otherwise
inapplicable, then the Market Value per Share will be determined in
good faith by the Stock Option Committee.




     (k) “Option Price” means the purchase price per share payable on
exercise of a Stock Option.




     (l) “Participant” means (i) an individual who is selected by the
Stock Option Committee to receive Stock Options under Paragraph 5 and who
is at that time an executive officer or other employee of the Company or
any Subsidiary or (ii) a Director.




     (m) “Rule 16b-3” means Rule 16b-3 under Section 16 of the Act, as
such Rule is in effect from time to time.




     (n) “Stock Option” means the right to purchase one or more shares of
Common Stock upon exercise of an option granted pursuant to Paragraph 5.




     (o) “Stock Option Committee” means the 2001 General Stock Option
Plan Committee, which is a committee of the Board whose members are
appointed by the Board from time to time. All of the members of the
Stock Option Committee, which may



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	 	 	not be less than two, are intended at all times to qualify as
“outside directors” within the meaning of Section 162(m) of the Code and
as “Non-Employee Directors” within the meaning of Rule 16b-3; provided,
however, that the failure of a member of such committee to so qualify
will not be deemed to invalidate any Stock Option granted by such
committee.






     (p) “Subsidiary” means any corporation, partnership, limited
liability company, joint venture, trust or other entity in which the
Company owns or controls, directly or indirectly, not less than 50% of
the total combined voting power or equity interests represented by all
classes of stock or other equity interests issued by such corporation,
partnership, limited liability company, joint venture, trust or other
entity.




     (q) “Voting Stock” has the meaning ascribed to such term in
Paragraph 2(c)(i).



     3. Shares Available Under Plan. The shares of Common Stock which may be
issued under the Plan will not exceed in the aggregate 5,930,000 shares (which
number has been adjusted, in accordance with the terms of the Plan, for the
two-for-one stock splits in the form of stock dividends issued to stockholders
of record of the Company on November 12, 2001 and September 27, 2004 pursuant
to Paragraph 7), subject to adjustment as provided in Paragraph 7. Such shares
may be shares of original issuance or treasury shares or a combination of the
foregoing. Any shares of Common Stock which are subject to Stock Options that
are terminated unexercised, forfeited or surrendered, or that expire for any
reason, will again be available for issuance under the Plan. For purposes of
the Plan, the term “surrendered” shall be construed to include Stock Options
(or portions thereof) exercisable for shares of Common Stock that an optionee
authorizes the Company to withhold in connection with the exercise of a Stock
Option (or a portion thereof) in accordance with Paragraph 6 to pay the Option
Price or in accordance with Paragraph 8 to satisfy a tax withholding
obligation.



     4. Individual Limitation on Stock Options. The maximum aggregate number
of shares of Common Stock with respect to which Stock Options may be granted to
any Participant during any single calendar year will not exceed 300,000 shares
(which number has been adjusted, in accordance with the terms of the Plan, for
the two-for-one stock split in the form of a stock dividend issued to
stockholders of record of the Company on September 27, 2004 pursuant to
Paragraph 7); provided, however, that Stock Options with respect to up to an
additional 700,000 shares (which number has been adjusted, in accordance with
the terms of the Plan, for the two-for-one stock split in the form of a stock
dividend issued to stockholders of record of the Company on September 27, 2004
pursuant to Paragraph 7) may be granted to a Participant who has not previously
been employed by the Company or any of its Subsidiaries upon such Participant’s
initial employment by the Company or any of its Subsidiaries.



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5. Grants of Stock Options





     (a) General. Each grant of Stock Options under the Plan may utilize
any or all of the authorizations, and will be subject to all of the
requirements, set forth below.




     (i) Each grant will specify the number of shares of Common
Stock to which it pertains.




     (ii) Each grant will specify the Option Price, which will not
be less than 100% of the Market Value per Share on the Date of
Grant.




     (iii) Except as otherwise provided in Paragraphs 5(b)(iii),
5(b)(iv) and 5(c)(iv), each Stock Option granted to a Participant
will expire at 5:00 p.m. Dallas, Texas, time, on the calendar day
immediately preceding the fifth anniversary of the Date of Grant.




     (iv) Successive grants may be made to the same Participant
whether or not any Stock Options previously granted to such
Participant remain unexercised.




     (v) Grants may be made to the same Participant, in the same
year or otherwise, under both Paragraph 5(b) and Paragraph 5(c)
(i.e., grants may be made to a Participant for such Participant’s
service both as a Director under Paragraph 5(c) and as an executive
officer or other employee of the Company or a Subsidiary under
Paragraph 5(b)).




     (vi) Each grant may be made subject to such transfer
restrictions as the Stock Option Committee may determine.




     (vii) Each grant will be evidenced by a stock option agreement
executed on behalf of the Company by an officer of the Company and
delivered to the Participant and containing such further terms and
provisions, consistent with the Plan, as the Stock Option Committee
may approve.




     (viii) Notwithstanding any other provision of this Paragraph
5, upon a Change of Control each outstanding Stock Option will vest
and be fully exercisable and will remain exercisable until the term
of the Stock Option expires; provided, however, that if a merger,
consolidation or reorganization described in Paragraph 2(c)(i) or a
sale or transfer of all or substantially all of the assets of the
Company described in Paragraph 2(c)(ii) is abandoned by the
Company, then, on the date of such abandonment, each Stock Option
that vested and became fully exercisable pursuant to this Paragraph
5(a)(viii) but that has not been exercised will revert to the
exercise terms such Stock Option had prior to acceleration of
vesting under this Paragraph 5(a)(viii) and thereafter vest and
become exercisable in accordance with the terms of the Plan.




     (ix) The periods for vesting of a Stock Option granted under
the Plan may not be accelerated in deviation from the terms set
forth in Paragraph 5(b) or



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5(c), as applicable, and the expiration date for a Stock
Option granted under the Plan may not be extended beyond the terms
set forth in this Paragraph 5.




     (b) Grants to Executive Officers and Other Employees.




     (i) The Stock Option Committee may from time to time authorize
grants of Stock Options to executive officers and other employees
of the Company and its Subsidiaries upon such terms and conditions
as such committee may determine consistent with Paragraph 5(a)
above, and the Board may, but will not be required to, ratify such
grants from time to time. The number of shares of Common Stock for
which a Stock Option granted under this Paragraph 5(b) is
exercisable, and the period or periods of continuous service by the
Participant with the Company or any Subsidiary that are necessary
before such Stock Option or portions thereof become exercisable,
will be determined, and the grant thereof will be made, in
accordance with Paragraph 5(b)(ii) and the guidelines (the
“Guidelines”) adopted by the Stock Option Committee from time to
time. The Stock Option Committee may amend, or provide for
exemptions to or deviations from, the Guidelines.




     (ii) Each Stock Option granted to a Participant pursuant to
this Paragraph 5(b) will vest 1/3 on the first anniversary of the
Date of Grant, 1/3 on the second anniversary of the Date of Grant
and 1/3 on the third anniversary of the Date of Grant.




     (iii) Notwithstanding any other provision of the Plan, on the
date on which a Participant’s employment is terminated by reason of
the Participant’s retirement at or after the age of 60, long-term
disability (as determined by the Stock Option Committee in good
faith) or death (the date of such retirement, disability or death,
as the case may be, being referred to herein as the “Employee
Termination Date”), each outstanding Stock Option granted to the
Participant pursuant to this Paragraph 5(b) will immediately vest,
to the extent not vested, and become fully exercisable on the
Employee Termination Date and will expire (A) in the case of
retirement or long-term disability, at 5:00 p.m., Dallas, Texas,
time, on the calendar day immediately preceding the fifth
anniversary of the Employee Termination Date, and (B) in the case
of death, at 5:00 p.m., Dallas, Texas, time, on the calendar day
immediately preceding the third anniversary of the Employee
Termination Date.




     (iv) Notwithstanding any other provision of the Plan, on the
date on which a Participant’s employment is terminated by reason
other than retirement at or after the age of 60, long-term
disability (as determined by the Stock Option Committee in good
faith) or death, the unvested portion of each outstanding Stock
Option granted to such Participant pursuant to this Paragraph 5(b)
will terminate immediately, and the vested portion of each such
Stock Option will expire at 5:00 p.m., Dallas, Texas, time, on the
30th calendar day following the date of such termination.



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     (c) Grants to Directors.




     (i) Grants of Stock Options to employee and non-employee
Directors of the Company, commencing with the annual meeting of
stockholders of the Company in 2001, will be automatic pursuant to
a “formula plan” for grants of Stock Options under the Plan, such
formula plan to consist of the provisions set forth in Paragraphs
5(c)(ii), 5(c)(iii) and 5(c)(iv).




     (ii) On the date of first election to the Board, if such
election is not at an annual meeting of the stockholders of the
Company, and immediately after each annual meeting of the
stockholders of the Company, each Director will be granted a Stock
Option to purchase 35,000 shares of Common Stock.




     (iii) Each Stock Option granted to a Director pursuant to this
Paragraph 5(c) will fully vest on the Date of Grant.




     (iv) Notwithstanding any other provision of the Plan, on the
date of a Director’s death, any unexpired Stock Option granted to
such Director pursuant to this Paragraph 5(c) unexercised on the
date of such Director’s death will expire at 5:00 p.m., Dallas,
Texas, time, on the calendar day immediately preceding the third
anniversary of the Director’s death.




     (d) If an optionee who participates in the Michaels Stores, Inc.
Deferred Compensation Plan (the “Deferred Compensation Plan”) elects to
defer delivery of the shares of Common Stock to be acquired upon exercise
of a Stock Option (or a portion thereof), the date of the issuance and
delivery of such shares shall be the date elected by the optionee under
the Deferred Compensation Plan, but for all purposes under the Plan, such
shares shall be deemed to have been issued and delivered on the date of
exercise of the Stock Option (or a portion thereof). An election by an
optionee to participate in the Deferred Compensation Plan with respect to
exercise of a Stock Option (or a portion thereof) requires compliance
with the terms and conditions of the Deferred Compensation Plan,
including Option Price payment provisions that may be more restrictive
than provided in Paragraph 6 of the Plan.



     6. Payment. The Option Price will be payable (i) in cash or by check
acceptable to the Company, (ii) by the transfer to the Company of shares of
Common Stock, having an aggregate Market Value per Share on the business day
immediately preceding the date of exercise equal to the aggregate Option Price,
that are owned by the optionee and, unless otherwise determined by the Stock
Option Committee or the Board, either (A) were acquired from a person other
than the Company or (B) have been held by the optionee for at least six months,
(iii) by deferred payment from the proceeds of sale through a bank or broker of
some or all of the shares of Common Stock to which such exercise relates, (iv)
by authorizing the Company to withhold a number of shares of Common Stock
otherwise issuable to the optionee, having an aggregate Market Value per Share
on the business day immediately preceding the date of exercise equal to the
aggregate Option Price (provided that, unless otherwise determined by the Stock
Option Committee or the Board, the optionee must attest that the optionee owns
on the date of exercise such number of shares and that the shares either (A)
were acquired from a person other than the Company or (B)



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have been held by the optionee for at least six months), (v) in any other
form of valid consideration acceptable to the Stock Option Committee or (vi) by
a combination of such methods of payment; provided, however, that the payment
methods described in clauses (ii), (iii) and (iv) will not be available at any
time that the Company is prohibited from purchasing or acquiring such shares of
Common Stock.




     7. Adjustments. The Stock Option Committee or the Board will make or
provide for such adjustments in the maximum number of shares specified in
Paragraph 3 and Paragraph 4, in the number of shares of Common Stock covered by
outstanding Stock Options granted hereunder, in the Option Price applicable to
any such Stock Options, and/or in the kind of shares covered thereby (including
shares of another issuer), as such committee or the Board, as applicable, in
its sole discretion, exercised in good faith, may determine is equitably
required to prevent dilution or enlargement of the rights of Participants that
otherwise would result from any stock dividend, stock split, combination of
shares, recapitalization or other change in the capital structure of the
Company, merger, consolidation, spin-off, reorganization, partial or complete
liquidation, issuance of rights or warrants to purchase securities or any other
corporate transaction or event having an effect similar to any of the
foregoing. Moreover, if any such transaction or event occurs, the Stock Option
Committee or the Board, each in its sole discretion, may provide in
substitution for any or all outstanding Stock Options under the Plan such
alternative consideration as the Stock Option Committee or the Board, as
applicable, may determine in good faith to be equitable in the circumstances
and may require in connection with such substitution the surrender of all Stock
Options so replaced. In the event the Stock Option Committee shall disagree
with the Board with respect to the foregoing adjustments, the Board’s
determination will be final and conclusive. Any fractional shares resulting
from the foregoing adjustments will be eliminated.



     8. Withholding of Taxes. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any benefit
realized by an optionee under the Plan, and the amounts available to the
Company for such withholding are insufficient, it will be a condition to the
realization of such benefit that the optionee make arrangements satisfactory to
the Company for payment of the balance of such taxes required or requested to
be withheld. In addition, an optionee may elect to have a tax withholding
obligation of the Company in connection with the exercise of a Stock Option (or
a portion thereof) with respect to which an election to participate in the
Deferred Compensation Plan has not been made, in an amount not greater than the
minimum tax withholding obligation associated with such exercise, satisfied
with shares of Common Stock (having an aggregate Market Value per Share on the
business day immediately preceding the date of exercise equal to the amount of
the tax withholding obligation or part thereof that the optionee elected to
have so satisfied) that would otherwise be transferred to the optionee on
exercise of the Stock Option (or a portion thereof).



     9. Administration of the Plan.




     (a) Unless administration of the Plan has been expressly assumed by
the Board pursuant to a resolution of the Board, the Plan will be
administered by the Stock Option Committee. For purposes of any action
taken by the Stock Option Committee, a majority of the members will
constitute a quorum, and the action of the members present



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	 	 	at any meeting at which a quorum is present, or acts unanimously
approved in writing, will be the acts of the Stock Option Committee.






     (b) The Stock Option Committee has the full authority and discretion
to administer the Plan and to take any action that is necessary or
advisable in connection with the administration of the Plan, including
without limitation the authority and discretion to interpret and construe
any provision of the Plan or of any agreement, notification or document
evidencing the grant of a Stock Option. The interpretation and
construction by the Stock Option Committee of any such provision and any
determination by the Stock Option Committee pursuant to any provision of
the Plan or of any such agreement, notification or document will be final
and conclusive. No member of the Stock Option Committee will be liable
for any such action or determination made in good faith.



     10. Amendments, Etc.




     (a) To the extent not inconsistent with Paragraph 5, the Stock
Option Committee may, without the consent of the optionee, amend any
agreement evidencing a Stock Option granted under the Plan, or otherwise
take action, to expand or limit the payment methods under Paragraph 6, to
waive any condition or restriction applicable to such Stock Option or to
the exercise of such Stock Option, or to expand the events that would
constitute a Change of Control of the Company under Paragraph 2(c) and
may, with the consent of the optionee, amend any such agreement in any
other respect.




     (b) The Plan may be amended from time to time by the Board or any
duly authorized committee thereof (including, without limitation, the
Stock Option Committee). In the event any law, or any rule or regulation
issued or promulgated by the Internal Revenue Service, the Securities and
Exchange Commission, the National Association of Securities Dealers,
Inc., any stock exchange or market upon which the Common Stock is listed
for trading, or any other governmental or quasi-governmental agency
having jurisdiction over the Company, the Common Stock or the Plan,
requires the Plan to be amended, or in the event Rule 16b-3 is amended or
supplemented (e.g., by addition of alternative rules) or any of the rules
under Section 16 of the Act are amended or supplemented, in either event
to permit the Company to remove or lessen any restrictions on or with
respect to Stock Options, the Board and any duly authorized committee
thereof (including, without limitation, the Stock Option Committee)
reserves the right to amend the Plan to the extent of any such
requirement, amendment or supplement, and all Stock Options then
outstanding will be subject to such amendment.




     (c) None of the Board, the Stock Option Committee or any other
committee of the Board may authorize the amendment of any outstanding
Stock Option to reduce the Option Price without the further approval of
the stockholders of the Company. Furthermore, no Stock Option may be
cancelled and replaced with Stock Options having a lower Option Price
without further approval of the stockholders of the Company. This
Paragraph 10(c) is intended to prohibit the repricing of “underwater”
Stock Options and will not be construed to prohibit the adjustments
provided for in Paragraph 7.



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     (d) If the Stock Option Committee determines, with the advice of
legal counsel, that any provision of the Plan would prevent the grant of
any Stock Option intended to qualify as performance-based compensation
within the meaning of Section 162(m) of the Code from so qualifying, such
Plan provision with respect to such grant will be invalid and cease to
have any effect without affecting the validity or effectiveness of any
other provision of the Plan with respect to such grant or otherwise.




     (e) The Plan may be terminated at any time by action of the Board.
The termination of the Plan will not adversely affect the terms of any
outstanding Stock Option.




     (f) The Plan will not confer upon any Participant any right with
respect to continuance of employment or other service with the Company or
any Subsidiary, nor will it interfere in any way with any right the
Company or any Subsidiary would otherwise have to terminate a
Participant’s employment or other service at any time.



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     11. Termination. No grant shall be made under the Plan after October 5,
2011, but all grants made on or prior to such date shall continue in effect
thereafter subject to the terms thereof and of the Plan.



	 	 	 
	

	 	MICHAELS STORES, INC.







	 	 	 	 	 
	

	 	By:
	 	/s/ R. MICHAEL ROULEAU
	

	 	 	 	
 
	

	 	 	 	R. Michael Rouleau
	

	 	 	 	President and Chief Executive Officer








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