SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
MICHAELS STORES, INC.
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(Name of Registrant as Specified in Its Charter)
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MICHAELS STORES, INC.
8000 BENT BRANCH DRIVE
IRVING, TEXAS 75063
August 31, 2001
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Michaels Stores, Inc. to be held at the Four Seasons Resort and Club, 4150
North MacArthur Boulevard, Irving, Texas on Friday, October 5, 2001, at 10:30
a.m. central daylight savings time.
The attached Notice of Annual Meeting of Stockholders and Proxy
Statement describe fully the formal business to be transacted at the Annual
Meeting. During the Annual Meeting, stockholders will consider and vote upon the
election of two members to the Board of Directors, the adoption of an amendment
to the Restated Certificate of Incorporation of Michaels, which would eliminate
division of our Board of Directors into three classes, and approval of the
Michaels Stores, Inc. 2001 General Stock Option Plan.
Certain directors and officers will be present at the Annual Meeting
and will be available to respond to any questions you may have. I hope you will
be able to attend.
We urge you to review carefully the accompanying material and to return
the enclosed proxy card promptly. Please sign, date and return the enclosed
proxy card without delay. If you attend the Annual Meeting, you may vote in
person even if you have previously mailed a proxy.
Sincerely,
CHARLES J. WYLY, JR.
CHAIRMAN OF THE BOARD
MICHAELS STORES, INC.
8000 BENT BRANCH DRIVE
IRVING, TEXAS 75063
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 5, 2001
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Michaels Stores, Inc. will be held at the Four Seasons
Resort and Club, 4150 North MacArthur Boulevard, Irving, Texas on Friday,
October 5, 2001, at 10:30 a.m. central daylight savings time for the following
purposes:
(1) To elect two members to our Board of Directors for terms expiring in
2004 (or expiring in 2002 if the proposal to amend our Restated
Certificate of Incorporation is approved by our stockholders at the
Annual Meeting).
(2) To adopt an amendment to the Restated Certificate of Incorporation of
Michaels, which would eliminate division of our Board of Directors
into three classes.
(3) To approve and ratify the adoption of the Michaels Stores, Inc. 2001
General Stock Option Plan.
(4) To consider such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Information concerning the matters to be acted upon at the Annual
Meeting is set forth in the accompanying Proxy Statement.
The close of business on August 27, 2001 has been fixed as the record
date for determining the stockholders entitled to notice of, and to vote at, the
Annual Meeting or any adjournments thereof. For a period of at least 10 days
prior to the Annual Meeting, a complete list of stockholders entitled to vote at
the Annual Meeting will be open for examination by any stockholder during
ordinary business hours at our offices at 8000 Bent Branch Drive, Irving, Texas
75063.
WE URGE STOCKHOLDERS TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED
PROXY CARD IN THE ACCOMPANYING ENVELOPE, WHICH DOES NOT REQUIRE POSTAGE IF
MAILED IN THE UNITED STATES.
By Order of the Board of Directors
MARK V. BEASLEY
SECRETARY
Irving, Texas
August 31, 2001
PROXY STATEMENT
TABLE OF CONTENTS
Page
GENERAL QUESTIONS AND ANSWERS....................................................................................1
PROPOSAL NO. 1: ELECTION OF TWO DIRECTORS........................................................................4
BOARD MEETINGS AND COMMITTEES....................................................................................5
EXECUTIVE OFFICERS OF MICHAELS...................................................................................7
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP..................................................................9
MANAGEMENT COMPENSATION.........................................................................................11
Summary Compensation Table.............................................................................11
Option Grants During Fiscal 2000.......................................................................12
Option Exercises During Fiscal 2000 and Fiscal Year-End Option Values..................................13
Compensation of Directors..............................................................................13
Employment, Severance and Change of Control Agreements.................................................13
Compensation and Stock Option Committee Interlocks and Insider Participation...........................14
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES..........................................................15
STOCK PERFORMANCE CHART.........................................................................................17
PROPOSAL NO. 2: ADOPTION OF AN AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION...........................18
PROPOSAL NO. 3: APPROVAL OF THE MICHAELS STORES, INC. 2001 GENERAL STOCK OPTION PLAN............................18
Summary of the Michaels Stores, Inc. 2001 General Stock Option Plan....................................19
Federal Income Tax Consequences........................................................................21
INDEPENDENT AUDITORS............................................................................................22
FISCAL 2000 INDEPENDENT AUDITORS' FEES..........................................................................22
Audit Fees.............................................................................................22
Financial Information Systems Design and Implementation Fees...........................................22
All Other Fees.........................................................................................22
AUDIT COMMITTEE REPORT..........................................................................................22
CERTAIN TRANSACTIONS............................................................................................24
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.........................................................24
OTHER MATTERS...................................................................................................24
ANNUAL REPORT...................................................................................................24
FORM 10-K.......................................................................................................24
STOCKHOLDER PROPOSALS...........................................................................................24
i
MICHAELS STORES, INC.
8000 BENT BRANCH DRIVE
IRVING, TEXAS 75063
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 5, 2001
-----------------------
GENERAL QUESTIONS AND ANSWERS
Q: WHEN IS THE PROXY STATEMENT BEING MAILED?
A: This Proxy Statement is first being mailed on or about August 31, 2001 to
our stockholders by our Board of Directors to solicit proxies for use at
the Annual Meeting.
Q: WHEN IS THE ANNUAL MEETING AND WHERE WILL IT BE HELD?
A: The Annual Meeting will be held on Friday, October 5, 2001, at 10:30 a.m.
central daylight savings time at the Four Seasons Resort and Club, 4150
North MacArthur Boulevard, Irving, Texas.
Q: WHO MAY ATTEND THE ANNUAL MEETING?
A: All of our stockholders may attend the Annual Meeting.
Q: WHO IS ENTITLED TO VOTE?
A: Stockholders as of the close of business on August 27, 2001 are entitled
to vote at the Annual Meeting. Each share of our common stock is entitled
to one vote.
Q: ON WHAT AM I VOTING?
A: You will be voting on:
o The election of two members to our Board of Directors for terms
expiring in 2004 (or expiring in 2002 if the proposal to amend our
Restated Certificate of Incorporation is adopted by our stockholders
at the Annual Meeting);
o The adoption of an amendment to the Restated Certificate of
Incorporation of Michaels, which would eliminate division of our
Board of Directors into three classes;
o The approval of the Michaels Stores, Inc. 2001 General Stock Option
Plan; and
o Such other business as may properly come before the Annual Meeting
or any adjournments thereof.
Q: HOW DO I VOTE?
A: You may vote by either attending the Annual Meeting or signing and dating
each proxy card you receive and returning it in the enclosed prepaid
envelope. We encourage you to complete and send in your proxy card.
All shares represented by valid proxies, unless the stockholder otherwise
specifies, will be voted:
o "FOR" the election of each of the persons identified in "Proposal
No. 1: Election of Two Directors" as nominees for election as
directors;
o "FOR" the adoption of the amendment to the Restated Certificate of
Incorporation;
o "FOR" the approval of the Michaels Stores, Inc. 2001 General Stock
Option Plan; and
o At the discretion of the proxy holders with regard to any other
matter that may properly come before the Annual Meeting.
If you properly specify how your proxy is to be voted, your proxy will be
voted accordingly. If you sign and send in your proxy but do not indicate
how you want to vote, your proxy will be counted as a vote in favor of
each of the proposals.
Q: IF I ABSTAIN FROM VOTING OR WITHHOLD AUTHORITY TO VOTE ON ANY PROPOSAL,
WILL MY SHARES BE COUNTED IN THE VOTE?
A: If you abstain from voting on Proposal No. 1 (election of two directors)
or Proposal No. 3 (approval of the 2001 General Stock Option Plan) or if
you elect to withhold authority to vote on either of those proposals, your
shares will not be counted in the vote for that proposal. However, if you
abstain from voting or if you elect to withhold authority to vote on
Proposal No. 2 (amendment to the Restated Certificate of Incorporation),
your shares effectively will count as votes against that proposal.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A: Your broker has limited discretion to vote street name shares without your
instructions. For example, your broker could vote your shares without your
instructions on Proposal No. 1 (election of two directors) and Proposal
No. 3 (approval of the 2001 General Stock Option Plan). Your broker likely
will not vote on Proposal No. 2 (amendment to the Restated Certificate of
Incorporation) without your instructions. To be sure your shares are
voted, you should instruct your broker to vote your shares using the
instructions provided by your broker. If you do not instruct your broker
on how to vote your shares, your shares may not be counted in the vote on
Proposal No. 1 or Proposal No. 3 and effectively will be counted as votes
against Proposal No. 2.
Q: CAN I CHANGE MY VOTE AFTER I MAIL MY PROXY?
A: Yes. You can change your vote at any time before your proxy is voted at
the Annual Meeting. You may revoke your proxy by:
o delivering no later than 5:00 p.m. central daylight savings time on
October 4, 2001, written notice of revocation to Computershare
Investor Services, L.L.C., 1601 Elm Street, Suite 4340, Dallas,
Texas 75201, or
o attending the Annual Meeting and voting in person. Your attendance
alone will not revoke your proxy. You must also vote in person at
the Annual Meeting.
If you instruct a broker to vote your shares, you must follow your
broker's directions for changing those instructions.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
A: If you receive more than one proxy card, it is because your shares are in
more than one account. You will need to sign and return all proxy cards to
ensure that all your shares are voted.
Q: WHO WILL COUNT THE VOTE?
A: Representatives of Computershare Investor Services, L.L.C, our transfer
agent, will tabulate the votes and act as inspectors of election.
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Q: WHAT CONSTITUTES A QUORUM?
A: As of August 27, 2001, the record date, ___________ shares of our common
stock were issued and outstanding. A majority of the issued and
outstanding shares, present or represented by proxy, will constitute a
quorum for the transaction of business at the Annual Meeting. If you
submit a properly executed proxy card, then your shares will be counted as
part of the quorum. Votes that are withheld and broker non-votes will be
counted towards a quorum but will be excluded from any vote.
Q: WHAT IS THE REQUIRED VOTE FOR ELECTION OF EACH DIRECTOR?
A: The required vote for election of each director is a plurality of the
votes of the shares of common stock having voting power present or
represented by proxy at the Annual Meeting.
Q: WHAT IS THE REQUIRED VOTE FOR ADOPTION OF THE AMENDMENT TO THE RESTATED
CERTIFICATE OF INCORPORATION?
A: The amendment must be approved by the holders of a majority of the total
number of outstanding shares of our common stock. As a result, abstentions
from this vote, withheld authority to vote and broker non-votes
effectively will be votes against this proposal.
Q: WHAT IS THE REQUIRED VOTE FOR APPROVAL OF THE MICHAELS STORES, INC. 2001
GENERAL STOCK OPTION PLAN?
A: The Michaels Stores, Inc. 2001 General Stock Option Plan must be approved
by the holders of a majority of the total number of outstanding shares of
our common stock having voting power present or represented by proxy at
the Annual Meeting and actually voted on the proposal. If you abstain or
if you withhold authority to vote on the proposal, your shares will not be
considered to have been actually voted on the proposal. Broker non-votes
will not be considered to have been actually voted on the proposal.
Q: HOW MUCH DID THIS PROXY SOLICITATION COST?
A: We have hired Morrow & Co., Inc. to assist us in the distribution of proxy
materials and solicitation of votes at a cost of approximately $10,000,
plus out-of-pocket expenses. We will reimburse brokerage firms and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding proxy and solicitation materials to the owners of
our common stock. Our officers and regular employees may also solicit
proxies, but they will not be specifically compensated for these services.
3
PROPOSAL NO. 1:
ELECTION OF TWO DIRECTORS
Our Board of Directors has five members, a majority of whom are
independent directors. Our Board is presently divided into three classes, with
each of two classes consisting of two directors and one class consisting of one
director. Members of each class of directors generally serve for a term of three
years. A director serves until the annual meeting of stockholders in the year in
which his or her term expires or until a successor is elected and qualified.
EFFECTIVE JULY 26, 2001, OUR BOARD APPROVED AND RECOMMENDED TO OUR
STOCKHOLDERS THAT THEY APPROVE AN AMENDMENT TO OUR RESTATED CERTIFICATE OF
INCORPORATION. THE AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION WILL
ELIMINATE THE DIVISION OF OUR BOARD INTO THREE CLASSES. IF OUR STOCKHOLDERS VOTE
TO ADOPT THE AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION AT THE
ANNUAL MEETING, ALL CURRENT DIRECTORS, INCLUDING DIRECTORS ELECTED AT THE ANNUAL
MEETING, WILL HOLD OFFICE FOR A TERM EXPIRING AT THE ANNUAL MEETING OF
STOCKHOLDERS IN 2002. THEREAFTER, EACH OF THE DIRECTORS WILL SERVE FOR A
ONE-YEAR TERM OR UNTIL HIS OR HER SUCCESSOR IS DULY ELECTED AND QUALIFIED OR
UNTIL THE EARLIER OF HIS OR HER RESIGNATION, DEATH OR REMOVAL. SEE PROPOSAL NO.
2 IN THIS PROXY STATEMENT.
The terms of Messrs. Charles J. Wyly, Jr. and Richard E. Hanlon expire
at this Annual Meeting, and our Board has nominated each of them for re-election
at the Annual Meeting as a director to serve for a three-year term expiring at
our annual meeting of stockholders in 2004 or until his successor is elected and
qualified. In order to be elected a director, a nominee must receive a plurality
of the votes of the shares of common stock having voting power present or
represented by proxy at the Annual Meeting.
The nominees have indicated their willingness to serve as members of
the Board if elected; however, in case any nominee becomes unavailable for
election to the Board for any reason not presently known or contemplated, the
proxy holders have discretionary authority to vote the proxy for a substitute
nominee or nominees. Proxies cannot be voted for more than two nominees. The
following table sets forth information as to the nominees for election at the
Annual Meeting and each of the directors whose term of office will continue
after the Annual Meeting, including their ages, present principal occupations,
other business experiences during the last five years, membership on committees
of the Board and directorships in other publicly-held companies.
YEAR
TERM
NAME AGE POSITION EXPIRES
------------------------------------ --- -------------------------------------------- -------
Nominees for a three-year term
ending in 2004:
Charles J. Wyly, Jr. 67 Chairman of the Board of Directors 2001
Richard E. Hanlon (1) 53 Director 2001
Continuing Directors:
Elizabeth A. VanStory (1) 39 Director 2002
Sam Wyly 66 Vice Chairman of the Board of Directors 2003
Richard C. Marcus (1) 62 Director 2003
----------------------
(1) Member of the Audit Committee, the Compensation Committee, the 1997 Stock
Option Committee, the Corporate Governance and Nominating Committee and
the 2001 Employee Stock Option Plan Committee.
Mr. Charles J. Wyly, Jr. has served as Chairman of the Board of
Michaels since July 2001. He became a director of Michaels in 1984 and served as
Vice Chairman of the Board from 1985 to July 2001. He co-founded Sterling
Software, Inc., a worldwide supplier of software products, in 1981 and, until
its acquisition in 2000 by another company, had served as a director and since
1984 as Vice Chairman of the Board. Mr. Wyly served as a director of Sterling
Commerce, Inc. from December 1995 until its acquisition in 2000 by another
company. Mr. Wyly was a director of Scottish Annuity & Life Holdings, Ltd., a
variable life insurance and reinsurance company, from October 1998 until
November 2000. Mr. Wyly served from 1964 to 1975 as an officer and director,
including serving as President from 1969 to 1973, of University Computing
Company. Mr. Wyly and his brother,
4
Sam Wyly, founded Earth Resources Company, an oil refining and silver mining
company, and Charles J. Wyly, Jr. served as Chairman of the Board of that
company from 1968 to 1980. He was also a founding partner of Maverick
Capital, Ltd., a manager of equity hedge funds.
Mr. Hanlon became a director of Michaels in April 1990. He has been
Senior Vice President--Investor Relations of AOL Time Warner, Inc., the world's
first Internet-powered media and communications company, since its inception in
January 2001. From February 1995 until its inception as AOL Time Warner, Inc. in
January 2001, he held various executive positions at America Online, Inc., a
leading provider of Internet online services. From March 1993 until February
1995, Mr. Hanlon was President of Hanlon & Co., a consulting firm, and from 1988
until 1993 was Vice President--Corporate Communications and Secretary of LEGENT
Corporation.
Ms. VanStory became a director of Michaels in July 1999. She is
President of Thinkout, a consulting firm. From June 1999 until October 2000, she
served as President of iMotors.com. From 1997 to June 1999, Ms. VanStory was
Vice President of OfficeDepot.com, an office products retailer and a division of
Office Depot, Inc. From 1995 to 1997, she served as Vice President and General
Manager of New Media for The Weather Channel. Ms. VanStory began her career in
interactive media as Director of Marketing for Bell Atlantic Video Services,
where she served from 1992 to 1995. From 1988 to 1992, she held several
marketing positions with MCI Telecommunications Corporation. Ms. VanStory was
previously a director of shop.org, an online retailing association.
Mr. Sam Wyly has served as Vice Chairman of the Board of Michaels since
July 2001. He became a director of Michaels in 1984 and served as Chairman of
the Board from 1984 to July 2001. Mr. Wyly is an entrepreneur who has created
and managed several public and private companies. He is the sole manager of
Ranger GP Governance, L.L.C., the general partner of Ranger Governance, Ltd., a
Dallas-based investment company created by Mr. Wyly and Charles J. Wyly, Jr. Mr.
Wyly also was Chairman of the Board of Green Mountain Energy Company, a clean
energy provider, from March 1999 to August 2000. Mr. Wyly founded University
Computing Company, which became one of the first computer utility networks and
one of the first software products companies. He was a founder and, until its
acquisition in 2000 by another company, was Chairman and a director of Sterling
Software, Inc. He also was Chairman of the Executive Committee and a director of
Sterling Commerce, Inc., until its acquisition in 2000 by another company, and
was Chairman and a director of Scottish Annuity & Life Holdings, Ltd. from
October 1998 until June 2000. He was also a founding partner of Maverick
Capital, Ltd.
Mr. Marcus became a director of Michaels in July 1999. Since January
1997, Mr. Marcus has served as Senior Advisor to Peter J. Solomon Company, an
investment banking company. From December 1994 through December 1995, Mr. Marcus
served as Chief Executive Officer of Plaid Clothing Group, a manufacturer of
men's tailored clothing. He is currently on the boards of directors of Zale
Corporation, Lands' End, Inc., Fashionmall.com and GiftCertificates.com. Prior
to these activities, Mr. Marcus was with Neiman Marcus for 27 years and served
as Chairman and Chief Executive Officer from 1979 through 1988.
BOARD MEETINGS AND COMMITTEES
During fiscal year 2000, our Board of Directors held five meetings and
acted by unanimous consent twice. In addition to meetings of the full Board,
directors attended meetings of Board committees. All incumbent directors
attended at least 75% of all Board meetings, except Mr. Hanlon who attended
three of the five Board meetings. All incumbent directors attended at least 75%
of all applicable committee meetings.
Our Board had four active standing committees in fiscal year 2000. We
did not have a standing nominating committee in fiscal year 2000; however,
effective June 29, 2001, we established a Nominating Committee and, effective
July 26, 2001, that committee's functions were expanded and it was renamed the
Corporate Governance and Nominating Committee.
o Prior to July 26, 2001, the EXECUTIVE COMMITTEE had the power to
act on behalf of the Board and to direct and manage the business
and affairs of Michaels whenever the Board was not in session.
Committee members were Sam Wyly (Chairman) and Charles J. Wyly, Jr.
During fiscal year 2000, the Executive Committee did not meet, but
acted by unanimous written consent of the members twice. Effective
July 26, 2001, we dissolved the Executive Committee.
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o The AUDIT COMMITTEE reviews the professional services and
independence of our independent auditors and our accounts,
procedures and internal controls. The Audit Committee (i) recommends
to the Board for appointment the firm selected to be independent
auditors for Michaels and monitors the performance of such firm,
(ii) reviews and approves the scope of the annual audit,
(iii) reviews and evaluates with the independent auditors our
annual audit and annual consolidated financial statements,
(iv) reviews with management the status of internal accounting
controls, (v) evaluates problem areas having a potential financial
impact on Michaels that may be brought to its attention by
management, the independent auditors or the Board and
(vi) evaluates all public financial reporting documents of
Michaels. Committee members are Richard C. Marcus (Chairman),
Richard E. Hanlon and Elizabeth A. VanStory, all of whom are
independent directors as defined in Rule 4200(a)(14) of the listing
standards of the National Association of Securities Dealers, Inc.
During fiscal year 2000, the Audit Committee met seven times.
o The COMPENSATION COMMITTEE reviews and approves salaries and bonuses
for officers and key employees of Michaels. Committee members until
September 2000 were Charles J. Wyly, Jr. (Chairman) and Sam Wyly,
with Richard E. Hanlon as an alternate member. Since September 2000,
committee members have been Richard E. Hanlon (Chairman), Richard C.
Marcus and Elizabeth A. VanStory. During fiscal year 2000, the
Compensation Committee met twice.
o The 1997 STOCK OPTION COMMITTEE administers our 1997 Stock Option
Plan and has the power to grant options, determine the number of
shares to be covered by each option and determine when the options
will be exercisable under that plan. Committee members are Richard
E. Hanlon (Chairman), Richard C. Marcus and Elizabeth A. VanStory.
During fiscal year 2000, the 1997 Stock Option Committee did not
meet, but acted by unanimous written consent of the members
thirteen times.
Michaels has designated three new committees of the Board of Directors:
the Corporate Governance and Nominating Committee, effective as of July 26,
2001, the 2001 Employee Stock Option Plan Committee, effective as of July 23,
2001, and the 2001 General Stock Option Plan Committee.
o The CORPORATE GOVERNANCE AND NOMINATING COMMITTEE is charged with
the development of corporate governance guidelines for Michaels and
with advising the Board of Directors with respect to corporate
governance practices generally. In addition, the Corporate
Governance and Nominating Committee considers and recommends to the
Board of Directors nominees for election to the Board. Committee
members are Richard E. Hanlon (Chairman), Richard C. Marcus and
Elizabeth A. VanStory.
o The 2001 EMPLOYEE STOCK OPTION PLAN COMMITTEE administers our 2001
Employee Stock Option Plan and has the power to grant options and
determine the number of shares to be covered by each option under
that plan. Committee members are Richard E. Hanlon (Chairman),
Richard C. Marcus and Elizabeth A. VanStory.
o The 2001 GENERAL STOCK OPTION PLAN COMMITTEE will administer the
Michaels Stores, Inc. 2001 General Stock Option Plan presented to
the stockholders for approval at the Annual Meeting and will have
the power to grant options and determine the number of shares to be
covered by each option under that plan. Committee members are
Richard E. Hanlon (Chairman), Richard C. Marcus and Elizabeth A.
VanStory. See Proposal No. 3 in this Proxy Statement.
6
EXECUTIVE OFFICERS OF MICHAELS
NAME AGE POSITION
--------------------------- --- --------------------------------
Charles J. Wyly, Jr. 67 Chairman of the Board of Directors
Sam Wyly 66 Vice Chairman of the Board of Directors
R. Michael Rouleau 63 President and Chief Executive Officer
Bryan M. DeCordova 45 Executive Vice President--Chief Financial Officer
Edward F. Sadler 56 Executive Vice President--Store Operations
Robert M. Spencer 61 Executive Vice President--Merchandising
Douglas B. Sullivan 50 Executive Vice President--Development
James F. Tucker 57 Executive Vice President--Chief Information Officer
Thomas C. DeCaro 46 Senior Vice President--Merchandise Planning and Control
Sue Elliott 50 Senior Vice President--Human Resources
Stephen R. Gartner 51 Senior Vice President--Supply Chain Management
Duane E. Hiemenz 47 Senior Vice President--New Business Development
James C. Neustadt 53 Senior Vice President--Advertising and Marketing
Information concerning the business experience of each of Mr. Charles
J. Wyly, Jr. and Mr. Sam Wyly is provided under "Proposal No. l: Election of Two
Directors."
Mr. Rouleau has served as Chief Executive Officer since April 1996, and
has also served as President from April 1997 to June 1999 and again since March
2001. Prior to joining us, Mr. Rouleau had served as Executive Vice President of
Store Operations for Lowe's Companies, Inc. from May 1992 until April 1996 and
in addition as President of Lowe's Contractor Yard Division from February 1995
until April 1996. Prior to joining Lowe's, Mr. Rouleau was a co-founder and
President and Chief Executive Officer of Office Warehouse, which subsequently
merged into Office Max. Mr. Rouleau also served with the Target Stores division
of Dayton Hudson Corporation for 20 years.
Mr. DeCordova became Executive Vice President--Chief Financial Officer
in March 1997. From 1990 until joining us, he served as Vice President of
Finance and Chief Financial Officer, and from May 1991 also as Treasurer, for
Duckwall-ALCO Stores, Inc.
Mr. Sadler became Executive Vice President--Store Operations in October
1999. From June 1995 until joining us, he was Regional Vice President and
subsequently Senior Vice President--Stores of Caldor. Prior to Caldor, Mr.
Sadler served with Target for 19 years, most recently as Vice President--Store
Operations.
Mr. Spencer became Executive Vice President--Merchandising in January
2001. From January 1998 until January 2001, he served as Vice
President--Northeast Zone. Prior to joining us, Mr. Spencer held senior
management positions at A.C. Moore, where he was Executive Vice President and
Chief Operating Officer from March 1996 until December 1997, and at McCrory
Stores, Target and W.T. Grant.
Mr. Sullivan became Executive Vice President--Development in April
1997. He joined Michaels in 1987 and has served in a variety of capacities,
overseeing our store operations, distribution, store opening, real estate, legal
and personnel functions, including serving as President from August 1995 to
April 1997. Prior to joining us, Mr. Sullivan had served with Family Dollar
Stores, Inc. for 11 years, most recently as Vice President--Real Estate.
Mr. Tucker became Executive Vice President--Chief Information Officer
in June 1997. From 1994 until joining us, Mr. Tucker held the positions of Vice
President of MIS and subsequently Senior Vice President and Chief Information
Officer for Shopko Stores, Inc. Prior to 1994, Mr. Tucker held the position of
Vice President--Management Information Services for Trans World Music Corp.
Mr. DeCaro became Senior Vice President--Merchandise Planning and
Control in August 2000. From 1998 until joining us, he was Vice
President--Merchandise for Disneyland Resort. Prior to this, he held the
position of Senior Vice President--Merchandise Planning and Allocation for
Kohl's Department Stores from February 1996 to April 1998. In addition, Mr.
DeCaro has held various positions in Merchandise Planning and Allocation and
Finance for The Disney Store, The Limited Stores, May Department Stores and
Sanger Harris Department Stores.
7
Ms. Elliott became Senior Vice President--Human Resources in October
2000. From May 1998 until joining us, she was Senior Vice President--Human
Resources for Luby's, Inc. Prior to this, she held the positions of Vice
President--Human Resources and subsequently Senior Vice President--Italianni's
Brand for Carlson Restaurants Worldwide from January 1993 to May 1998. In
addition, Ms. Elliott has held various human resources and operations positions
at PepsiCo (KFC Restaurants).
Mr. Gartner joined us as Senior Vice President--Supply Chain Management
in May 2001. From 1998 until joining us, Mr. Gartner held the position of
Executive Vice President--Supply Chain Management for DSC Logistics. Prior to
DSC Logistics, Mr. Gartner served with The Pillsbury Company for 20 years, most
recently as Vice President--Distribution Operations.
Mr. Hiemenz became Senior Vice President--New Business Development in
October 1999, after joining us as a Zone Vice President in July 1996 and serving
as Executive Vice President--Store Operations from August 1996 to October 1999.
Prior to joining Michaels, Mr. Hiemenz had served with Lowe's for nine years,
most recently as a Regional Vice President.
Mr. Neustadt joined us as Senior Vice President--Advertising and
Marketing in May 1998. From 1994 until joining us, Mr. Neustadt was Vice
President--Advertising for Lowe's. Prior to Lowe's, he held a variety of
advertising and marketing positions with Montgomery Ward, Handy Andy and Payless
Cashways, Inc.
8
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information as of August 27, 2001
regarding the beneficial ownership of common stock by each person known by
Michaels to own five percent or more of the outstanding shares of common stock,
each director of Michaels, certain Named Executives (as defined in "Management
Compensation -- Summary Compensation Table" herein), and the directors and
executive officers of Michaels as a group. The persons named in the table have
sole voting and investment power with respect to all shares of common stock
owned by them, unless otherwise noted. The percentage of beneficial ownership is
calculated based on _________ shares of common stock outstanding as of August
27, 2001.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OR NUMBER OF PERSONS IN GROUP OWNERSHIP(1) OF CLASS
------------------------------------------------------------------------- -------------------- ----------
Charles J. Wyly, Jr...................................................... (2)
Sam Wyly................................................................. (3)
Richard C. Marcus........................................................ (4)
Elizabeth A. VanStory.................................................... (4)
Richard E. Hanlon........................................................ (4)
R. Michael Rouleau....................................................... (5)
John C. Martin........................................................... (6)
Douglas B. Sullivan...................................................... (7)
Edward F. Sadler......................................................... (8)
First Pacific Advisors, Inc.............................................. (9)
11400 West Olympic Boulevard, Suite 1200
Los Angeles, California 90064
The Wyly Group........................................................... (10)
300 Crescent Court, Suite 1000
Dallas, Texas 75201
Capital Research & Management Company.................................... (11)
333 South Hope Street
Los Angeles, California 90071
SMALLCAP World Fund, Inc................................................. (12)
333 South Hope Street
Los Angeles, California 90071
Mellon Financial Corporation (13)
One Mellon Center
Pittsburgh, Pennsylvania 15258
All current directors and executive officers as a group (16 persons)..... (14)
------------------------------
* Less than 1 %.
(1) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, a person has beneficial ownership of any securities as to which
such person, directly or indirectly, through any contract, arrangement,
undertaking, relationship or otherwise has or shares voting power and/or
investment power or as to which such person has the right to acquire such
voting and/or investment power within 60 days. Percentage of beneficial
ownership by a person as of a particular date is calculated by dividing
the number of shares beneficially owned by such person by the sum of the
number of shares outstanding as of such date and the number of unissued
shares as to which such person has the right to acquire voting and/or
investment power within 60 days. The number of shares shown includes
outstanding shares of common stock owned as of August 27, 2001 by the
person indicated and shares underlying options owned by such person on
August 27, 2001 that are exercisable within 60 days of that date. Persons
holding shares of common stock pursuant to the Michaels Stores, Inc.
Employees 401(k) Plan have sole voting power and investment power with
respect to such shares.
(2) Includes _________ shares under options held by Stargate, Ltd. (a limited
partnership, the general partner of which is a trust of which Mr. Wyly is
one of the trustees), ________ shares held of record by Stargate, Ltd. and
________ shares held of record by family trusts of which Mr. Wyly is
Trustee.
9
(3) Includes _______ shares under options; __________shares held of record by
Tallulah, Ltd. (a limited partnership of which Mr. Wyly is a general
partner); and __________ shares held of record by family trusts of which
Mr. Wyly is Trustee.
(4) Includes ________ shares under options.
(5) Includes ________ shares under options and _________ shares owned pursuant
to the 401(k) Plan.
(6) Includes _________ shares under options and _____ shares owned pursuant to
the 401(k) Plan. Mr. Martin resigned as President and Chief Operating
Officer on March 26, 2001.
(7) Includes ________ shares under options and _____ shares owned pursuant to
the 401(k) Plan.
(8) Includes _______ shares under options and _______ shares owned pursuant to
the 401(k) Plan.
(9) Based on a Schedule 13G filed with the Securities and Exchange Commission
dated _____________, 2001, First Pacific Advisors, Inc., a registered
investment adviser, shares the power to dispose or to direct the
disposition of _______ shares of common stock and shares the power to vote
or to direct the vote of _______ shares of common stock.
(10) The Wyly Group consists of Charles J. Wyly, Jr. and Sam Wyly. Based on a
Schedule 13D/A filed with the Securities and Exchange Commission dated
______________, 2001, as supplemented by additional information made
available to Michaels, Charles J. Wyly, Jr. has sole voting power with
respect to _______ shares of common stock and sole dispositive power with
respect to _______ shares of common stock, and Sam Wyly has sole voting
power with respect to _______ shares of common stock and sole dispositive
power with respect to _______ shares of common stock.
(11) Based on a Schedule 13G/A filed with the Securities and Exchange
Commission dated ______________, 2001, Capital Research & Management
Company, a registered investment adviser, has the sole power to dispose or
direct the disposition of _______ shares of common stock but does not have
the power to vote such shares of common stock.
(12) Based on a Schedule 13G/A filed with the Securities and Exchange
Commission dated __________, 2001, SMALLCAP World Fund, Inc., an
investment company, has the sole power to vote or direct the vote of
__________ shares of common stock, but has no power to dispose or direct
the disposition of such shares.
(13) Based on a Schedule 13G filed with the Securities and Exchange Commission
dated _________, 2001, by Mellon Financial Corporation, a parent holding
company, on behalf of itself and its direct and indirect subsidiaries in
their various capacities, Mellon Financial Corporation has (a) sole power
to vote or direct the vote of _________ shares of common stock, (b) shared
voting power with respect to _______ shares of common stock, (c) sole
power to dispose or direct the disposition of _________ shares of common
stock and (d) shared dispositive power with respect to _______ shares of
common stock.
(14) Includes _______ shares under options held by six executive officers not
named in the table.
10
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding
compensation paid or accrued by Michaels to our Chief Executive Officer and each
of our four other most highly compensated executive officers, employed by
Michaels at the end of the fiscal year, based on salary and bonus earned during
fiscal 2000, and the Vice Chairman of the Board of Directors (the "Named
Executives").
LONG-TERM COMPENSATION
-----------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION --------------------- -------
---------------------------------- SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
FISCAL COMPENSATION STOCK OPTIONS/ PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) AWARDS SARS (#)(1) ($) ($)
-------------------------------- ------ ----------- -------- ------------ --------- ------------ ------ ------------
R. Michael Rouleau (2)....... 2000 632,308 267,500 61,967 (3) -- 100,000 -- 67,735 (4)
President and 1999 531,924 309,004 7,072 (3) -- 100,000 -- 45,331 (4)
Chief Executive Officer 1998 512,698 250,000 54,634 (5) -- 100,000 -- 22,342 (4)
Sam Wyly (6)................. 2000 450,000 -- -- -- 100,000 -- --
Chairman of the 1999 450,000 -- -- -- 400,000 -- --
Board of Directors 1998 450,000 -- -- -- -- -- --
Charles J. Wyly, Jr. (6)..... 2000 225,000 -- -- -- 50,000 -- --
Vice Chairman of the 1999 225,000 -- -- -- 200,000 -- --
Board of Directors 1998 225,000 -- -- -- -- -- --
John C. Martin (7)........... 2000 461,423 225,000 -- -- 50,000 -- 72,543 (8)
President and 1999 259,616 270,000 54,110 (9) -- 450,000 -- 119,310 (8)
Chief Operating Officer
Douglas B. Sullivan.......... 2000 300,290 120,000 -- -- 25,000 -- 32,959 (10)
Executive Vice 1999 299,988 150,000 -- -- 25,000 -- 34,478 (10)
President--Development 1998 299,988 120,000 -- -- 25,000 -- 23,616 (10)
Edward F. Sadler............. 2000 275,000 110,000 -- -- 18,750 -- 89,065 (11)
Executive Vice President-- 1999 74,039 (12) 62,404 44,719 (13) -- 50,000 -- 107,822 (11)
Store Operations
-----------------------------
(1) Options to acquire shares of common stock.
(2) Appointed to the additional position of President on March 26, 2001.
(3) Includes an automobile allowance of $22,889, income taxes of $18,144 paid
for by Michaels, and a gift given to Mr. Rouleau by Michaels valued at
$15,900 in fiscal 2000 and income taxes of $7,072 paid for by Michaels in
fiscal 1999.
(4) The amounts shown include (i) life insurance premiums paid by Michaels in
the amount of $39,516, $21,831 and $20,130 in fiscal 2000, 1999 and 1998,
respectively, (ii) annual matching contributions paid by Michaels for Mr.
Rouleau's account pursuant to our Deferred Compensation Plan in the amount
of $23,039 and $18,500 in fiscal 2000 and 1999, respectively, and (iii)
annual matching contributions paid by Michaels for Mr. Rouleau's account
pursuant to our 401(k) Plan in the amount of $5,180, $5,000 and $2,212 in
fiscal 2000, 1999 and 1998, respectively.
(5) Includes an automobile paid for by Michaels for Mr. Rouleau in the amount
of $52,933.
(6) Effective July 26, 2001, Mr. Charles J. Wyly, Jr. was appointed as
Chairman of the Board and Mr. Sam Wyly was appointed as Vice Chairman of
the Board. As a result, Mr. Charles J. Wyly, Jr. will receive an annual
salary of $450,000 and Mr. Sam Wyly will receive an annual salary of
$225,000.
(7) Mr. Martin resigned as President and Chief Operating Officer on March 26,
2001. He joined Michaels on June 28, 1999.
(8) The amounts shown include (i) life insurance premiums paid by Michaels in
the amount of $1,527 in fiscal 2000, (ii) annual matching contributions
paid by Michaels for Mr. Martin's account pursuant to our Deferred
Compensation Plan in the amount of $19,684 in fiscal 2000, (iii) annual
matching contributions paid by Michaels for Mr. Martin's account pursuant
to our 401(k) Plan in the amount of $2,259 in fiscal 2000, and (iv)
relocation expenses paid for by Michaels in the amount of $49,073 and
$117,816 in fiscal 2000 and 1999, respectively.
(9) Includes income taxes paid for by Michaels in the amount of $49,101 on
taxable relocation expenses.
(10) The amounts shown include (i) life insurance premiums paid by Michaels in
the amount of $19,460, $21,870 and $21,291 in fiscal 2000, 1999 and 1998,
respectively, (ii) annual matching contributions paid by Michaels for Mr.
Sullivan's account pursuant to our Deferred Compensation Plan in the
amount of $9,113 and $7,608 in fiscal 2000 and 1999, respectively, and
(iii) annual matching contributions paid by Michaels for Mr. Sullivan's
account pursuant to our 401(k) Plan in the amount of $4,386, $5,000 and
$2,325 in fiscal 2000, 1999 and 1998, respectively.
11
(11) The amounts shown include (i) life insurance premiums paid by Michaels in
the amount of $7,244 in fiscal 2000, (ii) annual matching contributions
paid by Michaels for Mr. Sadler's account pursuant to our Deferred
Compensation Plan in the amount of $7,754 in fiscal 2000, (iii) annual
matching contributions paid by Michaels for Mr. Sadler's account pursuant
to our 401(k) Plan in the amount of $1,714 in fiscal 2000, and (iv)
relocation expenses paid for by Michaels in the amount of $72,353 and
$107,822 in fiscal 2000 and 1999, respectively.
(12) Mr. Sadler joined Michaels on October 28, 1999.
(13) Income taxes paid for by Michaels on taxable relocation expenses.
OPTION GRANTS DURING FISCAL 2000
The following table provides information related to options granted to
the Named Executives during fiscal 2000.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
-------------------------------------------------------------------------------------------- ------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#)(2) FISCAL YEAR ($/SH)(3) DATE 5% ($) 10% ($)
------------------------------- -------------- --------------- ---------- ----------- ----------- -----------
R. Michael Rouleau............. 100,000(4) 6.66 41.75 07/27/05 1,153,476 2,548,879
Sam Wyly....................... 100,000(5) 6.66 35.00 08/30/05 966,985 2,136,785
Charles J. Wyly, Jr............ 50,000(5) 3.33 35.00 08/30/05 483,493 1,068,393
John C. Martin................. 50,000(6) 3.33 41.75 07/27/05 576,738 1,274,440
Douglas B. Sullivan............ 25,000(4) 1.66 41.75 07/27/05 288,369 637,220
Edward F. Sadler............... 18,750(4) 1.25 41.75 07/27/05 216,277 477,915
-----------------------------
(1) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately
prior to the expiration of their term, assuming the specified compounded
rates of appreciation on our common stock over the term of the options.
These numbers do not take into account provisions of certain options
providing for termination of the options following termination of
employment, nontransferability or vesting over periods. The use of the
assumed 5% and 10% returns is established by the Securities and Exchange
Commission and is not intended by Michaels to forecast possible future
appreciation of the price of our common stock.
(2) Options to acquire shares of common stock.
(3) The option exercise price may be paid in shares of common stock owned by
the Named Executives, in cash, or in any other form of valid consideration
or a combination of any of the foregoing, in some cases as determined by
the Board of Directors or the 1997 Stock Option Committee in their
discretion. The exercise price of each option was equal to the fair market
value of the common stock on the date of grant.
(4) Stock options are exercisable with respect to 1/3 of the shares covered
thereby and will become exercisable with respect to 1/3 of the shares
covered thereby on each of July 28, 2002 and July 28, 2003.
(5) Stock options are fully exercisable.
(6) The listed options were terminated upon Mr. Martin's ceasing to be
employed by Michaels.
12
OPTION EXERCISES DURING FISCAL 2000 AND FISCAL YEAR-END OPTION VALUES
The following table provides information related to options exercised
by the Named Executives during fiscal 2000 and the number and value of options
held at fiscal year-end. Michaels does not have any outstanding stock
appreciation rights.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL OPTIONS/SARS AT FISCAL
YEAR END (#) YEAR END ($)(1)
SHARES ACQUIRED VALUE ---------------------------- ---------------------------
NAME ON EXERCISE (#) REALIZED($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------------------- ---------------- -------------- ------------ -------------- ------------ --------------
R. Michael Rouleau........ 369,500 7,581,378 99,999 200,001 895,824 941,675
Sam Wyly.................. 1,200,000 (3) 25,299,519 500,000 -- 8,837,480 --
Charles J. Wyly, Jr....... 600,000 (4) 11,786,030 250,000 (5) -- 4,418,740 --
John C. Martin............ -- -- 150,000 350,000 2,456,250 4,912,500
Douglas B. Sullivan....... -- -- 24,999 50,001 223,949 235,426
Edward F. Sadler.......... -- -- 16,666 52,084 90,621 181,254
-----------------------------
(1) The closing price for our common stock as reported through The Nasdaq
Stock Market on February 2, 2001, the last trading day of fiscal 2000, was
$39.00. Value is calculated on the basis of the difference between the
option exercise price and $39.00 multiplied by the number of shares of
common stock underlying the option.
(2) Value realized is calculated based on the difference between the aggregate
exercise price of the options exercised and the aggregate market value of
the shares of common stock acquired on the date of exercise.
(3) Includes shares acquired on exercise by Cheryl R. Wyly Marital Trust, of
which Mr. Wyly's wife is the trustee.
(4) Shares acquired on exercise by Stargate, Ltd., the general partner of
which is a trust of which Charles J. Wyly, Jr. is one of the trustees.
(5) Includes stock options held by Stargate, Ltd., the general partner of
which is a trust of which Charles J. Wyly, Jr. is one of the trustees.
COMPENSATION OF DIRECTORS
Effective July 26, 2001, Michaels pays Charles J. Wyly, Jr. $37,500 per
month for serving as Chairman of the Board and Sam Wyly $18,750 per month for
serving as Vice Chairman of the Board. During fiscal 2000, Sam Wyly was paid
$37,500 per month for serving as Chairman of the Board and Charles J. Wyly, Jr.
was paid $18,750 per month for serving as Vice Chairman of the Board.
Messrs. Hanlon and Marcus and Ms. Van Story each receive an annual fee
of $24,000 as members of the Board, a fee of $1,000 for attendance at each
regular or special Board meeting, and a fee of $1,000 for attendance at each
meeting of the Audit Committee.
EMPLOYMENT, SEVERANCE AND CHANGE OF CONTROL AGREEMENTS
In March 2001, Michaels entered into a new employment agreement with R.
Michael Rouleau, the President and Chief Executive Officer of Michaels. The
employment agreement is for a term expiring on January 31, 2006 with provisions
for annual automatic one-year extensions unless Michaels gives notice of
non-extension 120 days prior to any expiration date. Under the employment
agreement, Mr. Rouleau is entitled to receive an annual base salary of $675,000,
or such higher amount as the Board of Directors or Compensation Committee shall
determine, and standard executive officer benefits. Additionally, he is allowed
to participate in a bonus plan in any year in which a bonus plan is established.
For fiscal 2000, Mr. Rouleau received a bonus of $267,500 pursuant to a bonus
plan based upon the attainment by Michaels of certain performance goals. Upon a
change of control of Michaels or if Michaels terminates Mr. Rouleau's employment
(other than for cause) prior to the expiration of the employment agreement, Mr.
Rouleau is entitled to continue to receive his base salary and other benefits
until January 31, 2006. If Mr. Rouleau's employment is terminated for any
reason, at any time, all unvested options then held by him will immediately
become fully exercisable and Mr. Rouleau will be entitled to the value of any
unvested interest he may have in our 401(k) Plan.
13
Michaels has an agreement with Douglas B. Sullivan, an executive
officer of Michaels, which provides for his employment by Michaels to age 65
upon a change of control of Michaels for a salary not less than his annual
salary immediately preceding the change of control and allows him to participate
in bonuses with other key management personnel of Michaels. This agreement (i)
is currently for a term expiring on April 5, 2004 with provisions for annual
automatic one-year extensions unless Michaels gives notice of non-extension six
months prior to any extension date and, upon a change of control, an additional
extension of twelve months and (ii) requires Michaels to pay to Mr. Sullivan, if
his employment is terminated on or prior to his 65th birthday and within one
year of a change of control, a sum equal to his salary and bonus during the
twelve-month period immediately preceding termination.
In connection with his resignation as President and Chief Operating
Officer of Michaels on March 26, 2001, John C. Martin entered into a separation
agreement with Michaels. Under this agreement, Mr. Martin remained a non-officer
employee of Michaels through May 12, 2001 at his base salary as President and
Chief Operating Officer, and he then became entitled to receive severance
payments totaling $463,500. Under the terms of his severance arrangement,
200,000 unexercised options granted to him under our 1997 Stock Option Plan
terminated effective June 11, 2001.
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Until September 2000, Sam Wyly and Charles J. Wyly, Jr. were members of
the Compensation Committee and, as such, were primarily responsible for
determining executive compensation for fiscal 2000. Since September 2000, the
Compensation Committee has consisted of Richard E. Hanlon, Richard C. Marcus and
Elizabeth A. VanStory. The Board as a whole and the members of the 1997 Stock
Option Committee have authority to make decisions related to stock option grants
under our 1997 Stock Option Plan to executive officers and directors. During
fiscal 2000, we paid to C&S Aviation, Ltd., a partnership of which Charles J.
Wyly, Jr. and Sam Wyly are managing members, $170,957 for the rental of an
airplane. We paid $82,825 in fiscal 2000 to Sterling Commerce, Inc. for the
purchase of services and software. Charles J. Wyly, Jr. and Sam Wyly served as
directors of Sterling Commerce, Inc., until its acquisition in 2000 by another
company.
Sam Wyly and Charles J. Wyly, Jr. are executive officers of Michaels
and were, until September 2000, members of our Compensation Committee. Sam Wyly
and Charles J. Wyly, Jr. were, until its acquisition in 2000 by another company,
directors and executive officers of Sterling Software, Inc. and were, during
part of fiscal 2000, directors of Scottish Annuity & Life Holdings, Ltd.,
serving on the compensation committee (or its equivalent) for each such company.
Accordingly, Sam Wyly and Charles J. Wyly, Jr. have participated in decisions
related to compensation of executive officers of each of Michaels, Sterling
Software, Inc., and Scottish Annuity & Life Holdings, Ltd.
Sam Wyly is a director and, during part of fiscal 2000, was an
executive officer of Green Mountain Energy Company, the board of which makes
decisions related to executive compensation.
Evan A. Wyly, a director of Michaels during part of fiscal 2000, is
also a director and, for part of fiscal 2000, was an executive officer of Green
Mountain Energy Company.
Michael C. French, a director of Michaels for a portion of fiscal 2000,
is also a director and executive officer of Scottish Annuity & Life Holdings,
Ltd. Mr. French participates in compensation decisions related to executive
officers of Scottish Annuity & Life Holdings, Ltd. Pursuant to a prior
consulting arrangement with Michaels, Mr. French received a non-refundable
retainer, in the amount of $90,000, for his assistance and advice during his
term as a director in fiscal 2000.
14
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES
WHAT IS OUR COMPENSATION PHILOSOPHY?
The objectives of our executive compensation program are to:
o attract and retain highly qualified and productive people;
o motivate employees to high levels of performance;
o differentiate individual pay based on performance;
o ensure external competitiveness and internal equity; and
o align company, employee and stockholder interests.
We do not believe in "bargain rate" executive compensation. Instead, we
believe that outstanding executives should be compensated generously, both in
cash compensation in amounts sufficient to preempt other opportunities for such
executives and in stock option awards which align such executives' interests
with the interests of the stockholders and stimulate focus on long-term
stockholder value enhancement.
HOW IS COMPENSATION DETERMINED?
In determining base pay, the Compensation Committee considers an
individual's experience and prior performance as well as our operating
performance and the attainment of planned financial and strategic initiatives.
The experience, performance and attainment of initiatives are evaluated by the
Compensation Committee on a subjective basis and no particular weight is given
to any particular factor.
In determining executive bonuses, the Compensation Committee provides
financial incentives to those members of management who can make an important
contribution to our success by tying the bonuses to the attainment of certain
financial objectives which may be different from individual to individual. Each
participating executive is entitled to a bonus equal to a certain percentage of
that executive's salary based upon the attainment of such objectives.
In determining compensation through stock option awards, the 1997 Stock
Option Committee (or the Board as a whole) makes discretionary grants, based
upon the level of responsibility and performance of the individual grantee.
HOW ARE OUR INCENTIVE COMPENSATION PROGRAMS USED TO FOCUS MANAGEMENT ON
INCREASING STOCKHOLDER VALUE?
We maintain stock option plans for our executive officers, directors
and key employees. We believe that the grant of options aligns executive and
stockholder long-term interests by creating a strong and direct link between
executive compensation and stockholder return. The grant of options also allows
executives to develop and maintain a long-term ownership position in our common
stock.
HOW HAVE WE RESPONDED TO THE IRS LIMITS ON DEDUCTIBILITY OF COMPENSATION?
Options granted under our 1997 Stock Option Plan are intended to meet
the performance based compensation exception to the annual $1,000,000 limitation
on the tax deduction we may claim for compensation of certain executives.
However, our executive bonus program does not meet the exception to the IRS
deduction limitation.
HOW IS THE CEO COMPENSATED?
As our Chief Executive Officer, Mr. Rouleau received a base salary of
$632,308 during fiscal year 2000. Mr. Rouleau's incentive compensation for
fiscal year 2000, in the form of a bonus, was based upon the attainment of
15
specified financial objectives. With respect to fiscal year 2000, Mr. Rouleau
received $267,500 in a cash bonus. Mr. Rouleau also received stock options for
100,000 shares of common stock.
HOW ARE THE OTHER EXECUTIVE OFFICERS COMPENSATED?
Our other executive officers usually receive a base salary, annual cash
bonuses, long-term incentive compensation in the form of stock options and
various benefits. As described above, the Compensation Committee annually
reviews the compensation for our executive officers and determines the
compensation for each executive based upon the executive's performance, our
attainment of certain financial and strategic objectives and other factors. The
1997 Stock Option Committee also evaluates the executive officers' performance
in determining whether to grant any stock options to the executives.
This report is submitted by the members of the Compensation Committee
and the 1997 Stock Option Committee:
COMPENSATION COMMITTEE 1997 STOCK OPTION COMMITTEE
---------------------- ---------------------------
Sam Wyly (until September 2000) Richard E. Hanlon
Charles J. Wyly, Jr. (until September 2000) Richard C. Marcus
Richard E. Hanlon (since September 2000) Elizabeth A. VanStory
Richard C. Marcus (since September 2000)
Elizabeth A. VanStory (since September 2000)
16
STOCK PERFORMANCE CHART
The following chart compares the yearly changes in the total
stockholder return on our common stock against two other measures of
performance. The comparison is on a cumulative basis for our last five fiscal
years. The two other performance measures are the Dow Jones US Total Market
Index (previously known as the Dow Jones Equity Market Index) and the Dow Jones
Retail--Other Specialty Index. In each case, we assumed an initial investment of
$100 on January 29, 1996. Dates on the following chart represent the last
trading day of the indicated fiscal year. We paid no dividends during such
five-year period.
[STOCK PERFORMANCE CHART]
Dow Jones Equity Market Index Dow Jones Retailers - Other Specialty Michaels
01/27/95 122.27 0.00 01/27/95 130.22 0.00 1994 01/27/95 35.0000 0.00
01/26/96 164.46 100.00 01/26/96 128.91 100.00 1995 01/26/96 12.7500 100.00
01/31/97 210.91 128.24 01/31/97 161.33 125.15 1996 01/31/97 13.1250 102.94
01/30/98 264.33 160.73 01/30/98 200.82 155.78 1997 01/30/98 30.7500 241.18
01/29/99 340.77 207.21 01/29/99 315.48 244.73 1998 01/29/99 18.7500 147.06
01/29/00 378.08 229.89 01/29/00 336.00 260.65 1999 01/28/00 27.0000 211.76
02/02/01 373.25 226.95 02/02/01 298.47 231.53 2000 02/02/01 39.0000 305.88
17
PROPOSAL NO. 2:
ADOPTION OF AN AMENDMENT
TO THE RESTATED CERTIFICATE OF INCORPORATION
Effective July 26, 2001, our Board approved the amendment to the
Restated Certificate of Incorporation attached as Appendix A to this Proxy
Statement. Our Board is currently divided into three classes, with each of two
classes consisting of two directors and one class consisting of one director.
Members of each class generally serve for three-year terms.
The amendment to the Restated Certificate of Incorporation will
eliminate division of our Board into three classes. Following adoption of the
amendment to the Restated Certificate of Incorporation by our stockholders at
the Annual Meeting and filing of a certificate of amendment with the Delaware
Secretary of State, all current directors will hold office for a term expiring
at our annual meeting of stockholders in 2002. Thereafter, each of the directors
will serve for a one-year term or until his or her successor is duly elected and
qualified or until the earlier of his or her resignation, death or removal.
The Board believes it is in the best interest of Michaels and its
stockholders to adopt the amendment to the Restated Certificate of Incorporation
and to eliminate classification of the Board. Classification (or staggered
election) of boards of directors has been a widely-used corporate governance
provision to make it more difficult for companies to be the subject of
"take-overs." These kinds of provisions, however, also act as an impediment to
the stockholders' ability to make changes in board membership when the
stockholders are dissatisfied with the performance of the board of directors.
Your Board of Directors believes that modern corporate governance best practices
encourages the elimination of staggered board membership as an arbitrary
impediment to changing stewardship of a company and that our stockholders should
have the right to vote on performance of all our directors each year.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE
RESTATED CERTIFICATE OF INCORPORATION.
PROPOSAL NO. 3:
APPROVAL OF THE MICHAELS STORES, INC. 2001 GENERAL STOCK OPTION PLAN
On July 23, 2001, the Board of Directors adopted our 2001 Employee
Stock Option Plan authorizing the grant of options exercisable for up to
1,000,000 shares of our common stock. The terms of our 2001 Employee Stock
Option Plan do not permit options under that plan to be granted to our executive
officers and directors. Substantially all of the options available for grant to
our executive officers and directors under our 1997 Stock Option Plan have been
issued. As a result, the Board approved the Michaels Stores, Inc. 2001 General
Stock Option Plan, attached as Appendix B to this Proxy Statement, and directed
that it be submitted to the stockholders for approval at the Annual Meeting. The
Plan authorizes the grant of options exercisable for up to 1,500,000 shares of
our common stock to our officers, directors and employees, but we expect that
options under the Plan will be granted principally, if not exclusively, to our
executive officers (currently 13 persons) and directors (currently five persons)
who are not eligible for grants under our 2001 Employee Stock Option Plan. We
are seeking your approval to adopt the Michaels Stores, Inc. 2001 General Stock
Option Plan and to ensure that compensation pursuant to the Plan will not be
subject to the limits on deductibility by Michaels under Section 162(m) of the
Internal Revenue Code of 1986.
The Board believes that it is in the best interests of Michaels to
attract and retain the best available talent and encourage the highest level of
performance by our directors and executive officers. The Plan is designed to
provide incentive to directors and executive officers and is intended to align
the interests of each of them with those of our stockholders. The Board has
directed that, to the extent permitted by applicable law, all proceeds to
Michaels from the exercise of options granted under the Plan be used to
repurchase shares of our common stock under our current stock repurchase plan
(except where the use of proceeds for that purpose would conflict with fiduciary
obligations of directors or officers or there is a compelling need to use the
proceeds for other corporate purposes).
18
SUMMARY OF THE MICHAELS STORES, INC. 2001 GENERAL STOCK OPTION PLAN
GENERAL. The purpose of the Plan is to attract and retain the best
available talent and encourage the highest level of performance by our
directors, executive officers and other eligible employees and to provide each
of them with incentives to put forth maximum efforts for the success of our
business. All stock options granted under the Plan will be non-statutory stock
options.
SHARES AVAILABLE UNDER THE PLAN. Subject to adjustments described
below, the number of shares that may be issued upon exercise of all stock
options granted under the Plan may not exceed 1,500,000. Any shares of common
stock which were subject to stock options that are forfeited, surrendered or
expire for any reason will again be available for issuance under the Plan.
ELIGIBILITY. Our directors and any executive officer or other employee
of Michaels or its subsidiaries who is selected by the 2001 General Stock Option
Plan Committee is eligible to receive stock options under the Plan, but we
believe that options under this Plan will be granted principally, if not
exclusively, to our executive officers and directors.
STOCK OPTION GRANTS. Stock options granted to a participant under the
Plan entitle him or her to purchase shares of our common stock at a price no
less than fair market value at the time of the grant. The exercise price is
payable (i) in cash at the time of exercise, (ii) by transfer of shares of our
common stock owned by the participant for at least six months having an
aggregate market value per share on the day before the date of exercise equal to
the aggregate exercise price, (iii) by deferred payment from the proceeds of
sale of some or all of the shares to which the exercise relates or (iv) by other
forms of consideration acceptable to the Committee.
The maximum number of shares of our common stock with respect to which
stock options may be granted to a participant during a single calendar year may
not exceed 150,000 shares. If, however, the participant is a newly-hired
employee who has never been employed by either Michaels or any of its
subsidiaries, that employee may be granted stock options exercisable for up to
an additional 350,000 shares. A participant who is a director and also an
executive officer or other employee of Michaels or any of its subsidiaries may
be granted stock options both as a director and as an executive officer or other
employee.
Generally, each stock option granted under the Plan will expire one
calendar day prior to the fifth anniversary of the date of grant except in the
case of retirement, death or disability, as described below. However, upon a
change of control (as defined in the Plan), each outstanding stock option will
immediately vest and be fully exercisable and will remain exercisable until the
term of the stock option expires. If, however, a proposed merger, consolidation,
reorganization or sale of assets which constitutes the change of control is
abandoned by Michaels, then all stock options that vested and became fully
exercisable as a result of the change of control, and which have not been
exercised, will revert to the exercise terms existing prior to acceleration.
STOCK OPTION GRANTS TO EXECUTIVE OFFICERS AND OTHER EMPLOYEES. Each
grant made to any executive officer or other employee will specify the number of
shares of common stock for which the option is granted, which will be determined
in accordance with guidelines adopted by the Committee. Each stock option
granted to an executive officer or other employee will vest 1/3 on each of the
first three anniversary dates following the date of grant. If the executive
officer or other employee is terminated by reason of retirement (at or after age
60), long-term disability (as determined by the Committee) or death, each
outstanding stock option granted to such executive officer or other employee, to
the extent not vested, will immediately vest and become fully exercisable.
Thereafter, the stock option will expire (i) in the case of retirement or
long-term disability, one calendar day prior to the fifth anniversary of such
retirement or disability, or (ii) in the case of death, one calendar day prior
to the third anniversary of death. If the employment of the executive officer or
other employee is terminated for any other reason, the unvested portion of each
outstanding stock option granted to the executive officer or other employee will
terminate immediately and the vested portion will expire 30 days after such
termination.
STOCK OPTION GRANTS TO DIRECTORS. Each grant made to any director in
that capacity will be automatic pursuant to a "formula plan" as set forth in the
Plan. Upon first election to the Board, and immediately following each annual
meeting of stockholders thereafter, a director will receive a grant of options
exercisable for 17,500 shares of common stock. Each stock option granted to a
director will vest immediately upon the date of grant. In
19
the event of the death of the director prior to the exercise or expiration of
an option, the unexercised and unexpired stock option will expire one
calendar day prior to the third anniversary of the director's death.
ADMINISTRATION AND AMENDMENTS TO THE PLAN. The Plan is to be
administered by the 2001 General Stock Option Plan Committee unless the Board of
Directors expressly assumes the administration pursuant to a resolution. The
Committee is required to be composed of at least two members of the Board, and
such committee members are intended at all times to qualify as "outside
directors" within the meaning of Section 162(m) of the Internal Revenue Code and
"Non-Employee Directors" as defined in Securities and Exchange Commission Rule
16b-3. The Board resolutions adopting the Plan establish an initial 2001 General
Stock Option Plan Committee of Richard E. Hanlon (Chairman), Richard C. Marcus
and Elizabeth A. VanStory. Any actions taken by the Committee may be taken by a
majority of the members present at any meeting at which a quorum is present or
by unanimous written consent. The Committee is authorized to interpret the Plan
and any related agreements and other documents and such interpretation will be
final and conclusive.
The Plan may be amended at any time by the Board of Directors or any
authorized committee, including the 2001 General Stock Option Plan Committee,
without the consent of our stockholders except where consent of the stockholders
is required by applicable law or applicable rules and regulations of a national
securities exchange. Subject to the terms of the Plan, the Committee may,
without the consent of the option holder, amend any option agreement or
otherwise take any action to (i) expand or limit the payment methods, (ii) waive
any condition or restriction applicable to the stock option or to the exercise
of such stock option, or (iii) expand the events that would constitute a change
of control. Unless approved by our stockholders, none of the Board, the 2001
General Stock Option Plan Committee or any other committee of the Board may
authorize the amendment of any outstanding stock option to reduce the option
exercise price. No stock option may be cancelled and replaced with stock options
having a lower option exercise price without the approval of our stockholders.
The Plan does not permit acceleration of vesting or extension of the expiration
date of an option except as described above.
TRANSFERABILITY. Any option grant under the Plan may be made subject to
such transfer restrictions as the Committee may determine.
ADJUSTMENTS. The maximum number of shares that may be issued upon
exercise of stock options and the price per share applicable thereto are subject
to adjustment in the event of stock dividends, stock splits, combinations of
shares, recapitalizations, mergers, consolidations, spin-offs, reorganizations,
liquidations, issuances of rights or warrants and similar events. If any such
transaction or event occurs, the Board or the Committee may, in its discretion,
provide in substitution for any and all outstanding stock options, such
alternative consideration as it, in good faith, may determine to be equitable
under the circumstances and may require the surrender of all stock options so
replaced. If the Board and the Committee disagree on any adjustments, the
Board's determination will be final and conclusive.
PLAN BENEFITS. Under the present guidelines adopted by the Committee
and the provisions of the Plan, the following table shows the value and number
of shares of common stock covered by anticipated annual option grants under the
Plan to our Chief Executive Officer, each of the Named Executives, all other
current executive officers as a group, each director (including directors who
are executive officers) and all other employees as a group. Option grants under
the Plan to executive officers are expected to commence in July, 2002 (except
grants to newly-hired executive officers, if any). Automatic option grants to
directors would commence immediately after the Annual Meeting to which this
Proxy Statement relates.
20
MICHAELS STORES, INC. 2001 GENERAL STOCK OPTION PLAN
ANNUAL OPTION
NAME AND POSITION DOLLAR VALUE ($)(1) GRANTS (SHARES)
------------------------------------------------------- ------------------- ---------------
R. Michael Rouleau..................................... 100,000
President and
Chief Executive Officer
Charles J. Wyly, Jr.................................... 100,000
Chairman of the Board
Sam Wyly............................................... 50,000
Vice Chairman of the Board
John C. Martin (2)..................................... -- --
Former President and
Chief Operating Officer
Douglas B. Sullivan.................................... 25,000
Executive Vice President--
Development
Edward F. Sadler....................................... 25,000
Executive Vice President--
Store Operations
All Other Executive Officers (7 persons)............... 162,500
Each Director.......................................... 17,500
All Other Employees.................................... -- --
------------------------
(1) The dollar value of the options is derived from the Black Scholes option
valuation model, assuming the grant of the options on August 27, 2001 with
an exercise price of $_____ per share, the market price of our common
stock on that date.
(2) Mr. Martin is no longer employed by Michaels.
MARKET VALUE OF OUR COMMON STOCK. The market value of our common stock
is $_____, based on the closing price of our common stock on August 27, 2001.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain federal income tax
consequences relating to grants of stock options under the Plan based on federal
income tax laws currently in effect. This summary is not intended to be complete
and does not describe state, local or foreign tax consequences.
TAX CONSEQUENCES TO PARTICIPANTS. In general, no income will be
recognized by a participant at the time a stock option is granted. At the time
of exercise of the stock option, the participant will recognize ordinary income
if the shares are not subject to a substantial risk of forfeiture (as defined in
Section 83 of the Internal Revenue Code). The amount of such income will be
equal to the difference between the option exercise price and the fair market
value of the shares on the date of exercise. At the time of the sale of the
shares of common stock acquired pursuant to the exercise of a stock option,
appreciation (or depreciation) in value of the shares after the date of exercise
will be treated as either short-term or long-term capital gain (or loss)
depending on how long the shares have been held. Long-term capital gains may be
eligible for reduced rates if applicable holding period requirements are
satisfied.
TAX CONSEQUENCES TO MICHAELS. To the extent that a participant
recognizes ordinary income as described above, Michaels or the subsidiary for
which the participant performs services will be entitled to a corresponding
deduction provided that, among other things, the income meets the test of
reasonableness, is an ordinary and necessary business expense, is not an "excess
parachute payment" within the meaning of Section 280G of the Internal Revenue
Code and is not disallowed by the $1 million limitation on certain executive
compensation under Section 162(m) of the Internal Revenue Code.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE MICHAELS STORES,
INC. 2001 GENERAL STOCK OPTION PLAN.
21
INDEPENDENT AUDITORS
We have engaged Ernst & Young LLP as independent auditors to audit and
report to our stockholders on our financial statements for fiscal 2001. During
fiscal 2000, there were no disagreements with Ernst & Young LLP on any matter of
accounting principle or practice, financial statement disclosure or auditing
scope or procedure, which, if not resolved to the satisfaction of Ernst & Young
LLP, would have caused them to make a reference to the subject matter of the
disagreement in connection with its reports.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
FISCAL 2000 INDEPENDENT AUDITORS' FEES
AUDIT FEES
We paid Ernst & Young LLP $444,000 in aggregate fees for the audit of
our fiscal 2000 annual financial statements and reviews of our financial
statements included in our reports on Form 10-Q for that year.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
We did not pay any fees to Ernst & Young LLP for professional services
rendered in fiscal 2000 with respect to financial information systems design and
implementation.
ALL OTHER FEES
We paid Ernst & Young LLP $355,000 in aggregate fees for all other
services rendered by it during fiscal year 2000.
AUDIT COMMITTEE REPORT
On May 31, 2000, the Board of Directors adopted a new Audit Committee
Charter. This Charter requires our Audit Committee to undertake a variety of
activities designed to assist our Board in fulfilling its oversight role
regarding our auditors' independence, our financial reporting process, our
systems of internal control and our compliance with applicable laws, rules and
regulations. The Charter also makes it clear that the independent auditors are
ultimately accountable to the Board and the Audit Committee, not management.
The Audit Committee is currently composed of three outside directors
who are not officers or employees of Michaels. All members of the Audit
Committee are independent as defined by the listing standards of the National
Association of Securities Dealers, Inc.
The Audit Committee has reviewed and discussed with our management and
Ernst & Young LLP, our independent auditors, the audited financial statements of
Michaels contained in our Annual Report on Form 10-K for the fiscal year ended
February 3, 2001. The Audit Committee has also discussed with our independent
auditors the matters required to be discussed pursuant to SAS No. 61 and SAS No.
90 (Codification of Statements on Auditing Standards, COMMUNICATION WITH AUDIT
COMMITTEES).
The Audit Committee has also received and reviewed the written
disclosures and the letter from Ernst & Young LLP required by Independence
Standards Board Standard No. 1 ("Independence Discussions with Audit
Committees") and has discussed with Ernst & Young LLP their independence.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in our Annual Report on Form 10-K for the fiscal year
ended February 3, 2001, as filed with the Securities and Exchange Commission.
The Audit Committee considered whether, and concluded that, the
provision by Ernst & Young LLP of the services referred to under "All Other
Fees" is compatible with maintaining the independence of Ernst & Young LLP.
22
This report is submitted by the members of the Audit Committee of the
Board of Directors.
AUDIT COMMITTEE
---------------
Richard C. Marcus
Richard E. Hanlon
Elizabeth A. VanStory
23
CERTAIN TRANSACTIONS
In fiscal 2000, we paid $233,692 in salary to Donald R. Miller, Jr.,
Vice President--Market Development of Michaels. Mr. Miller also earned (i) a
bonus of $90,000, (ii) $19,609 for personal use of a company-owned automobile,
and (iii) $5,788 for other employee benefits. Mr. Miller is the son-in-law of
Charles J. Wyly, Jr.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
officers and directors and persons who own more than 10% of a registered class
of our equity securities to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission. Such persons
are required by regulation of the Securities and Exchange Commission to furnish
us with copies of all Section 16(a) forms they file. Based solely on our review
of the copies of such forms or written representations from certain reporting
persons received by us with respect to fiscal year 2000, we believe that our
officers and directors and persons who own more than 10% of a registered class
of our equity securities have complied with all applicable filing requirements.
OTHER MATTERS
We do not know of any other matters to be presented or acted upon at
the Annual Meeting. If any other matter is presented at the Annual Meeting on
which a vote may properly be taken, the shares represented by proxies will be
voted in accordance with the judgment of the proxy holders.
ANNUAL REPORT
The Annual Report to Stockholders of Michaels, including financial
statements for the fiscal year ended February 3, 2001, accompanies this Proxy
Statement. The Annual Report is not to be deemed part of this Proxy Statement.
FORM 10-K
COPIES OF OUR ANNUAL REPORT ON FORM 10-K (EXCLUDING EXHIBITS) TO THE
SECURITIES AND EXCHANGE COMMISSION ARE AVAILABLE, WITHOUT CHARGE, UPON WRITTEN
REQUEST TO MICHAELS STORES, INC., 8000 BENT BRANCH DRIVE, IRVING, TEXAS 75063,
ATTENTION: INVESTOR RELATIONS DEPARTMENT. Exhibits to the Form 10-K will be
furnished upon payment of a fee of $0.50 per page to cover our expenses in
furnishing the exhibits.
STOCKHOLDER PROPOSALS
To be considered for inclusion in our proxy statement for our 2002
annual meeting of stockholders, proposals of stockholders must be in writing and
received by us no later than April 11, 2002. To be presented at the 2002 annual
meeting of stockholders without inclusion in our proxy statement for such
meeting, proposals of stockholders must be in writing and received by us no
later than June 11, 2002. Such proposals should be mailed to Michaels Stores,
Inc., P.O. Box 619566, DFW, Texas 75261-9566 and directed to the Secretary of
Michaels.
By Order of the Board of Directors
MARK V. BEASLEY
SECRETARY
Irving, Texas
August 31, 2001
24
APPENDIX A
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
MICHAELS STORES, INC.
Michaels Stores, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: The name of the Corporation is Michaels Stores, Inc.
SECOND: At a meeting of the Board of Directors of the Corporation
held on July 23, 2001, resolutions were duly adopted by
the Board of Directors of the Corporation effective July
26, 2001 setting forth a proposed amendment to the
Restated Certificate of Incorporation of the Corporation,
as amended (the "Certificate"), declaring the amendment to
be advisable and directing that the amendment be
considered at the 2001 Annual Meeting of Stockholders of
the Corporation. The resolution setting forth the proposed
amendment is as follows:
"RESOLVED, that Paragraphs Three and Four of Article Seven of
the Certificate be amended and restated in their entirety to read as
follows:
Each director shall hold office for a term expiring
at the next annual meeting of the stockholders of the
Corporation and until his successor is duly elected and
qualified or until the earlier of his resignation, death or
removal.
Any vacancies in the Board of Directors for any
reason, and any newly created directorships resulting from any
increase in the number of directors, will be filled by the
Board of Directors, acting by a majority of the directors then
in office, although less than a quorum, and any director so
chosen will hold office until the next annual meeting of
stockholders and until his successor is duly elected and
qualified or until the earlier of his resignation, death or
removal. No decrease in the number of directors will shorten
the term of any incumbent director. Notwithstanding the
foregoing, and except as otherwise required by law, whenever
the holders of any one or more series of Preferred Stock have
the right, voting separately as a class, to elect one or more
directors of the Corporation, the terms of the director or
directors elected by such holders will be as provided in the
terms of such series."
THIRD: At the 2001 Annual Meeting of Stockholders of the
Corporation, duly called and held on October 5, 2001, upon
notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, the necessary
number of shares as required by statute were voted in
favor of the amendment.
FOURTH: The amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Mark V. Beasley, its Secretary, on this ___ day of ____________, 2001.
MICHAELS STORES, INC.
By: ______________________________
Mark V. Beasley
Secretary
APPENDIX B
MICHAELS STORES, INC.
2001 GENERAL STOCK OPTION PLAN
Michaels Stores, Inc., a Delaware corporation (the "Company"), hereby
establishes the Michaels Stores, Inc. 2001 General Stock Option Plan (the
"Plan"), effective as of October 5, 2001.
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).
(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.
B-2
(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 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 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.
(o) "Stock Option" means the right to purchase one or more
shares of Common Stock upon exercise of an option granted pursuant to
Paragraph 5.
(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 1,500,000 shares, 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.
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 150,000 shares;
PROVIDED, HOWEVER, that Stock Options with respect to up to an additional
350,000 shares 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.
5. GRANTS OF STOCK OPTIONS.
(a) GENERAL. Each grant of Stock Options under this 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.
B-3
(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 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 this
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 this
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.
B-4
(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 17,500 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 this
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.
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 owned by the Participant for at least six months (or, with the
consent of the Stock Option Committee, for less than six months) having an
aggregate Market Value per Share on the business day immediately preceding the
date of exercise equal to the aggregate Option Price, (iii) by deferred payment
from the proceeds of sale through a bank or broker of some or all of the shares
to which such exercise relates, (iv) in any other form of valid consideration
acceptable to the Stock Option Committee or (v) by a combination of such methods
of payment; PROVIDED, HOWEVER, that the payment methods described in clauses
(ii) and (iii) 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 this 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, if permitted by the Stock Option Committee or the Board, an
optionee may elect to have any withholding obligation of the Company satisfied
with shares of Common Stock (i) owned by the Participant for at least six months
(or, with the consent of the Stock Option Committee or the Board, for less than
six months) or (ii) that would otherwise be transferred to the optionee on
exercise of the Stock Option.
B-5
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 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.
(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.
B-6
MICHAELS STORES, INC.
By:
-----------------------------------------
R. Michael Rouleau
President and Chief Executive Officer
B-7
PROXY PROXY
MICHAELS STORES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 2001 ANNUAL MEETING OF STOCKHOLDERS -- OCTOBER 5, 2001
The undersigned hereby appoints Bryan M. DeCordova and Mark V. Beasley,
each with power to act without the other and with full power of substitution,
as proxies to vote, as designated below, all stock of Michaels Stores, Inc.
owned by the undersigned at the 2001 Annual Meeting of Stockholders to be held
at the Four Seasons Resort and Club, 4150 North MacArthur Boulevard, Irving,
Texas on Friday, October 5, 2001, at 10:30 a.m. central daylight savings time,
or any adjournment thereof, upon such business as may properly come before the
meeting or any adjournment thereof.
UNLESS OTHERWISE MARKED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
EACH OF THE NOMINEES NAMED; FOR THE ADOPTION OF AN AMENDMENT TO THE RESTATED
CERTIFICATE OF INCORPORATION; FOR THE APPROVAL OF THE MICHAELS STORES, INC.
2001 GENERAL STOCK OPTION PLAN; AND IN THE DISCRETION OF THE PROXY HOLDERS ON
ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued and to be signed and dated on reverse side)
MICHAELS STORES, INC.
PLEASE MARK VOTE IN THE BLOCK IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE ELECTION OF THE DIRECTORS
LISTED BELOW, FOR THE ADOPTION OF AN AMENDMENT TO THE RESTATED CERTIFICATE OF
INCORPORATION AND FOR APPROVAL OF THE MICHAELS STORES, INC. 2001 GENERAL STOCK
OPTION PLAN.
1. ELECTION OF DIRECTORS -- 2. ADOPTION OF AN AMENDMENT TO THE ABSTAIN OR
Nominees: 01-Charles J. Wyly, Jr. RESTATED CERTIFICATE OF INCORPORATION. FOR AGAINST WITHHOLD
02-Richard E. Hanlon / / / / / /
FOR WITHHOLD FOR ALL 3. APPROVAL OF THE MICHAELS STORES, INC. ABSTAIN OR
ALL ALL EXCEPT 2001 GENERAL STOCK OPTION PLAN. FOR AGAINST WITHHOLD
/ / / / / / / / / / / /
_____________________________________ 4. IN THEIR DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE
(Except for nominee(s) written above) THE MEETING OR ANY ADJOURNMENT THEREOF.
_________________________________________ ___________________, 2001
Signature Date
_________________________________________ ___________________, 2001
Signature Date
Please sign exactly as your name appears hereon and mail promptly
this proxy in the enclosed envelope. Joint owners should each sign.
When signing as attorney, administrator, executor, guardian or
trustee, please give your full title as such. If executed by a
corporation, the proxy should be signed by a duly authorized
officer. If executed by a partnership, please sign in the
partnership name by an authorized person.
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- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.