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Exhibit 10.22

MICHAELS STORES, INC.

DEFERRED COMPENSATION PLAN

(Amended and Restated as of January 1, 2002)

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TABLE OF CONTENTS

ARTICLE 1       TITLE AND DEFINITIONS   2 1.1     Title   2 1.2     Definitions
  2 ARTICLE 2       ELIGIBILITY AND PARTICIPATION   4 2.1     Eligibility   4
2.2     Participation   4 ARTICLE 3       DEFERRED COMPENSATION   5 3.1    
Elections to Defer Compensation   5 3.2     Matching Amounts   6 3.3    
Discretionary Amounts   7 3.4     Investment Elections   7 ARTICLE 4  
    ACCOUNTS   8 4.1     Participant Accounts   8 4.2     Quarterly Statements  
8 ARTICLE 5       VESTING   9 5.1     Account   9 ARTICLE 6       DISTRIBUTIONS
  9 6.1     Form and Time of Payment   9 6.2     Scheduled Early Distributions  
10 6.3     Unscheduled Early Distributions   11 6.4     Financial Hardship
Withdrawals   12 6.5     Death Benefits   12 6.6     Inability To Locate
Participant   12 6.7     Directors and Consultants   13 6.8     Claims Procedure
  13 ARTICLE 7       ADMINISTRATION   14 7.1     Administrative Committee   14
7.2     Committee Action   15 7.3     Powers and Duties of the Administrative
Committee   15 7.4     Construction and Interpretation   16 7.5     Information
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7.6     Expenses and Indemnity   16 ARTICLE 8       MISCELLANEOUS   17 8.1    
Unsecured General Creditor   17 8.2     Restriction Against Assignment   17
8.3     Withholding   17 8.4     Amendment, Modification, Suspension or
Termination   17 8.5     Governing Law   18 8.6     Receipt or Release   18
8.7     Payments on Behalf of Persons Under Incapacity   18 8.8     Successors
and Assigns   18 8.9     No Employment Rights   18 8.10   Headings, etc. Not
Part of Agreement   18

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MICHAELS STORES, INC.

DEFERRED COMPENSATION PLAN

        Michaels Stores, Inc., a Delaware corporation (the "Company"), acting on
behalf of itself and its designated subsidiaries, hereby amends and completely
restates the Michaels Stores, Inc. Deferred Compensation Plan (the "Plan"),
effective as of January 1, 2002.

RECITALS

        1.    The Plan was established effective as of August 1, 1999, as an
unfunded supplemental retirement plan for the benefit of selected highly
compensated employees, directors and consultants and their respective
beneficiaries. Benefits under the Plan are to be paid by the Company from its
general assets or from the assets of the trust hereinafter described.

        2.    The Company has entered into a trust agreement with Wachovia Bank,
N.A., as trustee, and has established a trust (the "Trust") to hold and manage
assets contributed by the Company in connection with the Plan. It is intended
that the Trust will qualify as a "grantor trust" under the Internal Revenue Code
of 1986, as amended, with the principal and income of the Trust to be treated as
assets and income of the Company for federal and state income tax purposes.

        3.    The assets of the Plan held in the Trust will at all times be
subject to the claims of the general creditors of the Company.

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ARTICLE 1

TITLE AND DEFINITIONS

        1.1    Title.    This Plan will be known as the Michaels Stores, Inc.
Deferred Compensation Plan.

        1.2    Definitions.    Whenever the following words and phrases are used
in this Plan, with the first letter capitalized, they will have the meanings
specified below.

                (a)    "Account" means for each Participant the bookkeeping
account maintained by the Administrative Committee on the books of the Company
that is credited with amounts equal to (i) the portion of the Participant's
Salary and Incentive Bonus that he or she elects to defer, (ii) the matching
amounts determined pursuant to Section 3.2, (iii) discretionary amounts
determined pursuant to Section 3.3, and (iv) the deemed earnings on such amounts
that are determined pursuant to Section 4.1(iii).

                (b)    "Administrative Committee" or "Committee" means the
person or persons appointed to administer the plan in accordance with Article 7.

                (c)    "Beneficiary" or "Beneficiaries" means the beneficiary or
beneficiaries last designated in writing by a Participant, in accordance with
procedures established by the Administrative Committee, to receive benefits
under the Plan in the event of the Participant's death. No beneficiary
designation will become effective unless and until it is filed with the
Administrative Committee during the Participant's lifetime.

                (d)    "Board of Directors" or "Board" means the Board of
Directors of Michaels Stores, Inc. Any determination or other action specified
in this Plan to be made, taken or effectuated by the Board may be made, taken or
effectuated by the Executive Committee of the Board.

                (e)    "Code" means the Internal Revenue Code of 1986, as
amended.

                (f)    "Company" means Michaels Stores, Inc., a Delaware
corporation, any successor corporation to Michaels Stores, Inc. satisfying the
requirements of Section 8.8; Aaron Brothers, Inc., a wholly-owned subsidiary of
Michaels Stores, Inc.; and any other entity that is directly or indirectly
controlled by Michaels Stores, Inc. or in which Michaels Stores, Inc. has a
significant equity or investment interest, as determined by the Administrative
Committee.

                (g)    "Disability" means, with respect to a Participant, a
disability as defined in the Company's then-existing long-term disability plan
in which the Participant is eligible to participate.

                (h)    "Distributable Amount" means the balance of a
Participant's Account at any given time.

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                (i)    "Eligible Individual" for a Plan Year means (i) a common
law employee of the Company who satisfies the eligibility criteria set forth in
Article 2; (ii) a member of the Board of Directors who is not a common law
employee of the Company; or (iii) a consultant who is not a common law employee
of the Company and who is designated by the Administrative Committee as eligible
to participate in the Plan. An individual other than a member of the Board who
is classified by the Company as an independent contractor whose compensation for
services is reported by the Company on a form other than Form W-2 or any
successor form for reporting wages paid to employees will not be an Eligible
Individual, unless the Administrative Committee specifically designates such
individual by name as an Eligible Individual pursuant to clause (iii) above.

                (j)    "Fund" or "Funds" means one or more of the investment
funds or contracts selected by the Administrative Committee pursuant to
Section 7.3(i).

                (k)    "Incentive Bonus" means any cash incentive compensation
payable to an employee of the Company in addition to the employee's Salary,
other than any bonus or other compensation paid to an individual as an
inducement to the individual to accept employment with the Company. The amount
of an employee's Incentive Bonus will be computed before giving effect to the
Participant's salary reduction elections under Code Sections 125 or 401(k).

                (l)    "Investment Fund Subaccount" has the meaning set forth in
Section 4.1.

                (m)    "Michaels 401(k) Plan" means the Michaels Stores, Inc.
Employees 401(k) Plan.

                (n)    "Net Earnings" means, for any Fund and for any month, an
amount expressed as a percentage equal to the net rate of gain or loss on the
assets of such Fund during such month.

                (o)    "Participant" means any Eligible Individual who elects to
defer Salary or Incentive Bonus in accordance with Section 3.1.

                (p)    "Plan" means the Michaels Stores, Inc. Deferred
Compensation Plan set forth herein, as amended from time to time in accordance
with Section 8.4.

                (q)    "Plan Year" means the 12-consecutive month period
beginning January 1 and ending December 31 of each year.

                (r)    "Salary" means, for any calendar year, the annual base
salary payable to an Eligible Individual who is an employee, the annual retainer
and meeting fees payable to members of the Board and the fees payable to
consultants during the calendar year, computed before giving effect to the
Eligible Individual's salary reduction elections under Code Sections 125 or
401(k). Salary excludes any other form of compensation such as bonuses,
restricted stock, income from stock options or stock appreciation rights,
severance payments, moving expenses, car or other special allowances,
reimbursements for taxes or any other remuneration for personal services.

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                (s)    "Threshold Amount" means, for the Plan Year beginning
January 1, 2002, $85,000 and, for any subsequent Plan Year, such other amount as
may be determined by the Administrative Committee pursuant to Section 7.3(iv).

                (t)    "Trust" means the trust established by the Trust
Agreement.

                (u)    "Trust Agreement" means the agreement between the Company
and the Trustee that establishes a trust to hold and manage the assets
contributed by the Company in connection with the Plan.

                (v)    "Trustee" means the one or more individuals or
organizations that have entered into the Trust Agreement as trustee(s), and any
duly appointed successors.

ARTICLE 2

ELIGIBILITY AND PARTICIPATION

        2.1    Eligibility.    

                (a)    Employees.    Except as provided in the next sentence of
this Section 2.1(a), an employee of the Company will be eligible to participate
in the Plan during a Plan Year if (i) the employee is a United States citizen
whose Salary is paid in United States dollars on a United States payroll and
(ii) the employee's aggregate Salary and Incentive Bonus for the immediately
preceding Plan Year are equal to or in excess of the Threshold Amount for the
current Plan Year. Notwithstanding the foregoing, an individual who is hired or
rehired as an employee during a Plan Year will be eligible to participate in the
Plan during such Plan Year only if (A) the amount of his or her annual Salary
for the Plan Year is equal to or exceeds the Threshold Amount for the Plan Year
or (B) if the individual is a rehired employee who was an employee of the
Company during the immediately preceding Plan Year, the aggregate amount of his
or her Salary and Incentive Bonus for such preceding Plan Year are equal to or
in excess of the Threshold Amount for the current Plan Year.

                (b)    Directors and Consultants.    Directors and consultants
who are Eligible Individuals will be eligible to participate in the Plan during
any Plan Year without regard to the amount of their Salary for the current or
preceding Plan Year.

                (c)    Exceptions.    Notwithstanding the provisions of Sections
2.1(a) and 2.1(b), the Administrative Committee in its discretion may determine
in writing that an otherwise Eligible Individual may not participate in the Plan
for one or more Plan Years.

        2.2    Participation.    An Eligible Individual will become a
Participant in the Plan for a Plan Year by electing to defer all or a portion of
his or her Salary or Incentive Bonus for such Plan Year in accordance with
Section 3.1, by completing all required applications for life insurance (as
determined by the Administrative Committee in its discretion), and by complying
with any applicable medical underwriting requirements of the issuer of any
policy of insurance on the life of the Eligible Individual.

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ARTICLE 3

DEFERRED COMPENSATION

        3.1    Elections to Defer Compensation.    

                (a)    Elections.    For each Plan Year, an Eligible Individual
may make the following deferral elections:

                (i)    An Eligible Individual may elect to defer Salary by
filing with the Administrative Committee an election that conforms to the
requirements of this Section 3.1, on a form provided by the Administrative
Committee (an "Election Form"), no later than the last day of December of the
immediately preceding Plan Year.

                (ii)    Notwithstanding the provisions of Section 3.1(a)(i), an
Eligible Individual who becomes eligible to participate in the Plan on a date
other than the first day of a Plan Year may elect to defer Salary for such Plan
Year and/or any bonus or other compensation payable as an inducement to accept
employment with the Company by filing an Election Form with the Administrative
Committee no later than 60 days after the date such individual is notified that
he or she satisfies the eligibility criteria set forth in Section 2.1, and such
election will be effective to defer Salary earned and any such bonus or other
compensation payable after the Election Form is filed with the Administrative
Committee, as provided in subsection (d) below.

                (iii)    An Eligible Individual may also make a separate
election to defer the Incentive Bonus to be paid in a Plan Year by filing an
Election Form with the Administrative Committee on or before the last day of
October of the immediately preceding Plan Year.

                (iv)    An Eligible Individual who does not elect to defer
Salary or Incentive Bonus for a Plan Year may become a Participant with respect
to a subsequent Plan Year by filing an Election Form with the Administrative
Committee on or before the last day of December (with respect to elections to
defer Salary) or the last day of October (with respect to elections to defer
Incentive Bonus) preceding the Plan Year for which the election is to be
effective, provided he or she is still an Eligible Individual with respect to
such Plan Year.

                (b)    401(k) Plan Distributions.    In addition to the
elections described above, for each Plan Year an Eligible Individual may also
elect to defer an amount of Salary and/or Incentive Bonus that is equal to the
amount distributed to the Eligible Individual in such Plan Year from the
Michaels 401(k) Plan because of (i) the annual limitation on plan compensation
described in Code Section 401(a)(17), (ii) the annual dollar limit on elective
deferrals described in Code Section 402(g), (iii) the annual dollar limit on
annual additions to an individual's account described in Code Section 415(c), or
(iv) the limits on deferrals imposed by the plan administrator of the Michaels
401(k)Plan or resulting from the application of the nondiscrimination tests
described in Code Sections 401(k) and 401(m). Such an election for a Plan Year
must be filed with the Administrative Committee on an Election Form (i) with
respect to Salary on or before the last day of December of the immediately
preceding Plan Year, and (ii) with respect to Incentive Bonus on or before the
last day of October of the immediately preceding Plan Year. An Eligible
Individual may make an election to defer Salary or Incentive

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Bonus under this subsection (b) without making an election to defer Salary or
Incentive Bonus under subsection (a) above.

                (c)    Amount of Deferrals.    An Eligible Individual may elect
to defer any whole percentage or whole dollar amount of his or her Salary up to
100% of his or her Salary, any whole percentage or whole dollar amount of any
bonus or other compensation described in Section 3.1(a)(ii) up to 100% of such
bonus or other compensation and any whole percentage or whole dollar amount of
his or her Incentive Bonus up to 100% of his or her Incentive Bonus; provided,
however, that if an Eligible Individual's deferral elections would reduce the
cash compensation paid to the Eligible Individual to an amount that is less than
(i) the amount necessary to satisfy the Eligible Individual's portion of
applicable employment taxes for the Plan Year, (ii) amounts necessary to satisfy
any other benefit plan elections or loan repayments for the Plan Year under any
other plan sponsored by the Company and (iii) any income taxes payable with
respect to taxable compensation that is not eligible for deferral, then the
Eligible Individual's deferral elections will be limited to the extent necessary
to permit the Company to satisfy its obligation to withhold such taxes,
implement such benefit plan elections or deduct such loan repayments. In
addition, a deferral election made by an Eligible Individual will not be
effective unless and until the Eligible Individual completes all required
applications for life insurance (as determined by the Administrative Committee
in its discretion).

                (d)    Effect of Deferral Elections.    An election to defer
Salary or Incentive Bonus will be first effective with respect to Salary earned
during the first pay period beginning on or after the first day of the Plan Year
(or in the case of a newly eligible individual, the first pay period beginning
after the date on which the completed Election Form is filed with the
Administrative Committee) or as soon as administratively practicable thereafter;
with respect to any bonus or other compensation described in
Section 3.1(a)(ii) that becomes payable after the date on which the completed
Election Form is filed with the Administrative Committee; and with respect to
the Incentive Bonus payable in the Plan Year subsequent to the Plan Year in
which the election is made. Deferrals of Salary made in accordance with
subsection (a) above will be deducted during each pay period throughout the
year. Deferrals of any portion of Incentive Bonus made in accordance with
subsection (a) above will be deducted in the pay period(s) when the Incentive
Bonus would have otherwise been paid. Deferrals related to distributions from
the Michaels 401(k) Plan made in accordance with subsection (b) above will be
deducted in one or more pay period(s) after the Michaels 401(k) Plan
distribution is made.

                (e)    Duration of Deferral Elections.    Any deferral elections
made under this Section 3.1 will be irrevocable and, with respect to the
deferral of Salary and Incentive Bonus, will apply only to the Salary payable
with respect to services performed during the Plan Year for which the election
is made and to the Incentive Bonus payable in the Plan Year subsequent to the
Plan Year in which the elections are made.

        3.2    Matching Amounts.    The Account of each Participant will be
credited each pay period with a matching amount equal to 50% of the
Participant's deferrals under this Plan during such pay period but only to the
extent the Participant's deferrals elected under this Plan do not exceed 6% of
the Participant's Salary and Incentive Bonus for the pay period, such matching
amount to be reduced by the matching contributions credited to the Participant's
account, if any, under the Michaels 401(k) Plan for the same pay period.
Notwithstanding the foregoing

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provisions of this Section 3.2, the portion of any bonus or other compensation
described in Section 3.1(a)(ii) deferred by the Participant will be excluded in
determining the matching amount credited to the Participant's Account.

        3.3    Discretionary Amounts.    At any time and from time to time, the
Company may elect to credit the Account of one or more Participants with an
additional discretionary amount. The timing and amount of any additional amount
credited under this Section 3.3 will be determined in the sole discretion of the
Administrative Committee and may vary among Participants. The crediting of the
Account of a Participant under this Section 3.3 will neither create nor imply
any obligation on the part of the Company to credit the Accounts of other
Participants. Only a Participant who is deferring compensation under Section 3.1
during a Plan Year and whose deferrals have not been suspended under Section 6.3
for such Plan Year will be eligible for such discretionary amounts credited
during the Plan Year.

        3.4    Investment Elections.    

                (a)    Investment Funds.    The Administrative Committee will
provide each Participant with a list of Funds available for hypothetical
investment and each Participant may designate, on a form provided by the
Administrative Committee, one or more of such Funds in which the portion of his
or her Account attributable to deferrals, matching amounts or discretionary
amounts credited to his or her Account for such Plan Year will be deemed to be
invested for purposes of determining the amount of earnings or loss to be
credited to such Account. The Administrative Committee may in its discretion
change from time to time the Funds available for hypothetical investment,
provided Participants are given at least 30 days' prior written notice of the
effective date of the deletion of any Fund (including, without limitation, the
deletion of a Fund in connection with the substitution of a new Fund in its
place); it being understood, however, that where the deletion of a Fund is
beyond the control of the Administrative Committee, the Administrative
Committee's obligation will be to give Participants written notice of the
effective date of such deletion as promptly as practicable after the
Administrative Committee obtains knowledge thereof. The Administrative Committee
may in its discretion add new Funds at any time and Participants will be given
written notice of such additions as promptly as practicable after the
Administrative Committee decides to add a new Fund.

                (b)    Investment Designations.    In making an investment
designation pursuant to this Section 3.4, the Participant may specify that all,
or any whole percentage, of the portion of his or her Account attributable to a
Plan Year will be deemed to be invested in one or more of the Funds designated
by the Administrative Committee (with all such designations in the aggregate not
to exceed 100% of the Participant's Account balance) and may make a separate
investment designation in whole percentages (not to exceed 100%) for future
deferrals. Pursuant to procedures adopted by the Administrative Committee from
time to time, a Participant may change the Fund designations made under this
Section 3.4 with respect to any portion of his or her Account Balance or his or
her future deferrals on any business day.

                (c)    Failure to Elect.    If a Participant fails to elect a
Fund under this Section 3.4, or if the Participant's investment designation is
less than 100% of his or her Account balance or future deferrals, as applicable,
the for any portion of the Account balance or future

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        deferrals for which no investment designation has been made he or she
will be deemed to have designated the Fund that the Administrative Committee
determines in its sole judgment to have the least risk of loss of principal or
conservative money market funds.

                (d)    Temporary Investment.    Pending any change in the Funds
available pursuant to Section 3.4(a), the Committee may credit one or more
Participant's Accounts with a money market rate of return notwithstanding any
Participant's investment election.

ARTICLE 4

ACCOUNTS

        4.1    Participant Accounts.    The Administrative Committee will
establish and maintain an Account for each Participant under the Plan. Each
Participant's Account will be further divided into separate subaccounts
("Investment Fund Subaccounts"), each of which corresponds to a Fund elected by
the Participant pursuant to Section 3.4. Under procedures established by the
Administrative Committee, a Participant's Account will be debited and credited
as follows:

        (i)    The Administrative Committee will credit the Investment Fund
Subaccounts of the Participant's Account with an amount equal to the
compensation deferred by the Participant in accordance with the Participant's
elections; that is, the portion of the Participant's deferred compensation that
the Participant has elected to defer under this Plan and to be invested in a
certain Fund will be credited to the Investment Fund Subaccount corresponding to
that Fund.

        (ii)    The Administrative Committee will also credit the Investment
Fund Subaccounts of the Participant's Account with an amount equal to the
matching amounts determined under Section 3.2 and the discretionary amounts
under Section 3.3.

        (iii)    As of the last day of each month, each Investment Fund
Subaccount of a Participant's Account will be credited with earnings or loss in
an amount determined by multiplying the balance credited to such Investment Fund
Subaccount as of the last day of the preceding month (adjusted to reflect
distributions from or additional credits to a Participant's Account during such
month) by the Net Earnings for the corresponding Fund for the then current
month. To the extent any such Net Earnings is negative in any month (due to a
net loss in the applicable Fund), the applicable Investment Fund Subaccount will
be debited in the same manner.

        (iv)    Each Investment Fund Subaccount will be debited or credited on a
daily basis to appropriately reflect any change in Fund designations made by
Participants pursuant to Section 3.4.

        4.2    Quarterly Statements.    Under procedures established by the
Administrative Committee, a Participant will receive a statement with respect to
such Participant's Account on a quarterly basis.

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ARTICLE 5

VESTING

        5.1    Account.    A Participant's interest in the portion of his or her
Account attributable to deferrals under Section 3.1 and matching amounts under
Section 3.2, and earnings and losses credited thereon, will be 100% vested at
all times. A Participant's vested interest in the portion of his or her Account
attributable to discretionary amounts under Section 3.3 and earnings and losses
credited thereon will be determined in accordance with the vesting schedule(s)
established by the Administrative Committee in connection with the
Administrative Committee's determination of any such discretionary amounts.
Notwithstanding the foregoing, a Participant's interest in his or her entire
Account will become 100% vested upon the Participant's death while employed by
the Company.

ARTICLE 6

DISTRIBUTIONS

        6.1    Form and Time of Payment.    

                (a)    Payment Form Elections.    Each Participant will elect,
at the time of his or her first election to defer compensation under the Plan
for a Plan Year, to have that portion of his or her Distributable Amount
attributable to his or her deferral elections for such Plan Year paid either in
annual installments or in a lump sum payment, subject to the following
provisions:

                (i)    If a Participant terminates employment with the Company
before the Participant has attained age 55 and for reasons other than death or
Disability, the Participant's Distributable Amount will be paid (A) in a single
lump sum, if the Distributable Amount is $25,000 or less, and (B) in a single
lump sum or in annual installments over a period of 2, 3 4 or 5 years, as the
Participant elects, if the Distributable Amount is more than $25,000. If a
Participant described in this Section 6.1(a)(i) fails to make a payment election
with respect to a deferral of compensation for a Plan Year, the Participant's
Distributable Amount attributable to such deferral election will be paid to the
Participant in a single lump sum.

                (ii)    If a Participant terminates employment with the Company
after the Participant has attained age 55 or as a result of the Participant's
death or Disability, the Participant's Distributable Amount will be paid in a
single lump sum or in annual installments over a period of 5, 10, 15 or
20 years, as the Participant elects. If a Participant described in this
Section 6.1(a)(ii) fails to make a payment election with respect to a deferral
of compensation for a Plan Year, the Participant's Distributable Amount
attributable to such deferral election will be paid to the Participant (or the
Participant's Beneficiary, if the Participant terminates employment by reason of
death) in annual installments over a period of 10 years.

                (iii)    Any distribution elections that were in effect on
October 1, 2001, that complied with the provisions of the Plan as in effect on
that date and that have not been modified after October 1, 2001, will be honored
in accordance with their terms, notwithstanding the provisions of
Section 6.1(a)(i) or Section 6.1(a)(ii).

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                (iv)    All amounts deferred for a Plan Year will be subject to
the same payment election.

                (v)    For purposes of this Plan, any portion of a Participant's
Incentive Bonus that the Participant elects to defer will be attributable to the
Plan Year in which the Incentive Bonus would otherwise have been paid to the
Participant.

                (b)    Payment Commencement Date.    Unless a Participant
receives an early distribution with respect to the Distributable Amount for a
Plan Year pursuant to Section 6.2, Section 6.3 or Section 6.4, such
Distributable Amount (or any remaining portion thereof) will be paid after the
Participant terminates employment with the Company. Lump sum payments will be
paid as soon as practicable following the Participant's termination of
employment. Annual installment payments will begin as soon as practicable
following the Participant's termination of employment and will continue to be
made during the month of February of each year thereafter until the applicable
portion of the Distributable Amount has been fully distributed. Each installment
payment will be made pro rata from the Participant's Investment Fund Subaccounts
according to the portion of the balances in such Subaccounts which are
attributable to the deferrals for the Plan Year which are subject to the
installment payment election. During the period in which installment payments
are being made, the Participant's Account will continue to be credited monthly
with earnings pursuant to Section 4.1(iii), the Participant (or his or her
Beneficiary) may continue to change Fund designations pursuant to Section 3.4,
and installment payments will be adjusted annually to reflect earnings, gains
and losses until all amounts credited to his or her Account under the Plan have
been distributed.

                (c)    Change in Payment Election.    A Participant who has not
terminated employment with the Company may change his or her form of payment
with respect to the portion of the Distributable Amount attributable to one or
more Plan Years to one of the payment forms permitted by the Plan, provided the
Participant files a written election with the Administrative Committee to change
such payment form at least one year prior to the date that payment of such
portion of his or her Distributable Amount would otherwise be made. In addition,
a Participant who has elected scheduled early distributions pursuant to
Section 6.2 may defer the scheduled distribution dates in accordance with
Section 6.2. A Participant's payment election with respect to a given Plan Year
may not be changed after payment of that portion of the Distributable Amount
attributable to such Plan Year has been made or has begun.

        6.2    Scheduled Early Distributions.    Participants may elect to have
the Distributable Amount attributable to compensation deferred for a given Plan
Year be paid in a future calendar year while still employed in a lump sum
payment, subject to the following provisions:

        (i)    The Participant's election is made at the time of the
Participant's first election to defer compensation for such Plan Year, and the
payment year is at least two years after the last day of such Plan Year.

        (ii)    Payments under this Section 6.2 will be made in February of the
elected payment year.

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        (iii)    A Participant may elect a different payment date for the
portion of his Distributable Amount attributable to deferrals for each Plan
Year.

        (iv)    Payment dates elected pursuant to this Section 6.2 may be
deferred by at least one year, by filing with the Administrative Committee
written notice at least 12 months prior to the payment date to be deferred, but
in no event may a Participant make more than three such deferral elections with
respect to deferrals for any Plan Year without the written approval of the
Administrative Committee.

        (v)    A distribution pursuant to this Section 6.2 of less than the
Participant's entire interest in the Plan will be made pro rata from his or her
Investment Fund Subaccounts according to the portion of the balances in such
Subaccounts which are attributable to the deferrals for the Plan Year which are
subject to the early distribution election.

        (vi)    Notwithstanding the foregoing provisions of this Section 6.2, if
a Participant terminates employment with the Company prior to the date on which
a lump sum payment is scheduled to be made pursuant to this Section 6.2, the
Participant's Distributable Amount that would have been paid pursuant to this
Section 6.2 will be paid following the Participant's termination of employment
based on the Participant's election pursuant to Section 6.1.

        6.3    Unscheduled Early Distributions.    Subject to paragraph (vi)
below, Participants will be permitted to request to withdraw amounts from their
Accounts at any time ("Early Distributions"). Upon receiving a withdrawal
request, the Administrative Committee will determine, in its sole discretion,
whether to permit any such withdrawal and the amount, if any, to be withdrawn,
subject to the following restrictions:

        (i)    The election to take an Early Distribution will be made by filing
a form provided by and filed with the Administrative Committee.

        (ii)    The maximum amount payable to a Participant in connection with
an Early Distribution will in all cases equal 90% of the amount requested by the
Participant (which requested amount must be not less than $10,000 or the
Participant's entire Distributable Amount if less than $10,000) or approved by
the Administrative Committee; provided, however, that the maximum amount payable
to a Participant in connection with an Early Distribution will be 90% of the
Distributable Amount as of the end of the calendar month in which the Early
Distribution request is received by the Administrative Committee.

        (iii)    The amount described in paragraph (ii) above will be paid in a
single lump sum by the end of the calendar month next following the calendar
month in which the Early Distribution request is received by the Administrative
Committee. A distribution pursuant to this Section 6.3 of less than the
Participant's entire interest in the Plan will be made pro rata from his or her
Investment Fund Subaccounts according to the balances in such Subaccounts.

        (iv)    If a Participant receives an Early Distribution, the remaining
portion of the requested or approved amount, as applicable, in excess of the
amount payable under paragraph (ii) above (i.e., 10% of such amount), will be
permanently forfeited and the

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Company will have no obligation to the Participant or his or her Beneficiary
with respect to such forfeited amount. Forfeiture of such amount will be made
pro rata from the Participant's Investment Fund Subaccounts according to the
balances in such Subaccounts.

        (v)    If a Participant receives an Early Distribution, the Participant
will be ineligible to participate in the Plan for the balance of the Plan Year
in which the Early Distribution occurs and for the immediately following Plan
Year.

        (vi)    A Participant will be limited to a maximum of two Early
Distributions during all of his or her periods of Plan participation.

        6.4    Financial Hardship Withdrawals.    The Administrative Committee
may, pursuant to rules or policies from time to time adopted and applied in a
consistent manner, accelerate the date of distribution of all or any portion of
a Participant's Account balance because of a financial hardship. A financial
hardship means an unforeseeable, severe financial emergency resulting from (a) a
sudden and unexpected illness or accident of the Participant or his or her
dependents (as defined in Section 152(a) of the Code); (b) loss of the
Participant's property due to casualty; or (c) other similar extraordinary and
unforeseeable circumstances arising out of events beyond the control of the
Participant, which may not be relieved through other available resources of the
Participant, as determined by the Administrative Committee in accordance with
such rules and policies. A distribution pursuant to this Section 6.4 of less
than the Participant's entire interest in the Plan will be made pro rata from
his or her Investment Fund Subaccounts according to the balances in such
Subaccounts. Subject to the foregoing, payment of any amount with respect to
which a Participant has filed a request under this Section 6.4 will be made as
soon as practicable after approval of such request by the Administrative
Committee. Distributions made pursuant to this Section 6.4 will be without
penalty.

        6.5    Death Benefits.    If a Participant dies while employed by the
Company or after termination of employment, the Participant's Distributable
Amount will be paid to the Participant's Beneficiary in the same form and in
accordance with the same payment schedule under which the Distributable Amount
was being or would have been paid to the Participant under the provisions of
Section 6.1. In addition to the foregoing, if a Participant with an
undistributed Account balance dies while employed by the Company, the
Participant's Beneficiary will be paid a single sum benefit of $100,000,
provided that coverage under any policy of insurance on the life of the
Participant which is required by the Administrative Committee is in effect at
the Participant's death.

        6.6    Inability To Locate Participant.    

        (a)    Forfeiture of Account.    In the event that the Administrative
Committee is unable to locate a Participant or, with respect to a Participant
who has died, any Beneficiary within two years following the date on which any
payment of the Participant's Distributable Amount is scheduled to be made or
begin, the amount allocated to the Participant's Account will be forfeited.
Following the date of forfeiture, the Participant's Account which is forfeited
will be invested in the Fund offering the least risk of loss of principal or
conservative money market funds. If, after such forfeiture and prior to the
escheat of the Participant's Account as provided in Section 6.6(b), the
Participant or Beneficiary later claims such benefit and establishes to the

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reasonable satisfaction of the Administrative Committee such Participant's or
Beneficiary's right to receive same, such Account will be reinstated at its
balance at the date of forfeiture without additional interest, earnings, gains
or losses from the date of forfeiture through the date of reinstatement. The
Participant's restored Account balance will be invested in the manner that the
Participant or Beneficiary elects pursuant to Section 3.4 and will be
distributed to the Participant or Beneficiary in accordance with the
Participant's payment elections made pursuant to this Article 6. In addition,
any installment payments that were scheduled to have been made during the period
in which the Participant or Beneficiary could not be located will be made to the
Participant or Beneficiary in a lump sum catch-up payment as soon as
administratively practicable.

        (b)    Escheat of Account.    The Administrative Committee, in its
discretion, may escheat, or may cause the Trustee to escheat, to the state of
Texas (or such other state as the Administrative Committee, in its discretion,
determines is appropriate) any Participant's Account which was forfeited if
either (i) the Administrative Committee has been unable to locate the
Participant or Beneficiary for a period of five years (or such other period as
may be specified by applicable law) following the date on which any payment of
the Participant's Distributable Amount is scheduled to be made or begin or
(ii) the Plan is terminated and the Administrative Committee has been unable to
locate the Participant or Beneficiary for a period of two years (or such other
period as may be specified by applicable law) following the date on which any
payment of the Participant's Distributable Amount is scheduled to be made or
begin. Upon the escheat of the Participant's Account, the Participant or
Beneficiary will have no further right to any benefits or payments under the
Plan, and neither the Company, the Administrative Committee nor the Trustee will
have any liability to such Participant or Beneficiary for the amount of the
Participant's Account.

        6.7    Directors and Consultants.    For purposes of the preceding
sections of this Article 6, a Participant who is a member of the Board or a
consultant, but who is not an employee of the Company, will be deemed to be
employed by the Company as long as he or she is a director or is engaged as a
consultant and will be deemed to have terminated employment when he or she is no
longer a director or is no longer engaged as a consultant or an employee of the
Company.

        6.8    Claims Procedure.    

                (a)    Claim for Benefits.    If a Participant or Beneficiary
does not receive the benefits which the Participant or Beneficiary believes he
or she is entitled to receive under the Plan, the Participant or Beneficiary may
file a claim for benefits with the Administrative Committee. All claims will be
made in writing and will be signed by the claimant. If the claimant does not
furnish sufficient information to enable the Administrative Committee to process
the claim, the Administrative Committee will indicate to the claimant any
additional information which is required.

                (b)    Notification by the Administrative Committee.    Each
claim will be approved or disapproved by the Administrative Committee within
90 days following the receipt of the information necessary to process the claim.
In the event the Administrative Committee denies a claim for benefits in whole
or in part, the Administrative Committee will notify the

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claimant in writing of the denial of the claim. Such notice by the
Administrative Committee will also set forth, in a manner calculated to be
understood by the claimant, the specific reason for such denial, the specific
Plan provisions on which the denial is based, a description of any additional
material or information necessary for the claim to be approved, if possible,
with an explanation of why such material or information is necessary, and an
explanation of the Plan's claim review procedure as set forth in subsection (c).
If no action is taken by the Administrative Committee on a claim within such
90 day period, the claim will be deemed to be denied for purposes of the review
procedure.

                (c)    Review Procedure.    A claimant may appeal a denial of
his or her claim by requesting a review of the decision by the Administrative
Committee or a person designated by the Administrative Committee. An appeal must
be submitted in writing within 60 days after receipt by the claimant of written
notification of the denial and must (i) request a review of the claim for
benefits under the Plan, (ii) set forth all of the grounds upon which the
claimant's request for review is based and any facts in support thereof, and
(iii) set forth any issues or comments which the claimant deems pertinent to the
appeal. The Administrative Committee or the person designated by the
Administrative Committee will make a full and fair review of each appeal and any
written materials submitted in connection with the appeal. The Administrative
Committee or the person designated by the Administrative Committee will act upon
each appeal within 60 days after receipt thereof unless special circumstances
require an extension of the time for processing, in which case a decision will
be rendered as soon as possible but not later than 120 days after the appeal is
received. The claimant will be given the opportunity to review documents or
materials directly pertinent to the appeal upon submission of a reasonable
written request to the Administrative Committee or person designated by the
Administrative Committee, provided the Administrative Committee or person
designated by the Administrative Committee in its reasonable judgment finds the
requested documents or materials are directly pertinent to the appeal. On the
basis of its review, the Administrative Committee or person designated by the
Administrative Committee will make an independent determination of the
claimant's eligibility for benefits under the Plan. The decision of the
Administrative Committee or person designated by the Administrative Committee on
any claim for benefits will be final and conclusive upon all parties thereto. In
the event the Administrative Committee or person designated by the
Administrative Committee denies an appeal in whole or in part, it will give
written notice of the decision to the claimant, which notice will set forth in a
manner calculated to be understood by the claimant the specific reasons for such
denial and which will make specific reference to the pertinent Plan provisions
on which the decision was based.

ARTICLE 7

ADMINISTRATION

        7.1    Administrative Committee.    The Administrative Committee for the
Plan will be appointed by, and serve at the pleasure of, the Board. The number
of members comprising the Committee will be determined by the Board, which may
from time to time vary the number of members, and may determine that the
Committee will consist of a single individual. A member of the Committee may
resign by delivering a written notice of resignation to the Board. The

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Board may remove any member of the Committee with or without cause. Vacancies in
the membership of the Committee will be filled as soon as practicable by the
Board.

        7.2    Committee Action.    The Administrative Committee will act at
meetings by affirmative vote of a majority of the members of the Committee. Any
action permitted to be taken at a meeting may be taken without a meeting if, a
written consent to the action is signed by all members of the Committee. A
member of the Committee will not vote or act upon any matter which relates
solely to himself or herself as a Participant. Any members of the Committee may
execute any certificate or other written direction on behalf of the Committee.

        7.3    Powers and Duties of the Administrative Committee.    The
Administrative Committee will administer the Plan in accordance with its terms
and will have all powers, authority and discretion necessary to accomplish its
purposes, including, but not by way of limitation, the authority and discretion
to:

        (i)    select the Funds and change the Funds from time to time pursuant
to Section 3.4;

        (ii)    appoint a representative, delegate or any other agent, and
delegate to them such powers and duties in connection with the administration of
the Plan as the Administrative Committee may from time to time prescribe;

        (iii)    resolve all questions relating to the eligibility of employees,
directors and consultants to be or become Eligible Individuals or Participants;

        (iv)    determine the Threshold Amount applicable to any Plan Year after
the first Plan Year and establish alternative criteria, consistent with the
purpose of the Plan to provide benefits to a select group of management or
highly compensated employees, for what will constitute an employee of the
Company or an Eligible Individual with respect to any given Plan Year, in
addition to or in lieu of the eligibility criteria set forth in
Section 1.2(i) or Section 2.1;

        (v)    determine the amount of benefits payable to Participants or their
Beneficiaries under this Plan, and determine the time and manner in which such
benefits are to be paid;

        (vi)    authorize and direct all disbursements by the Trustee from the
Trust;

        (vii)    engage any administrative, legal, accounting, clerical, or
other services it deems appropriate in administering the Plan or the Trust
Agreement;

        (viii)    construe and interpret this Plan and the Trust Agreement,
supply omissions from, correct deficiencies in, and resolve ambiguities in the
language of this Plan and the Trust Agreement, and adopt rules for the
administration of this Plan and the Trust Agreement that are not inconsistent
with the terms of such documents;

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        (ix)    compile and maintain all records it determines to be necessary,
appropriate or convenient in connection with the administration of this Plan and
of benefit payments hereunder;

        (x)    determine the disposition of assets in the Trust in the event
this Plan is terminated;

        (xi)    review the performance of the Trustee with respect to the
Trustee's administrative duties, responsibilities and obligations under this
Plan and the Trust Agreement, report to the Board regarding such administrative
performance of the Trustee, and recommend to the Board, if necessary, the
removal of the Trustee and the appointment of a successor Trustee; and

        (xii)    resolve all questions and make all factual determinations
relating to any matter for which it has administrative responsibility.

        7.4    Construction and Interpretation.    The Administrative Committee
will have full authority and discretion to construe and interpret the terms and
provisions of this Plan, which interpretation or construction will be final and
binding on all parties, including but not limited to the Company and any
Eligible Individual, Participant or Beneficiary. The Administrative Committee
will administer the Plan in a consistent and nondiscriminatory manner and in
full accordance with any and all laws applicable to the Plan.

        7.5    Information.    To enable the Administrative Committee to perform
its functions, the Company will supply full and timely information to the
Administrative Committee on all matters relating to the Salary and Incentive
Bonus of all Participants, their death or other cause of termination, and such
other pertinent facts as the Administrative Committee may reasonably require.

        7.6    Expenses and Indemnity.    

        (a)    Expenses. All expenses and fees incurred in connection with the
administration of the Plan and the Trust will be paid by the Company.

        (b)    Indemnification. To the fullest extent permitted by applicable
law, the Company will indemnify and save harmless the Administrative Committee,
the Board and any delegate of the Administrative Committee who is an employee of
the Company and any officers and employees of the Company against any and all
expenses, liabilities and claims, including legal fees to defend against such
liabilities and claims, arising out of their discharge in good faith of
responsibilities under or incident to the Plan, other than expenses and
liabilities arising out of willful misconduct. Without limiting the generality
of the foregoing, the Company will, promptly upon request, advance funds to
persons entitled to indemnification hereunder to the extent necessary to defray
legal and other expenses incurred in the defense of such liabilities and claims,
as and when incurred. This indemnity will not preclude such further indemnities
as may be available under insurance purchased by the Company or provided by the
Company under any bylaw, agreement or otherwise.

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ARTICLE 8

MISCELLANEOUS

        8.1    Unsecured General Creditor.    Participants and their
Beneficiaries, heirs, successors, and assigns will have no legal or equitable
rights, claims, or interests in any property or assets of the Company or the
Trust. No assets of the Company will be held as collateral security for the
obligations of the Company under this Plan. Any and all assets of the Trust will
be and will remain unpledged and unencumbered. The Company's obligation under
the Plan will be merely that of an unfunded and unsecured promise of the Company
to pay money in the future, and the rights of the Participants and Beneficiaries
will be no greater than those of unsecured general creditors. The Company will
maintain the Trust at all times during the term of the Plan. All assets of the
Company and the Trust will be subject to the claims of the Company's creditors.

        8.2    Restriction Against Assignment.    The Company or the Trustee
will pay all amounts payable hereunder only to the person or persons designated
pursuant to the Plan and not to any other person or entity. No part of a
Participant's Account will be liable for the debts, contracts, or engagements of
any Participant, his or her Beneficiary, or successors in interest, nor will a
Participant's Account be subject to execution by levy, attachment, or
garnishment or by any other legal or equitable proceeding, nor will any such
person have any right to alienate, anticipate, commute, pledge, encumber, or
assign any benefits or payments hereunder in any manner whatsoever, without the
prior written consent of the Administrative Committee, which may be withheld in
its sole discretion. If any Participant, Beneficiary or successor in interest is
adjudicated bankrupt or purports to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge any distribution or payment from the Plan,
voluntarily or involuntarily, the Administrative Committee, in its discretion,
may cancel such distribution or payment (or any part thereof) to or for the
benefit of such Participant, Beneficiary or successor in interest in such manner
as the Administrative Committee will direct.

        8.3    Withholding.    There will be deducted from each payment made
under the Plan all taxes which are required to be withheld by the Company in
respect to such payment.

        8.4    Amendment, Modification, Suspension or Termination.    

        (a)    The Administrative Committee or the Board may amend, modify,
suspend or terminate the Plan for any reason, in whole or in part, provided that
(i) no amendment, modification, suspension or termination will have any
retroactive effect that would directly or indirectly reduce any amounts
allocated to a Participant's Account or otherwise deprive any Participant of any
benefits already vested under the Plan; and (ii) any amendment, modification,
suspension or termination of the Plan that will significantly increase costs to
the Company will be approved by the Board.

        (b)    In the event that this Plan is terminated in accordance with this
Section 8.4, the balance of each Participant's Account will be distributed to
the Participant (or, in the event of the death of the Participant, to the
Participant's Beneficiary) in a lump sum payment as soon as administratively
feasible and in any event within 90 days of such termination.

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        8.5    Governing Law.    The Plan will be construed and governed in all
respects in accordance with applicable federal law and, to the extent not
preempted by such federal law, in accordance with the laws of the State of
Texas, including without limitation, the Texas statute of limitations, but
without giving effect to the principles of conflicts of laws of such State.

        8.6    Receipt or Release.    Any payment to a Participant or the
Participant's Beneficiary in accordance with the provisions of the Plan will, to
the extent thereof, be in full satisfaction of all claims against the
Administrative Committee and the Company with respect to the amount paid. The
Administrative Committee may require such Participant or Beneficiary, as a
condition precedent to such payment, to execute a receipt and release to such
effect.

        8.7    Payments on Behalf of Persons Under Incapacity.    In the event
that any amount becomes payable under the Plan to a person who, in the sole
judgment of the Administrative Committee, is considered by reason of physical or
mental condition to be unable to give a valid receipt therefor, the
Administrative Committee may direct that such payment be made to any person
found by the Administrative Committee, in its sole judgment, to have assumed the
care of such person. Any payment made pursuant to such determination will, to
the extent thereof, constitute a full release and discharge of the
Administrative Committee and the Company with respect to the amount paid.

        8.8    Successors and Assigns.    The Company may not assign its
obligations under this Plan, whether by contract, merger, operation of law or
otherwise, unless the assignment is to an assignee or successor entity (in
either case, hereafter called a "Successor") that has stockholders' equity or
the closest equivalent thereto (as measured by the most recent audited financial
statements of such Successor) equal to or greater than the stockholders' equity
of the Company (as measured immediately prior to the event that causes such
entity to become a Successor to the Company). The provisions of this Section 8.8
will be binding upon each and every Successor to the Company.

        8.9    No Employment Rights.    Participation in this Plan will not
confer upon any person any right to be employed by the Company nor any other
right not expressly provided hereunder.

        8.10    Headings, etc. Not Part of Agreement.    Headings and
subheadings in this Plan are inserted for convenience of reference only and are
not to be considered in the construction of the provisions hereof.

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        IN WITNESS WHEREOF, the Company has caused this document to be executed
by its duly authorized officer as of the 15th day of September, 2001.

    MICHAELS STORES, INC.
 
 
By:
 
MICHAELS STORES, INC.
DEFERRED COMPENSATION PLAN
ADMINISTRATIVE COMMITTEE

 
 
 
 
By:
 
/s/  SUE ELLIOTT      

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Sue Elliott
 
 
 
 
By:
 
/s/  DAVID KEEPES      

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David Keepes

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QuickLinks

MICHAELS STORES, INC. DEFERRED COMPENSATION PLAN (Amended and Restated as of
January 1, 2002)
TABLE OF CONTENTS
MICHAELS STORES, INC. DEFERRED COMPENSATION PLAN
RECITALS
ARTICLE 1 TITLE AND DEFINITIONS
ARTICLE 2 ELIGIBILITY AND PARTICIPATION
ARTICLE 3 DEFERRED COMPENSATION
ARTICLE 4 ACCOUNTS
ARTICLE 5 VESTING
ARTICLE 6 DISTRIBUTIONS
ARTICLE 7 ADMINISTRATION
ARTICLE 8 MISCELLANEOUS