Exhibit 10.1

 

[g155631kgi001.jpg]

Nicholas E. Crombie

Michaels Stores, Inc.

EVP - Store Operations

Fiscal Year 2007

Bonus Plan

1

--------------------------------------------------------------------------------

Introduction

Your Fiscal Year 2007 Bonus Plan provides you financial incentives for your
important contributions to our success.   In your position as EVP - Store
Operations, you have the potential to earn up to a maximum bonus payout of
100.00% of your bonus eligible base salary.

Bonus Measures

Your bonus plan is based on the overall company performance, your personal
performance, and your business unit performance (where applicable):

Fiscal Year 2007 Bonus Plan Measures, Definitions and Targets

Plan Measure

 

Measure Definition

 

Weight

 

Threshold
Performance

 

Target
Performance
(PLAN)

 

Maximum
Performance

 

Corporate Financial Performance: Michaels Stores Inc. EBITDA minus Inventory
Charge *

 

Total Company Sales, Less Cost of Goods Sold, Less Selling, General and
Administrative Expenses, Plus Depreciation and Amortization, Less Average
Monthly Inventory times   %

 

50%

 

$            

(94.0% of PLAN)

 

$            

(100.0% of PLAN)

 

$            

(106.0% of PLAN)

 

Your Performance

 

Your FY 2007 Performance Appraisal Rating

 

25%

 

Mixed
Performance

 

Solid
Performance

 

Exceeds
Expectations

 

Michaels Stores EBITDA minus Inventory Charge $(Michaels Stores)

 

Sales, Less Cost of Goods Sold, Less Selling, General and Administrative
Expenses, Plus Depreciation and Amortization, Less Average Monthly Inventory
Times  % for Michaels Stores Only (Division 010)

 

15%

 

$            

(94.0% of PLAN)

 

$            

(100.0% of PLAN)

 

$            

(106.0% of PLAN)

 

Michaels Sales Plan $(Michaels Stores)

 

Net Sales for All Michaels Stores
Only

 

10%

 

$            

(96.0% of PLAN)

 

$            

(100.0% of PLAN)

 

$            

(103.0% of PLAN)

 

 

--------------------------------------------------------------------------------

* May exclude additional charges as approved by the Compensation Committee of
the Board of Directors

EBITDA

EBITDA (“ee-bid-dah”) is short for “Earnings Before Interest, Taxes,
Depreciation and Amortization”.   It is a measure that indicates the Company’s
operating profitability before non-operating expenses and non-cash charges,
calculated by taking operating income and adding back depreciation and
amortization expenses.  Amortization refers to spreading an intangible asset’s
value over that asset’s useful life.  An example of an intangible asset would be
leasehold improvements (changes we make to a store location to make the building
setup consistent with a Michaels store layout). Depreciation, on the other hand,
refers to the spreading of a tangible asset’s cost over that asset’s life, such
as store fixtures or computer equipment.

EBITDA is intended to be a measure that is much more closely linked to the cash
flow that the business generates from its operations – a measure of the profit
and loss statement (P&L) based on the cash we take in each day (sales), less the
ongoing cash we are spending (cost of sales and expenses).

EBITDA minus Inventory Charge

The inventory charge is much like an “interest charge” to cover the cost of
buying and holding inventory, and is subtracted from the EBITDA number .

Minimum Company Performance Threshold

Before any Business Unit or Individual Performance portion can be earned, the
actual results of the Corporate Financial Performance measure (Michaels Stores
Inc. EBITDA minus inventory charge) must meet or exceed a minimum level of
performance (“Threshold”).  For Fiscal Year 2007, the Threshold level is
$                        .

Performance Levels and Bonus Payouts

For all company, business unit, and individual performance bonus plan measures,
there are four major performance levels:  Below Threshold, Threshold, Target and
Maximum.  Bonus payout percentages will be based upon the achieved level of
performance for each of your bonus plan measures.  To determine the actual
payout percent, each bonus measure’s performance must be calculated (percent
achieved between Threshold and Target, or Target and Maximum), weighted,
multiplied by the eligible base salary as of February 2, 2008, and adjusted for
any applicable proration.  If you change positions during the year, resulting in
a change in bonus plan, your base salary prior to your transfer will be used as
the eligible base salary for your former position.

2

--------------------------------------------------------------------------------

The performance of each bonus measure is evaluated independently, and the
achieved bonus percentage for each measure is added together to arrive at the
percentage of total bonus achieved.

Personal Bonus Calculation Worksheet – Nick Crombie

Target Bonus: 50.00%

 

Maximum Bonus: 100.00%

 

Measure

 

Weight

 

Weighted
Threshold Bonus %*

 

Weighted
Target Bonus %

 

Weighted
Maximum Bonus %

 

MSI EBITDA minus inventory charge

 

50

%

7.500

%

25.000

%

50.000

%

Your Performance (FY 07 Performance Rating)

 

25

%

6.250

%

12.500

%

25.000

%

Michaels Stores EBITDA minus Inventory Charge $(Michaels Stores)

 

15

%

2.250

%

7.500

%

15.000

%

Michaels Sales Plan $(Michaels Stores)

 

10

%

1.500

%

5.000

%

10.000

%

Total

 

100

%

Total

 

50.000

%

100.000

%

 

--------------------------------------------------------------------------------

* Weighted Threshold Bonus % is 30% of the Weighted Target Bonus % for all
Company or Business Unit measures. For “Your Performance”, Weighted Threshold
Bonus is 50% of the Weighted Target Bonus %.

Scaling of Payout Percentage

When performance falls at any point between the threshold and maximum goals,
your bonus payout will be scaled according to the performance above or below the
target goal.  The amount of bonus is scaled to the nearest hundredth of a
percent when comparing plan to actual results.  All calculations will be rounded
to the nearest hundredth.  The Individual Performance portion of the bonus has
four bonus payout levels based upon the Annual FY 2007 Performance Appraisal
Rating, and no scaling will be applied.   (Needs Development Performance Rating
equals zero bonus for the performance component).

Bonus Scaling Formulas

The following formulas illustrate how bonus scaling is applied in calculating
the Actual Bonus percentages achieved for the corporate financial measure and
any business unit measure:

Scenario 1: Actual performance is above target goal:

[g155631kgi002.jpg]

 Scenario 2: Actual performance is below target goal:

[g155631kgi003.jpg]

Note: Wtd = Weighted; PLAN = Target

Eligibility

To be eligible for a bonus under the Fiscal Year 2007 Bonus Plan, the associate
must meet all of the eligibility factors:

Must be in a bonus eligible position during Fiscal Year 2007.  The Fiscal Year
begins on February 4, 2007, and concludes on February 2, 2008.  If an associate
is not employed in a bonus eligible position at the beginning of the fiscal
year, but assumes a bonus eligible position during the fiscal year, he/she will
be eligible to earn a prorated bonus based upon the number of full months that
he/she was in the bonus eligible position.  Individuals who assume a bonus
eligible position on or before the 15th of the month will receive credit for
that entire month.  Individuals who assume such a position after the 15th will
not receive credit for that month.  Individuals who change positions during the
fiscal year will receive credit for bonus calculation purposes based upon the
bonus level of the position he/she is in on the 15th of the month, in accordance
with the bonus plan for the credited position (see #5).

An associate must be hired in a bonus eligible position on or before November
15, 2007.

1.

 

An associate must have worked for at least three months in a bonus eligible
position in Fiscal Year 2007.

 

 

 

2.

 

An associate must be employed in a bonus eligible position at the end of the
fiscal year, February 2, 2008, in order to be eligible to receive a bonus. All
bonus payments payable under this Bonus Plan will normally occur between April
1st and April 30th, following the end of the fiscal year, provided that all
eligibility criteria as set forth in this bonus plan document are met. Bonus
eligible positions are defined as any regular full-time or regular part-time
associates in one of the following store or corporate positions:

 

3

--------------------------------------------------------------------------------

 

Store Positions

 

Corporate Positions

Store Manager and Assistant Manager

 

Corporate Manager through Executive Committee Member
(Includes Artistree and Specialty Businesses)

Distribution Center Coach, Manager, Assistant General Manager and General
Manager

 

Note: Temporary employees and independent contractors are not bonus eligible
positions.

3.

 

If an associate is promoted or changes position during the fiscal year, the
associate may be eligible for bonus earnings calculated using the number of full
months (see #1) in each position, the respective base salaries, and the
applicable target bonus amount(s).

 

 

 

4.

 

An associate is not eligible for a bonus under this Bonus Plan if the associate
received a Performance Improvement Plan during Fiscal Year 2007 and the
associate remains on the Performance Improvement Plan at the time of bonus
payout (check date).

 

How a Bonus is Earned

In order to earn a bonus under this Fiscal Year 2007 Bonus Plan, the associate
must first satisfy all of the requirements in the Eligibility section of the
Bonus Plan.  In addition, and to the extent allowed by applicable law, the
associate will not earn, and no bonus will be paid, unless the associate is
employed in a bonus eligible position at the end of the fiscal year, February 2,
2008.

To the extent allowed by law, Michaels Stores, Inc. reserves the right to change
or cancel any portion(s) of this Bonus Plan for any reason. This Bonus Plan does
not constitute a contract or other agreement concerning the duration of any
associate’s employment. To the extent allowed by law, the employment
relationship remains “at will” and may be terminated at any time, with or
without cause.  This Bonus Plan shall be administered by the Compensation
Committee of the Board of Directors, in its sole discretion.

4

--------------------------------------------------------------------------------