Exhibit 10.2
Gregory A. Sandfort
Michaels Stores, Inc.
Fiscal Year 2006
Bonus Plan
President and
Chief Operating Officer

 

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Fiscal Year 2006 Bonus Plan
Purpose
The Fiscal Year 2006 Bonus Plan has been developed to provide financial
incentives to those members of management that can make an important
contribution to Michaels success and to encourage those members to remain with
the Company.
Eligibility

1.   To be eligible for a bonus under the Fiscal Year 2006 Bonus Plan, an
associate must be in a bonus eligible position during Fiscal Year 2006. The
Fiscal Year begins on January 29, 2006, and concludes on February 3, 2007.   2.
  An associate must be employed with the Company, in good standing (see #8), and
in a bonus eligible position at the time of bonus payout in order to be eligible
to receive a bonus. 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.   3.   Bonus
payments will normally occur by April 15th, following the end of the fiscal
year. Associates must be employed at the time of bonus payout in order to be
eligible to receive a bonus.   4.   Anyone hired or placed in a bonus eligible
position after November 15, 2006 will not be eligible to earn a bonus under the
Fiscal Year 2006 Bonus Plan.   5.   Any associate who is on leave of absence
longer than 90 days in Fiscal Year 2006 may be eligible to earn a prorated bonus
for time worked during the fiscal year, in accordance with the normal proration
guidelines outlined in this document.   6.   An associate must be in an active
status for at least one month of Fiscal Year 2006, as defined in this document,
to be eligible for any bonus consideration.   7.   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 #2) in each
position, the respective base salaries, and the applicable target bonus
amount(s).   8.   An associate must be in “good standing” at the time of bonus
payout to be eligible for a Fiscal Year 2006 bonus. An associate does not meet
this requirement if: 1) he/she receives an overall performance rating of
“Unacceptable” for FY 2006; and/or 2) at the time of bonus payout (check date),
he/she is on a Performance Improvement Plan (“PIP”) that was initiated during FY
2006. Associates who are on a Performance Improvement Plan that is initiated in
FY 2007 will be eligible for a bonus payment for FY 2006.

 

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How a Bonus Is Earned
The following factors must be satisfied in order for an eligible associate to
earn a bonus under the Fiscal Year 2006 Bonus Plan.

1.   The associate must be eligible as set forth in the Eligibility section of
the Fiscal Year 2006 Bonus Plan.   2.   In order to earn a bonus under the
Fiscal Year 2006 Bonus Plan, an associate must be employed by the Company, in a
bonus eligible position, at the time bonuses are paid. If an associate is not
employed by the Company in a bonus eligible position at the time bonuses are
paid, regardless of the reason for termination of employment, the associate does
not earn a bonus under the Fiscal Year 2006 Bonus Plan.   3.   An associate does
not earn a bonus payment for FY 2006 if: 1) he/she receives an overall
performance rating of “Unacceptable” for FY 2006 and/or 2) at the time of bonus
payout he/she is on a Performance Improvement Plan (“PIP”) that was initiated
during FY 2006. Associates who are on a Performance Improvement Plan that was
initiated in FY 2007 will be eligible for a bonus payment for FY 2006.

The Company anticipates that this bonus plan will be part of an ongoing bonus
program, but the Company does not guarantee that the program will in fact
continue for future periods or that the terms, amounts or measures of the
program will not change.
When bonuses are earned, the Company typically makes bonus payments in April of
the following fiscal year.
Bonus Payout Formula
Bonus payouts will be based upon your earned percentage multiplied by your base
salary as of the first day of the fiscal year (January 29, 2006). Your earned
percentage will be based upon actual performance as compared to Plan.

 

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Bonus Plan Measures, Definitions & Financial Targets
Fiscal Year 2006 Bonus plan measures, definitions and financial targets are as
follows:

              Plan Measure   Measure Definition   Plans Using This   Financial
Target         Measure   $ or %  
Michaels Stores Inc. Company Profit Before Taxes ($)
  Gross sales less cost of sales, SG&A expenses & interest, plus investment
income and after other income or expenses (excludes effect of one-time charges).
  Ÿ    Corporate
     Management
Ÿ    Distribution
Ÿ    Marketing
Ÿ    Merchandising
Ÿ    Inventory
     Management
Ÿ    Store Ops
     Corporate   Ÿ     $                      
Net Income % of Sales (Michaels Stores, U.S. & Canada)
  Net Sales less all costs and expenses on the store income statement, excluding
the effect of share based compensation expenses.   Ÿ    Store Ops
     Corporate
     Management   Ÿ                         %  
Operating Income % of Sales (Michaels Stores, U.S. & Canada) Company / Zone
  Net Sales less all costs and expenses on the store income statement, excluding
the effect of bonus and share based compensation expenses.   Ÿ    Store Ops
Ÿ    Store Ops
     Support   Ÿ     n/a  
Store Sales Plan (Michaels Stores, U.S. & Canada) Company / Zone
  Net sales on store income statement.   Ÿ    All Store Ops   Ÿ     $___  
Net Buyer
Contribution ($)*
  Scan margin plus entitlements & other allowances.   Ÿ     Merchandising  
Ÿ     n/a  
Merchandise
Comp Store Sales
Plan ($)
  Sales increase in stores open at least 13 months.       Merchandising
Ÿ    Marketing
Ÿ    Inventory
     Management   Ÿ     $                      
Company
Monthly Average
Inventory ($) per
store
  Avg. inventory per store for the 13 months 1/06 through 1/07 divided by 13.
(Includes stores, warehouse, in-transit only)   Ÿ    Merchandising
Ÿ    Inventory
     Management   Ÿ     $                      
Supply Chain
Expense Ratio
  Ratio (%) of supply chain expenses ($) to volume ($)   Ÿ    Distribution
     Corporate   Ÿ     n/a  
Specific DC
Performance
  Ratio (%) of DC expense ($) to volume ($)   Ÿ    Distribution
     Center
     Management   Ÿ     n/a  

     *May include inter-company profit allocation where applicable.

 

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2006 Bonus Plan — President and Chief Operating Officer
Michaels Stores Inc. Company Profit Before Taxes ($M)
Plan:

          Bonus Payout % of Plan   % of Salary 103+% ($___)   80% 101.5% ($___)
  70% Plan 100.0% ($___)   60% 99.0% ($___)   50% 98.0% ($___)   40% 97.0%
($___)   30% 96.0% ($___)   20% 95.0% ($___)   15% 94.0% ($___)   10% Less than
94%   0%

Example
* Actual results are 100% of plan
* Total Bonus earned = 60%