exv10w4



 






Exhibit 10.4




Gregory A. Sandfort




Michaels Stores, Inc.




EVP — Merchandising




Fiscal Year 2005

Bonus Plan




 









 








Fiscal Year 2005 Bonus Plan




Purpose




The Fiscal Year 2005 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 2005 Bonus Plan, an associate must be in a
bonus eligible position during Fiscal Year 2005. The Fiscal Year begins on January 30, 2005,
and concludes on January 28, 2006.






	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, 2005 will not be
eligible to earn a bonus under the Fiscal Year 2005 Bonus Plan.






	5.  	Any associate who is on leave of absence longer than 90 days in Fiscal Year 2005 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 2005, 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 2005 bonus. An associate does not meet this requirement if: 1) he/she receives an
overall performance rating of “Unacceptable” for FY 2005; 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 2005. Associates who are on a Performance Improvement Plan that is initiated in FY
2006 will be eligible for a bonus payment for FY 2005.




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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 Year 2005 Bonus Plan.





	1.  	The associate must be eligible as set forth in the Eligibility section of the Year 2005 Bonus
Plan.






	2.  	In order to earn a bonus under the Year 2005 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
Year 2005 Bonus Plan.






	3.  	An associate does not earn a bonus payment for FY 2005 if: 1) he/she receives an overall
performance rating of “Unacceptable” for FY 2005 and/or 2) at the time of bonus payout he/she
is on a Performance Improvement Plan (“PIP”) that was initiated during FY 2005. Associates who
are on a Performance Improvement Plan that was initiated in FY 2006 will be eligible for a
bonus payment for FY 2005.





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 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 30, 2005). 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 2005 Bonus plan measures, definitions and financial targets are as follows:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Financial Target	 
	 	Plan Measure	 	 	Measure Definition	 	 	Plans Using This Measure	 	 	$ or %	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	Michaels Stores Inc. Company Profit Before Taxes (PBT)


	 	 	Gross sales less cost of
	 	 	•
	 	Corporate Management	 	 	 	 	 	 
	 	 	 	sales, SG&A expenses &
	 	 	•	 	Distribution	 	 	 	 	 	 
	 	 	 	interest, plus investment
	 	 	•
	 	Marketing	 	 	 	 	 	 
	 	

	 	 	income and after other
	 	 	•
	 	Merchandising	 	 	 	 	 	 
	 	

	 	 	income or expenses
	 	 	•
	 	Inventory Management
	 	 	•
	 	$___	 
	 	

	 	 	(excludes effect of stock
	 	 	•
	 	Store Ops Corporate	 	 	 	 	 	 
	 	

	 	 	option expensing and one-
	 	 	 	 	 	 	 	 	 	 	 
	 	

	 	 	time charges).
	 	 	 
	 	 	 	 	 	 	 	 
	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	Company Net Income as a % of Sales
(Michaels Stores U.S.
& Canada)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Line 650 on Store income
	 	 	•
	 	Store Ops Corporate Management	 	 	•	 	___%	 
	 	 	 	statement.
	 	 	 	 	 
	 	 	 
	 	 	 
	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	Operating Income as a % of Sales (Michaels
Stores U.S. & Canada) Company / Zone


	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	•
	 	Store Ops	 	 	•	 	n/a	 
	 	 	 	Line 625 on Store income
	 	 	•
	 	Store Ops Support
	 	 	 
	 	 	 
	 	 	 	statement.
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	Stores
Sales Plan (Michaels Stores U.S. & Canada) Company / Zone
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Line 25 — Net Sales on	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Store income statement.
	 	 	•
	 	All Store Ops
	 	 	•
	 	$___	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	

	 	 	Scan margin plus	 	 	 	 	 	 	 	 	 	 	 
	 	Net Buyer

	 	 	entitlements & other
	 	 	•
	 	Merchandising
	 	 	•
	 	n/a	 
	 	Contribution *

	 	 	allowances.	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	Merchandise Comp Stores Sales Plan
minus Dept 33 (in Dollars)



	 	 	Sales increase in stores open
	 	 	•
	 	Merchandising	 	 	 	 	 	 
	 	 	 	at least 13 months, minus
	 	 	•
	 	Inventory Management
	 	 	•
	 	$___	 
	 	 	 	Dept 33.
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	Merchandise Comp Store Sales Plan (in Dollars)



	 	 	Sales increase in stores open	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	at least 13 months.
	 	 	•
	 	Marketing
	 	 	•
	 	n/a	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	

	 	 	Avg. inventory per store for	 	 	 	 	 	 	 	 	 	 	 
	 	Company Monthly Average Inventory per store (in Dollars)



	 	 	the 13 months 1/05 through
	 	 	•
	 	Merchandising	 	 	 	 	 	 
	 	 	 	1/06 divided by 13.
	 	 	•
	 	Inventory Management
	 	 	•
	 	$___	 
	 	 	 	(Included stores, warehouse,
	 	 	 	 	 	 	 	 	 	 	 
	 	

	 	 	in-transit only)	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	Supply Chain Expense Ratio


	 	 	Ratio (%) of Supply Chain
	 	 	•
	 	Distribution Corporate	 	 	 	 	 	 
	 	 	 	Expenses ($) to Volume ($)
	 	 	 	 	 
	 	 	•
	 	n/a	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	

	 	 	 	 	 	•
	 	Distribution Center Management	 	 	•	 	n/a	 
	 	Specific DC Performance


	 	 	Ratio (%) of expense ($) to
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	volume ($)
	 	 	 	 	 
	 	 	 
	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 










	*May include inter-company profit allocation where applicable.




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2005 Bonus Plan — Executive Vice President, Merchandising




	 	 	 	 	 	 	 	 
	 
	 	 Bonus Criteria	 	 	Point Value	 
	 	1.  Michaels Stores Inc. Company Profit Before Taxes
	 	 	 	40	 	 
	 	2.  Merchandising Comp Store Sales Plan minus Dept 33
	 	 	 	40	 	 
	 	3.  Company Monthly Average Inventory ($) per Store
	 	 	 	30	 	 
	 	 Total Points:
	 	 	 	110	 	 
	 










1. Michaels Stores Inc. Company Profit Before Taxes

40 Potential Points

Plan: $___________________




	 	 	 	 	 	 
	 
	 % of Plan	 	 	Points Earned 
	 	 	 	 
	104+% ($___)

	 	 	 	40	 
	 	 	 	 
	102% ($___)

	 	 	 	35	 
	 	 	 	 
	100% ($___)

	 	 	 	30	 
	 	 	 	 
	98% ($___)

	 	 	 	25	 
	 	 	 	 
	96% ($___)

	 	 	 	20	 
	 	 	 	 
	94% ($___)

	 	 	 	15	 
	 	 	 	 
	Less than 94%

	 	 	 	0	 















2. Merchandising Comp Store Sales Plan minus Dept 33

40 Potential Points

Plan: $___________________




	 	 	 	 	 	 
	 
	 % of Plan	 	 	Points Earned	 
	 	 	 	 
	101+% ($___)

	 	 	 	40	 
	 	 	 	 
	100% ($___)

	 	 	 	35	 
	 	 	 	 
	99% ($___)

	 	 	 	30	 
	 	 	 	 
	98% ($___)

	 	 	 	25	 
	 	 	 	 
	97% ($___)

	 	 	 	20	 
	 	 	 	 
	96% ($___)

	 	 	 	15	 
	 	 	 	 
	95% ($___)

	 	 	 	10	 
	 	 	 	 
	94% ($___)

	 	 	 	5	 
	 	 	 	 
	Less than 94%

	 	 	 	0	 










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2005 Bonus Plan — Executive Vice President, Merchandising









3. Company Monthly Average Inventory ($) per Store

30 Potential Points

Plan: $___________________




	 	 	 	 	 	 
	 
	 % of Plan	 	 	Points Earned 
	 	 	 	 
	100% ($___)

	 	 	 	30	 
	 	 	 	 
	101% ($___)

	 	 	 	25	 
	 	 	 	 
	102% ($___)

	 	 	 	20	 
	 	 	 	 
	103% ($___)

	 	 	 	15	 
	 	 	 	 
	104% ($___)

	 	 	 	10	 
	 	 	 	 
	105% ($___)

	 	 	 	5	 
	 	 	 	 
	More than 105%

	 	 	 	0	 















Bonus Payout Matrix




	 	 	 	 	 	 	 	 	 
	 
	Total Points Earned	 	 	 	 	 	Bonus Payout % of Salary
	 	 	 	 	 	 	 
	Super — 100+

	 	 	 	 	 	 	50.0	%
	 	 	 	 	 	 	 
	Stretch — 90

	 	 	 	 	 	 	45.0	%
	 	 	 	 	 	 	 
	Target — 80

	 	 	 	 	 	 	40.0	%
	 	 	 	 	 	 	 
	75

	 	 	 	 	 	 	35.0	%
	 	 	 	 	 	 	 
	70

	 	 	 	 	 	 	30.0	%
	 	 	 	 	 	 	 
	65

	 	 	 	 	 	 	25.0	%
	 	 	 	 	 	 	 
	60

	 	 	 	 	 	 	20.0	%
	 	 	 	 	 	 	 
	55

	 	 	 	 	 	 	15.0	%
	 	 	 	 	 	 	 
	Less than 55

	 	 	 	 	 	 	0.0	%















Example




* Actual results are 99% of Criterion 1 plan = 25 points earned

* Actual results are 100% of Criterion 2 plan = 35 points earned

* Actual results 101% of Criterion 3 plan = 25 points earned

* Total points earned = 85

*Total Bonus earned = 40% of salary















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