Exhibit 10.1


 





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:





 Scenario 2: Actual performance is below target goal:





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