Document:

Exhibit 10.18

 

SEPARATION AGREEMENT AND RELEASE

 

I.  Release.  For good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the undersigned, with
the intention of binding himself, his heirs, executors, administrators and
assigns, does hereby release and forever discharge Michaels Stores, Inc.,
a Delaware corporation (the “Company”), and its present and former
parent, officers, directors, executives, agents, employees, affiliated
companies, subsidiaries, successors, predecessors and assigns (collectively,
the “Released Parties”), from any and all claims, complaints, actions,
causes of action, demands, rights, damages, debts, accounts, suits, expenses,
attorneys’ fees and liabilities of whatever kind or nature in law, equity, or
otherwise, whether now known or unknown (collectively, the “Claims”),
which the undersigned now has, owns or holds, or has at any time heretofore
had, owned or held against any Released Party, arising out of or in any way
connected with the undersigned’s employment relationship with the Company, its
subsidiaries, predecessors or affiliated entities, or the termination thereof,
under any Federal, state or local statute, rule, or regulation, or principle of
common, tort or contract law, including but not limited to, Title VII of
the Civil Rights Act of 1964, as  amended, 42 U.S.C. §§ 2000e
et  seq., the Age Discrimination in Employment Act of 1967, as
amended, 29 U.S.C. §§ 621 et  seq., the Americans with
Disabilities Act of 1990, as  amended, 42 U.S.C. §§ 12101, et
seq., and any other equivalent or similar Federal, state, or local
statute; provided, however, that nothing herein shall release the
Company of its obligations under that certain Change in Control Severance
Agreement (the “Change in Control Severance Agreement”) in which the
undersigned participates and pursuant to which this Separation Agreement and
Release is being executed and delivered. 
The undersigned understands that, as a result of executing this
Separation Agreement and Release, he will not have the right to assert that the
Company or any other Released Party unlawfully terminated his employment or
violated any of his rights in connection with his employment or otherwise.

 

The undersigned affirms that he has not
filed, caused to be filed, or presently is a party to any Claim against any
Released Party in any forum or form and that he knows of no facts which may
lead to any Claim being filed against any Released Party in any forum by the
undersigned or by any agency or group. 
Except for his final paycheck, the undersigned further affirms that he
has been paid and/or has received all leave (paid or unpaid), compensation,
wages, bonuses, commissions, and/or benefits to which he may be entitled and
that no other leave (paid or unpaid), compensation, wages, bonuses, commissions
and/or benefits are due to him from any Released Party, except as specifically
provided in this Separation Agreement and Release.  The undersigned furthermore affirms that he
has no known workplace injuries or occupational diseases and has been provided
and/or has not been denied any leave requested under the FMLA.  If any court assumes jurisdiction of any such
Claim against any Released Party on behalf of the undersigned, the undersigned
will request such court to withdraw the matter.

 

The undersigned further declares and
represents that he has carefully read and fully understands the terms of this
Separation Agreement and Release; that he has been advised and had the
opportunity to seek the advice and assistance of counsel with regard to this
Separation Agreement and Release; that he may take up to and including
twenty-one (21) calendar days from receipt of this Separation Agreement
and Release to consider whether to sign it; that he may revoke this Separation
Agreement and Release within seven (7) calendar days after signing it by
delivering to the Company written notification of revocation; and that he
knowingly and 

 

 

voluntarily, of his own free will, without
any duress, being fully informed and after due deliberate action, accepts the
terms of and signs the same as his own free act.

 

II.  Resignation
and Severance Compensation. The termination of the undersigned is effective
April 4, 2008 (“Termination Date”). 
Accordingly, the undersigned hereby irrevocably and unconditionally
resigns from any officer position he holds within Michaels or any of its
subsidiaries or divisions effective on the Termination Date.  It is stipulated and agreed that the
undersigned’s resignation from the Company is for “Good Reason” (as that term
is defined in Section 1(t) of the Severance Agreement), and that the
undersigned is not obligated to comply with the notice provisions set forth in Section 1(t) of
the Change in Control Severance Agreement. It is further stipulated and agreed
that the Company shall pay, provide and/or grant the undersigned all
compensation and benefits set forth under Section 6(b) of the Change
in Control Severance Agreement.

 

III.  Severance Pay.  Pursuant to Section 6(b)(i) of the
Change in Control Severance Agreement, the Company shall pay a lump-sum payment
in the gross amount of Three Million, Two Hundred Sixty Seven Thousand, One
Hundred Eighty-Nine Dollars and 74/100 ($3,267,189.74), subject to all
applicable or customary tax withholding requirements.

 

IV.  Prorated
Annual Bonus. Pursuant to Section 6(b)(ii) of the Change in
Control Severance Agreement, the Company shall pay a lump-sum payment in the
gross amount of Seventy Six Thousand, One Hundred Seventy-Three Dollars and
00/100 ($76,173.00), subject to all applicable or customary tax withholding
requirements.

 

V. Continued Welfare and Fringe Benefits.  The undersigned’s welfare and fringe benefits
will continue in accordance with Section 6(b)(iii) of the Change in
Control Severance Agreement.  The
undersigned agrees that he will notify the Company within seven calendar days
of becoming eligible under another employer’s medical and/or welfare benefits
plan.  The Company will make a lump-sum
payment in the amount of One Thousand Five Hundred Thirty-Two Dollars and 16/100
($1,532.16) which is the equivalent of certain welfare benefits that are
unavailable to the undersigned after the Termination Date.  Further, the Company will make an additional
lump sum payment in the amount of Three Thousand Five Hundred Dollars and
00/100 ($3,500.00) (in addition to transferring title of the Company-leased
vehicle explained in Section XII of this Agreement) which is equal to the
remaining value owed to the undersigned pursuant to the Compensation Policy
Regarding Company Cars, adopted on August 1, 2007.

 

VI.  Savings
and Retirement Plan Benefits. 
Pursuant to Section 6(b)(v) of the Change in Control Severance
Agreement, the Company will pay a lump-sum payment in the gross amount of One
Hundred Thousand, Three Hundred Dollars and 88/100 ($100,300.88), subject to
all applicable or customary tax withholding requirements.

 

VII.  Outplacement
Services.  Pursuant to Section 6(b)(vi) of
the Change in Control Severance Agreement, the Company agrees to reimburse him,
or directly pay expenses, for outplacement services up to $50,000; provided he
commences such services no later than six months following the Release
Effective Date and stops using these services within one year after the
Termination Date.

 

2

 

VIII.  Protected
Rights.  The Company and the
undersigned agree that nothing in this Separation Agreement and Release is
intended to or shall be construed to affect, limit or otherwise interfere with
any non-waivable right of the undersigned under any Federal, state or local
law, including the right to file a charge or participate in an investigation or
proceeding conducted by the Equal Employment Opportunity Commission (“EEOC”)
or to exercise any other right that cannot be waived under applicable law.  The undersigned is releasing, however, his
right to any monetary recovery or relief should the EEOC or any other agency
pursue Claims on his behalf.  Further,
should the EEOC or any other agency obtain monetary relief on his behalf, the
undersigned assigns to the Company all rights to such relief.

 

IX.  Nonsolicitation/Non-Interference
with Business Relationships.  The
undersigned further agrees that for one-year after the Termination Date, he
will not, directly or indirectly, (i) solicit, recruit or hire any person
who is at such time, or who at any time during the six-month period prior to
such solicitation or hiring had been, an employee of, or exclusive consultant
then under contract with, the Company, its subsidiaries, affiliates or divisions
without the Company’s prior written consent; (ii) solicit or encourage any
employee of the Company or its subsidiaries, affiliates and divisions to leave
the employment of the Company or its subsidiaries; (iii) intentionally
interfere with the relationship of the Company or any of its subsidiaries with
any employee of, or exclusive consultant then under contract with, the Company
or any such subsidiary; or (iv) intentionally interfere with, disrupt or
attempt to disrupt any past, present or prospective relationship, contractual
or otherwise, between the Company or any of its subsidiaries, on the one hand,
and any of their respective customers or suppliers, on the other hand.

 

X.  Equitable
Remedies.  The undersigned
acknowledges that a violation by the undersigned of any of the covenants
contained in Section IX would cause irreparable damage to the Company and
its subsidiaries in an amount that would be material but not readily
ascertainable, and that any remedy at law (including the payment of damages)
would be inadequate.  Accordingly, the
undersigned agrees that, notwithstanding any provision of this Separation
Agreement and Release to the contrary, the Company shall be entitled (without
the necessity of showing economic loss or other actual damage) to injunctive
relief (including temporary restraining orders, preliminary injunctions and/or
permanent injunctions) in any court of competent jurisdiction for any actual or
threatened breach of any of the covenants set forth in Section IX in
addition to any other legal or equitable remedies it may have.

 

XI.  Third-Party
Litigation.  The undersigned agrees
to be available to the Company, its affiliates and their attorneys on a
reasonable basis in connection with any pending or threatened claims, charges
or litigation in which the Company or any of its affiliates is now or may
become involved, or any other claims or demands made against or upon the
Company or any of its affiliates, regardless of whether or not the undersigned
is a named defendant in any particular case.

 

XII.  Return
of Property.  Unless expressly stated
otherwise herein, the undersigned shall return to the Company on or before the
Termination Date, all property of the Company in the undersigned’s possession
or subject to the undersigned’s control, including without limitation any keys,
credit cards, and files, including all copies. 
The undersigned shall not alter any of the Company’s records or computer
files in any way after the Termination Date. 
The Company is allowing the undersigned to keep his cellular phone and 

 

3

 

laptop computer, except that all company
files on such computer must be returned to the Company on or before the
Termination Date.  Further, and in
accordance with the Compensation Policy Regarding Company Cars, the Company
will purchase the vehicle currently leased by the undersigned for his use and
transfer title to him.

 

XIII.  Confidential
Information.  The undersigned agrees
to hold confidential, and not to disclose to any person, firm, corporation,
partnership or agency, any trade secret or Confidential Information (as defined
below) gained in the course of the undersigned’s employment with the Company
concerning the Company, its subsidiaries, affiliates, divisions, or employees except
if such disclosure is required by law or legal process. “Confidential
Information” shall include, without limitation, information concerning
financial affairs, business plans or strategies, product pricing information,
operating policies and procedures, vendor information and proprietary
statistics or reports.  The undersigned
agrees not to remove any Confidential Information from the Company, not to
request that others do so on the undersigned’s behalf, and to return any
Confidential Information currently in the undersigned’s possession or control
to the Company.

 

XIV.  Stock
Options.  In accordance with the
Company’s 2006 Equity Incentive Plan, upon the Termination Date, all unvested
stock options granted to the undersigned by the Company will be forfeited
without further action on the part of any party.

 

XV.  Severability.  If any term or provision of this Separation
Agreement and Release is invalid, illegal or incapable of being enforced by any
applicable law or public policy, all other conditions and provisions of this
Separation Agreement and Release shall nonetheless remain in full force and
effect so long as the economic and legal substance of the transactions
contemplated by this Separation Agreement and Release is not affected in any
manner materially adverse to any party.

 

[Remaining portion intentionally left black]

 

4

 

XVI.  GOVERNING LAW.  THIS SEPARATION AGREEMENT AND RELEASE SHALL
BE DEEMED TO BE MADE IN THE STATE OF TEXAS, AND THE VALIDITY, INTERPRETATION,
CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT IN ALL RESPECTS SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO ITS PRINCIPLES OF
CONFLICTS OF LAW.

 

Effective on the eighth
calendar day following the date set forth below.

 

 

	
   

  	
  MICHAELS STORES, INC.,

  
	
   

  	
   

  
	
   

  	
  By

  
	
   

  	
   

  	
  /s/ Shawn Hearn

  
	
   

  	
   

  	
   Name: Shawn Hearn 

  
	
   

  	
   

  	
   Title:
  Senior Vice President - HR

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EMPLOYEE,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Jeffrey N. Boyer

  
	
   

  	
   

  	
   Jeffrey
  N. Boyer

  
	
   

  	
   

  	
   Date
  Signed:

  	
  4/9/08

  

 

5

 

ACKNOWLEDGMENTS

 

	
  STATE OF TEXAS

  	
  )

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  )

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  COUNTY
  OF DALLAS

  	
  )

  	
   

  	
   

  

 

BEFORE ME, the
undersigned authority, on this day personally appeared SHAWN HEARN,
Senior Vice President – Human Resources of MICHAELS STORES, INC. a Delaware
corporation, known to me to be the person whose name is subscribed to the
foregoing instrument and acknowledged to me that he executed the same for the
purposes and consideration therein expressed, in the capacity therein stated
and as the act and deed of said corporation.

 

GIVEN MY HAND
AND SEAL this 10th day of April, 2008.

 

 

	
   

  	
   

  	
  /s/ Deborah L. Wade

  
	
   

  	
   

  	
  Notary
  Public in and for the

  
	
   

  	
   

  	
  State of
  Texas

  
	
  [NOTARY SEAL]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Deborah L. Wade

  
	
   

  	
   

  	
  Notary’s
  Printed Name and

  
	
   

  	
   

  	
  Commission
  Expiration

  

 

6

 

	
  STATE OF
  CALIFORNIA

  	
   

  	
  )

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  )ss

  
	
   

  	
   

  	
   

  
	
  COUNTY OF
  CONDRA COSTA

  	
   

  	
  )

  

 

On April 9th, 2008, before me, Lisa A.
Hulse, Notary Public, personally appeared Jeffrey N. Boyer, who proved to me on
the basis of satisfactory evidence to be the person whose name is subscribed to
the within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person, or
the entity upon behalf of which the person acted, executed the instrument.

 

I certify
under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.

 

WITNESS my
hand and official seal.

 

 

	
   

  	
   

  	
  /s/ Lisa A.
  Hulse

  
	
   

  	
   

  	
   (Signature
  of Notary Public)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Seal)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [NOTARY SEAL]

  	
   

  	
   

  

 

7Exhibit 10.29

 

EXECUTION COPY

 

MASTER SERVICES AGREEMENT

 

BY AND BETWEEN

 

MICHAELS STORES, INC

 

AND

 

TATA AMERICA INTERNATIONAL CORPORATION

 

JANUARY, 16, 
2009

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions and Interpretation

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Definitions

  	
   

  	
  1

  
	
   

  	
  1.2

  	
  Interpretation

  	
   

  	
  1

  
	
   

  	
  1.3

  	
  Order of Precedence

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Term

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Initial Agreement Term

  	
   

  	
  2

  
	
   

  	
  2.2

  	
  Renewal and Extension

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Parent Liability and Responsibility

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Services

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Scope of Services

  	
   

  	
  3

  
	
   

  	
  4.2

  	
  Provision of Services

  	
   

  	
  3

  
	
   

  	
  4.3

  	
  Savings Clause

  	
   

  	
  5

  
	
   

  	
  4.4

  	
  Technology Evolution

  	
   

  	
  5

  
	
   

  	
  4.5

  	
  Governmental Approvals

  	
   

  	
  5

  
	
   

  	
  4.6

  	
  Compliance with Laws

  	
   

  	
  6

  
	
   

  	
  4.7

  	
  Changes in Law

  	
   

  	
  6

  
	
   

  	
  4.8

  	
  Standards and Policies

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Transition; Acquisitions And Divestitures; Cooperation

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Transition Services

  	
   

  	
  7

  
	
   

  	
  5.2

  	
  Transition Milestones

  	
   

  	
  8

  
	
   

  	
  5.3

  	
  Transformation

  	
   

  	
  8

  
	
   

  	
  5.4

  	
  New Entities and Divestitures

  	
   

  	
  9

  
	
   

  	
  5.5

  	
  Cooperation with Third Parties

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  New Services

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  New Services

  	
   

  	
  10

  
	
   

  	
  6.2

  	
  Fees for New Services

  	
   

  	
  10

  
	
   

  	
  6.3

  	
  Terms for New Services

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Michaels Responsibilities

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Michaels Account Manager

  	
   

  	
  11

  
	
   

  	
  7.2

  	
  Michaels Resources

  	
   

  	
  11

  
	
   

  	
  7.3

  	
  Use of Michaels Facilities

  	
   

  	
  12

  

 

i

 

	
  8.

  	
  Equipment and Third Party Contracts

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Existing Equipment

  	
   

  	
  12

  
	
   

  	
  8.2

  	
  Technology Acquisitions

  	
   

  	
  13

  
	
   

  	
  8.3

  	
  Managed Agreements

  	
   

  	
  14

  
	
   

  	
  8.4

  	
  Managed Agreement Invoices

  	
   

  	
  14

  
	
   

  	
  8.5

  	
  Assigned Agreements

  	
   

  	
  15

  
	
   

  	
  8.6

  	
  Assigned Agreement Invoices

  	
   

  	
  15

  
	
   

  	
  8.7

  	
  Performance Under Third Party Contracts

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Service Levels and Reports

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Service Levels

  	
   

  	
  15

  
	
   

  	
  9.2

  	
  Knowledge Sharing

  	
   

  	
  16

  
	
   

  	
  9.3

  	
  Reports

  	
   

  	
  16

  
	
   

  	
  9.4

  	
  Relief Events

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Customer Satisfaction and Benchmarking

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Customer Satisfaction Surveys

  	
   

  	
  17

  
	
   

  	
  10.2

  	
  Disputes

  	
   

  	
  17

  
	
   

  	
  10.3

  	
  Benchmarking Process

  	
   

  	
  17

  
	
   

  	
  10.4

  	
  Benchmarking Overview

  	
   

  	
  17

  
	
   

  	
  10.5

  	
  Benchmark Results Review and Adjustments

  	
   

  	
  18

  
	
   

  	
  10.6

  	
  Benchmarking Disputes

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Service Locations

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Service Locations

  	
   

  	
  19

  
	
   

  	
  11.2

  	
  New Service Locations

  	
   

  	
  19

  
	
   

  	
  11.3

  	
  Safety and Security Procedures

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Supplier Staff

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Supplier Account Manager

  	
   

  	
  20

  
	
   

  	
  12.2

  	
  Key Supplier Personnel

  	
   

  	
  20

  
	
   

  	
  12.3

  	
  Supplier Staff

  	
   

  	
  21

  
	
   

  	
  12.4

  	
  Turnover of Supplier Staff

  	
   

  	
  21

  
	
   

  	
  12.5

  	
  Conduct of Supplier Personnel

  	
   

  	
  22

  
	
   

  	
  12.6

  	
  Assignment to Competitors

  	
   

  	
  22

  
	
   

  	
  12.7

  	
  Subcontractors

  	
   

  	
  22

  
	
   

  	
  12.8

  	
  No Termination of Employment

  	
   

  	
  23

  
	
   

  	
  12.9

  	
  Non-Solicitation

  	
   

  	
  23

  
	
   

  	
  12.10

  	
  Co-Employment

  	
   

  	
  23

  
	
   

  	
  12.11

  	
  Transitioned Employees

  	
   

  	
  24

  

 

ii

 

	
  13.

  	
  Governance and Change Control

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1

  	
  Governance

  	
   

  	
  24

  
	
   

  	
  13.2

  	
  Policies and Procedures Manual

  	
   

  	
  24

  
	
   

  	
  13.3

  	
  Change Management Process

  	
   

  	
  24

  
	
   

  	
  13.4

  	
  No Liability for Changes Not Approved

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  Proprietary Rights

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.1

  	
  Ownership of Background Technology and Derivative Works

  	
   

  	
  25

  
	
   

  	
  14.2

  	
  Michaels Software

  	
   

  	
  25

  
	
   

  	
  14.3

  	
  Supplier Software

  	
   

  	
  25

  
	
   

  	
  14.4

  	
  Commissioned Materials

  	
   

  	
  26

  
	
   

  	
  14.5

  	
  Michaels-Owned Materials

  	
   

  	
  26

  
	
   

  	
  14.6

  	
  Further Assurances

  	
   

  	
  26

  
	
   

  	
  14.7

  	
  Supplier IP

  	
   

  	
  27

  
	
   

  	
  14.8

  	
  Residual Knowledge

  	
   

  	
  27

  
	
   

  	
  14.9

  	
  Framework Initiative Work Products

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  Data

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.1

  	
  Ownership and Use of Michaels Data

  	
   

  	
  28

  
	
   

  	
  15.2

  	
  Correction and Reconstruction

  	
   

  	
  28

  
	
   

  	
  15.3

  	
  Provision of Data

  	
   

  	
  29

  
	
   

  	
  15.4

  	
  Data Privacy

  	
   

  	
  29

  
	
   

  	
  15.5

  	
  Data Security

  	
   

  	
  29

  
	
   

  	
  15.6

  	
  Protection of Michaels Data

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  Consents

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  Continued Provision of Services

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  17.1

  	
  Disaster Recovery Plan

  	
   

  	
  30

  
	
   

  	
  17.2

  	
  Force Majeure

  	
   

  	
  31

  
	
   

  	
  17.3

  	
  Alternate Source

  	
   

  	
  31

  
	
   

  	
  17.4

  	
  Allocation of Resources

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
  Payments

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  18.1

  	
  Fees

  	
   

  	
  32

  
	
   

  	
  18.2

  	
  Invoices

  	
   

  	
  32

  
	
   

  	
  18.3

  	
  Timeliness of Invoices

  	
   

  	
  32

  
	
   

  	
  18.4

  	
  Payment

  	
   

  	
  32

  
	
   

  	
  18.5

  	
  Fee Disputes

  	
   

  	
  32

  
	
   

  	
  18.6

  	
  Due Diligence

  	
   

  	
  33

  
	
   

  	
  18.7

  	
  No Other Charges

  	
   

  	
  33

  
	
   

  	
  18.8

  	
  No Payment for Unperformed Services

  	
   

  	
  33

  

 

iii

 

	
   

  	
  18.9

  	
  Most Favored Customer

  	
   

  	
  33

  
	
   

  	
  18.10

  	
  Certain Commitments By Parties

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  19.

  	
  Taxes

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  19.1

  	
  Taxes

  	
   

  	
  33

  
	
   

  	
  19.2

  	
  Relocation of Services

  	
   

  	
  34

  
	
   

  	
  19.3

  	
  Other Taxes

  	
   

  	
  34

  
	
   

  	
  19.4

  	
  Segregation of Fees

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20.

  	
  Audits

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  20.1

  	
  Services

  	
   

  	
  35

  
	
   

  	
  20.2

  	
  Fee Records

  	
   

  	
  35

  
	
   

  	
  20.3

  	
  SAS 70 Reports;

  	
   

  	
  35

  
	
   

  	
  20.4

  	
  Certain Audits

  	
   

  	
  37

  
	
   

  	
  20.5

  	
  Record Retention

  	
   

  	
  38

  
	
   

  	
  20.6

  	
  Facilities

  	
   

  	
  39

  
	
   

  	
  20.7

  	
  General Audit Procedures

  	
   

  	
  39

  
	
   

  	
  20.8

  	
  Supplier Audits

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  21.

  	
  Confidentiality

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  21.1

  	
  General Obligations

  	
   

  	
  40

  
	
   

  	
  21.2

  	
  Unauthorized Acts

  	
   

  	
  41

  
	
   

  	
  21.3

  	
  Injunctive Relief

  	
   

  	
  41

  
	
   

  	
  21.4

  	
  Return of Confidential Information

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  22.

  	
  Representations and Warranties

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  22.1

  	
  By Michaels

  	
   

  	
  42

  
	
   

  	
  22.2

  	
  By Supplier

  	
   

  	
  42

  
	
   

  	
  22.3

  	
  DISCLAIMER

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  23.

  	
  Additional Covenants

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  23.1

  	
  By Michaels

  	
   

  	
  43

  
	
   

  	
  23.2

  	
  By Supplier

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  24.

  	
  Dispute Resolution

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  24.1

  	
  Resolution Procedures

  	
   

  	
  45

  
	
   

  	
  24.2

  	
  Exclusions

  	
   

  	
  46

  
	
   

  	
  24.3

  	
  Continuity of Services

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  25.

  	
  Termination

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  25.1

  	
  Termination for Convenience

  	
   

  	
  46

  

 

iv

 

	
   

  	
  25.2

  	
  Termination for Change in Control of Michaels

  	
   

  	
  46

  
	
   

  	
  25.3

  	
  Termination for Change in Control of Supplier

  	
   

  	
  46

  
	
   

  	
  25.4

  	
  Termination for Cause

  	
   

  	
  46

  
	
   

  	
  25.5

  	
  Termination in Case of Insolvency

  	
   

  	
  47

  
	
   

  	
  25.6

  	
  Service Level Failures

  	
   

  	
  47

  
	
   

  	
  25.7

  	
  Effect of Termination

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  26.

  	
  Termination Fees

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  26.1

  	
  Termination Fees

  	
   

  	
  48

  
	
   

  	
  26.2

  	
  No Other Termination Fees

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  27.

  	
  Termination Assistance and Exit Rights

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  27.1

  	
  Termination Assistance

  	
   

  	
  48

  
	
   

  	
  27.2

  	
  Payment

  	
   

  	
  48

  
	
   

  	
  27.3

  	
  Exit Rights

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  28.

  	
  Indemnities

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  28.1

  	
  Indemnity by Michaels

  	
   

  	
  50

  
	
   

  	
  28.2

  	
  Indemnity by Supplier

  	
   

  	
  52

  
	
   

  	
  28.3

  	
  Obligation to Replace

  	
   

  	
  53

  
	
   

  	
  28.4

  	
  Indemnification Procedures

  	
   

  	
  54

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  29.

  	
  Damages

  	
   

  	
  54

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  29.1

  	
  Consequential Damages

  	
   

  	
  54

  
	
   

  	
  29.2

  	
  Direct Damages

  	
   

  	
  54

  
	
   

  	
  29.3

  	
  Exclusions

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  30.

  	
  Insurance

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  30.1

  	
  Documentation

  	
   

  	
  55

  
	
   

  	
  30.2

  	
  Types and Amounts

  	
   

  	
  56

  
	
   

  	
  30.3

  	
  Policy Requirements

  	
   

  	
  57

  
	
   

  	
  30.4

  	
  Risk of Loss

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  31.

  	
  Miscellaneous Provisions

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  31.1

  	
  Assignment

  	
   

  	
  57

  
	
   

  	
  31.2

  	
  Notices

  	
   

  	
  57

  
	
   

  	
  31.3

  	
  Counterparts

  	
   

  	
  58

  
	
   

  	
  31.4

  	
  Relationship

  	
   

  	
  58

  
	
   

  	
  31.5

  	
  Severability

  	
   

  	
  58

  
	
   

  	
  31.6

  	
  Waivers

  	
   

  	
  58

  
	
   

  	
  31.7

  	
  Timing and Cumulative Remedies

  	
   

  	
  58

  
	
   

  	
  31.8

  	
  Entire Agreement

  	
   

  	
  58

  

 

v

 

	
   

  	
  31.9

  	
  Amendments

  	
   

  	
  58

  
	
   

  	
  31.10

  	
  Survival

  	
   

  	
  58

  
	
   

  	
  31.11

  	
  Third Party Beneficiaries

  	
   

  	
  58

  
	
   

  	
  31.12

  	
  Governing Law and Venue

  	
   

  	
  59

  
	
   

  	
  31.13

  	
  Covenant of Further Assurances

  	
   

  	
  59

  
	
   

  	
  31.14

  	
  Export

  	
   

  	
  59

  
	
   

  	
  31.15

  	
  Conflict of Interest

  	
   

  	
  59

  
	
   

  	
  31.16

  	
  Publicity

  	
   

  	
  59

  

 

TABLE
OF EXHIBITS

 

	
  Exhibit 1

  	
  Definitions

  
	
  Exhibit 2

  	
  Statements of Work

  
	
  Exhibit 3

  	
  Service Level Management

  
	
  Exhibit 4

  	
  Pricing

  
	
  Exhibit 5

  	
  Governance and Change Management Process

  
	
  Exhibit 6

  	
  Service Locations

  
	
  Exhibit 7

  	
  Michaels Policies

  
	
  Exhibit 8

  	
  Key Supplier Personnel

  
	
  Exhibit 9

  	
  Third-Party Contracts

  
	
  Exhibit 10

  	
  Reports

  
	
  Exhibit 11

  	
  Michaels Agent NDA

  
	
  Exhibit 12

  	
  Competitors

  
	
  Exhibit 13

  	
  Disaster Recovery Plan

  
	
  Exhibit 14

  	
  Transition Plan

  
	
  Exhibit 15

  	
  Human Resources

  
	
  Exhibit 16

  	
  Current and Planned Projects

  
	
  Exhibit 17

  	
  Source Code Escrow

  
	
  Exhibit 18

  	
  Customer Satisfaction Surveys

  
	
  Exhibit 19

  	
  Approved Benchmarkers

  
	
  Exhibit 20

  	
  TCSL Joint and Several Liability Commitment

  
	
  Exhibit 21

  	
  Additional Services

  

 

vi

 

MASTER SERVICES AGREEMENT

 

THIS MASTER SERVICES AGREEMENT (this
“Agreement”), dated as of the
Effective Date, is between Michaels Stores, Inc, a Delaware corporation (“Michaels”)
acting on its own behalf and on behalf of its subsidiaries, and Tata America
International Corporation, operating as TCS America, a New York corporation (“Supplier”).

 

RECITALS

 

WHEREAS, Supplier
desires to provide to Michaels, and Michaels desires to obtain from Supplier,
the information technology services and related services and the business
process services and related services described in this Agreement on the terms
and conditions set forth in this Agreement;

 

WHEREAS, Michaels
and Supplier have engaged in extensive discussions and negotiations that have
culminated in the formation of the relationship described in this Agreement.

 

NOW, THEREFORE, for
and in consideration of the agreements set forth below, Michaels and Supplier
agree as follows:

 

1.            DEFINITIONS
AND INTERPRETATION

 

1.1          Definitions.  The terms used in this Agreement with initial
capital letters that are not defined herein have the meanings set forth in Exhibit 1.

 

1.2          Interpretation.

 

(a)           The Exhibits, as
amended from time to time, attached to this Agreement are hereby incorporated
into and deemed part of this Agreement. 
All references to “Agreement” herein include the Exhibits to this
Agreement.  All references to “Exhibits”
herein include the attachments and appendices to such Exhibits.

 

(b)           Any reference to an “Article,”
“Section,” or “Exhibit” shall be to such Article, Section or Exhibit of
this Agreement, unless otherwise expressly provided.

 

(c)           The headings
preceding the text of Articles and Sections and the headings to Exhibits, the
table of contents, and other portions of this Agreement are used for
convenience only and are not to be considered in construing or interpreting
this Agreement.

 

(d)           The use of the terms
“including,” “include” or “includes” shall in all cases mean “including without
limitation,” “include without limitation” or “includes without limitation,”
respectively.

 

(e)           Except as
specifically set forth in this Agreement: 
(i) consents and approvals to be given by a Party under this
Agreement shall not be unreasonably withheld or delayed; (ii) each Party
shall make only reasonable requests under this 

 

1

 

Agreement; and (iii) all notices, requests, consents, approvals,
agreements, authorizations, acknowledgements, waivers and other communications
required or permitted under this Agreement must be made in writing and by a
representative who, in the circumstances, can be reasonably expected to carry
the necessary authority in order to be binding.

 

(f)            The Parties
acknowledge and agree that they have negotiated the terms and conditions of
this Agreement and that any provision contained herein with respect to which an
issue of interpretation or construction arises shall not be construed to the
detriment of the drafter on the basis that such Party or its professional
advisor was the drafter, but shall be construed according to the intent of the
Parties as evidenced by the entire Agreement.

 

1.3          Order
of Precedence. 
Except as otherwise expressly set forth in the body of this Agreement or
in an Exhibit, in the event of a conflict, ambiguity or inconsistency between
the provisions in the body of this Agreement, any Exhibit, any attachment or
any document incorporated by reference, then such conflict, ambiguity or
inconsistency shall be resolved by giving precedence to the document higher in
the following order of priority:

 

(a)           first, the
provisions in the body of this Agreement;

 

(b)           second, the
provisions in the Exhibit;

 

(c)           third, the
provisions in any attachment or appendices to the Exhibit; and

 

(d)           fourth, any other
documents incorporated by reference.

 

2.            TERM

 

2.1          Initial
Agreement Term. 
The initial term of this Agreement shall commence on the Effective Date
and continue until 23:59 (Pacific Time) on the Initial Agreement Expiration
Date unless the Agreement is extended pursuant to Section 2.2 in which
case, the last day of the final Extension Period, or such earlier date upon
which this Agreement is terminated in accordance with its terms (the “Initial Agreement Term”).

 

2.2          Renewal
and Extension. 
At least 12 months prior to the Initial Agreement Expiration Date,
Supplier shall provide to Michaels the terms, conditions and pricing that
Supplier proposes would apply to any renewal term of this Agreement.  If Michaels desires to renew this Agreement,
but the Parties are unable to agree on the terms, conditions and pricing for a
renewal term 120 days before the Initial Agreement Expiration Date, Michaels
may elect to extend the Agreement Term by written notice of extension provided
to Supplier no later than 60 days before the Initial Agreement Expiration Date,
for a period of up to 12 months from the Initial Agreement Expiration Date, to
be determined in Michaels’ sole discretion and set forth in such extension
notice (“First  Extension Period”).   The terms and conditions of this Agreement
as in effect as of the Initial Agreement Expiration Date shall continue to be
in force during the First Extension Period, including the pricing and rates as
set forth in Exhibit 4 for the First Extension Period.  If the Parties are unable to reach agreement
on the terms, conditions and pricing applicable to the renewal of this
Agreement 60 days before the end of the First Extension Period, Michaels may
elect to:  (a) allow this Agreement
to expire at the end of such First Extension Period; or (b) further extend
the Agreement Term by written notice provided to Supplier no later than 60 days

 

2

 

prior to the End of the First Extension
Period for an additional Extension Period of 12 months (“Second Extension Period”) on the then
applicable terms, conditions including the pricing and rates applicable to such
additional Extension Period as set forth in Exhibit 4. For clarity, if
Michaels does not elect to exercise its option to extend for the Second
Extension Period by providing the required notice in a timely manner, the
Agreement shall expire at the end of the Second Extension Period.

 

3.                                    PARENT
LIABILITY AND RESPONSIBILITY.

 

As a condition precedent to the effectiveness of this Agreement,
Supplier’s parent, Tata Consultancy Services Ltd (an Indian corporation), shall
provide a joint and several liability letter for full performance of Supplier’s
obligations under this Agreement in the form substantially as attached hereto
as Exhibit 20.

 

4.            SERVICES

 

4.1          Scope
of Services. 
The term “Services” means:

 

(a)           the services,
functions, and responsibilities described in this Agreement; as amended from
time to time during the Term, including the Base Services and the Consulting
Services;

 

(b)           the services,
functions and responsibilities with respect to the services, functions and
responsibilities described in Sections 4.1(a) and 4.1(c) that
were routinely performed in the 12 month-period prior to the Effective Date
by the Affected Employees and the Affected Contractors which services,
functions or responsibilities were transitioned as a result of this Agreement,
even if such service, functions or responsibility is not specifically described
in this Agreement; and

 

(c)           any services,
functions or responsibilities required for the proper performance and delivery
of the Services or that are inherent or necessary for the proper performance of
the Services, whether or not expressly identified or described in this
Agreement.

 

as each of these services, functions or responsibilities may evolve
during the Term and as they may be supplemented, enhanced, modified or replaced
(e.g., to keep pace with technological advancements and improvements in the
methods of delivering these services, functions or responsibilities) pursuant
to the terms of this Agreement and including any supplement, enhancement,
modification or replacement that arises from the exercise of Michaels’ rights
under this Agreement.

 

4.2          Provision
of Services.

 

(a)           Commencement Dates; Transition Services.  The obligations of the Parties under this
Agreement shall commence on the Effective Date. 
Beginning on the date specified in the applicable Transition Plan,
Supplier shall provide the Transition Services as specified in that Transition
Plan.  Beginning on the Commencement
Date, Supplier shall provide all of the Services as specified in the relevant
Statement of Work.

 

3

 

(b)           Increase or Decrease in Services.  Subject to the provisions of Exhibit 4,
with respect to any Base Charges in an applicable Statement of Work, Supplier
shall increase or decrease the amount of the Services provided hereunder
according to Michaels’ demand for the Services. 
Increases in the volume of Base Services shall not be considered New
Services.  Any Change shall be agreed
upon by the Parties in accordance with the Change Management Process as set
forth in Exhibit 5 or the applicable Statement of Work.

 

(c)           Non-Exclusivity.  Except as set forth in Section 18.10
and Exhibit 4 (“Certain
Commitment of Parties”), this Agreement is non-exclusive and without
any minimum commitment by Michaels as to volume, scope or value.  Nothing herein shall be construed as a
requirements contract, or be interpreted to prevent Michaels from obtaining
from third parties, or providing to itself, any of the Services described in
this Agreement (whether Services, New Services, or otherwise) or services
similar thereto.

 

(d)           Authorized Users and Affiliates.  Supplier shall provide the Services in
accordance with this Agreement to Michaels and, as directed by Michaels, to
Michaels’ Affiliates and Authorized Users. 
With respect to Supplier’s obligations and license grants contained in
this Agreement, the term “Michaels”
shall include Michaels, its Affiliates and Authorized Users.  Michaels shall add Authorized Users or
Michaels’ Affiliates at its sole discretion, but Michaels shall not be
obligated to obtain the Services from Supplier in respect of any of the
Authorized Users or Michaels’ Affiliates. 
Michaels retains the financial responsibility for the Services provided
under this Agreement to any Michaels’ Affiliates and Authorized Users and to
cause each Michaels’ Affiliates and Authorized Users receiving the Services or
benefits of license grants under this Agreement to comply with all obligations
of Michaels as they apply to such Services and licenses.

 

(e)           Projects; Ongoing Projects.  Supplier shall perform the Projects as
directed by Michaels from time to time during the Term.  A list of projects that are ongoing or
approved by Michaels as of the Effective Date, and that Supplier shall assume
responsibility for as of the Effective Date, is set forth on Exhibit 16
(“Current and Planned Projects”).  The Current and Planned Projects are all
within the scope of the Services and shall be provided by using a combination
of the Base Charges, flex pool and Michaels resources.  All Current and Planned Projects shall
be:  (i) completed in accordance
with Michaels’ project management and development practices in place as of the
Effective Date as set forth in Exhibit 16 (as may be amended from
time to time in accordance with the Change Management Process as applicable); (ii) completed
by the date or dates established in the schedule for the relevant Current and
Planned Project; and (iii) subject to milestones, if any, established in
the schedule for the relevant Current and Planned Project.  Any Change for any of the Current and Planned
Projects shall be agreed upon by the Parties in accordance with the Change
Management Process.

 

(f)            Resources. 
Except as expressly provided otherwise in this Agreement or an agreed
Statement of Work, Supplier shall provide all facilities, assets, and resources
(including personnel, Equipment, and Software) necessary to provide the
Services and otherwise meet its obligations under this Agreement or an agreed
Statement of Work.  Supplier shall
provide to Michaels, at no cost, two lean resources onsite and one lean
resource offshore who will be dedicated for driving business process
efficiency.

 

4

 

4.3          Savings
Clause. 
Michaels recognizes that Supplier’s performance of the Services may be
dependent on Michaels ‘s (including Michaels Agents) performance of certain
related tasks.  All such tasks are set
forth in this Agreement and/or the Statement of Work applicable to such
Services (“Retained Responsibilities”).  Michaels shall not be responsible for, and
Supplier’s performance shall be deemed not to be dependent upon, the
performance of any other related tasks under this Agreement.  Supplier will be excused from the failure to
perform an obligation hereunder or the failure to achieve a Milestone or
Service Level, to the extent that such failure is directly caused by Michaels’
failure to perform a Retained Responsibility; provided that:

 

(a)           Supplier promptly
provides Michaels with advance notice in writing identifying in detail the
Retained Responsibility in question and the failure by Michaels for which
Michaels is responsible to perform and the relevant Supplier obligation or
Service Level that is at risk; and

 

(b)           Supplier continues
to use commercially reasonable efforts to perform its obligation notwithstanding
Michaels’ non-performance of the Retained Responsibility; and

 

(c)           Supplier provides a
root cause analysis report in accordance with the procedure established in the
Policies and Procedures Manual for review and approval by Michaels. In the
event of disagreement the matter shall be resolved according to the dispute
resolution procedure as specified in Section 24 of this Agreement.

 

4.4          Technology
Evolution. 
Supplier shall perform the Services using generally accepted
technological methods of service delivery for services similar to the Services,
including advancements and improvements to such methods that occur during the
Term, and shall, with Michaels’ prior approval and without additional charge to
Michaels, maintain a level of technology (including the Systems that are the
responsibility of Supplier) used to provide the Services that is at least
current with the level of technology:  (a) that
Supplier uses in providing services to its other customers; and (b) generally
accepted in the industry and compatible with commercial applications generally
adopted in Michaels’ industries during the Term.  Supplier shall meet with Michaels
periodically, at least once during every 120-day period or as otherwise
requested by Michaels, to inform Michaels of any new information technology
Supplier is developing or information technology trends and directions of which
Supplier is aware that could reasonably be expected to have an effect on
Michaels’ business operations.  Michaels
acknowledges that Supplier’s compliance with the technology evolution
requirements set forth in this Section 4.4 may require Michaels to upgrade
or replace Michaels System at Michaels’ cost and expenses at Michael’s sole
discretion. In the event Michael’s, at its sole discretion, decides not to invest
in such upgrade or replacement in the technology, Supplier will be relieved of
its obligation with respect to new technology only to the extent that Michaels
failure to invest in the required upgrade or replace Michaels Systems prevents
Supplier from implementing the new technology.

 

4.5          Governmental
Approvals. 
Michaels shall, at its cost and expense, obtain and maintain all
Governmental Approvals that Michaels is required by Law to obtain, maintain, or
provide, for engaging Supplier for the Services as contemplated in this
Agreement and to receive and use the Services, other than Supplier Governmental
Approvals (collectively, “Michaels 

 

5

 

Governmental Approvals”).  Supplier shall, at its cost and expense,
obtain and maintain all Governmental Approvals that Supplier is required by Law
to obtain, maintain, or provide, for performing and delivering the Services as
contemplated in this Agreement, other than Michaels Governmental Approvals,
(collectively, “Supplier Governmental
Approvals”).  With respect to
any Michaels Governmental Approvals that Michaels may be required by Law to
obtain, maintain or provide in a country in which Supplier has a Supplier
Service Location (excluding such Michaels Government Approvals that Michaels is
required to obtain, maintain or provide in the United States of America)
Supplier is responsible to notify Michaels of any such requirement and assist
and assume administrative and operational responsibility for obtaining such Governmental
Approvals, it being agreed that Michaels will retain financial responsibility
for the cost and expenses of such Michaels Governmental Approvals. Upon request
by either Party, the other Party shall provide to the requesting Party
reasonable cooperation and assistance in obtaining Governmental Approvals
hereunder.

 

4.6          Compliance
with Laws.  Michaels
shall be responsible for all Laws applicable to Michaels and its business
(i.e., Michaels would be liable to a Government Authority in the case of non-compliance
with the Law) that affect the provision or receipt of the Services, other than
Supplier Laws (“Michaels Laws”).  Supplier shall be responsible for all Laws
applicable to Supplier and Supplier’s business (i.e., Supplier would be liable
to a Governmental Authority in the case of non-compliance with the Law) that
affect the performance or delivery of the Services, (“Supplier Laws”).  Notwithstanding the foregoing, the Parties
acknowledge that a Law may be both a Supplier Law and a Michaels Law and, in
such case, each Party’s obligations under this Agreement with respect to such
Law shall continue to apply, except that the costs necessary to implement
changes to the Services necessary to comply with changes in such Law shall be
allocated equitably between the Parties.  
With respect to any Michaels Laws that apply to Michaels in a country in
which Supplier has a Supplier Service Location (excluding such Michaels Laws
applicable to Michaels and its business in the United States of America) as a
result of the consummation of the transactions contemplated by this Agreement
(i.e., any Michaels Laws that would not have applied to Michaels but for the
transactions contemplated by this Agreement), Supplier is responsible to notify
Michaels of any such Laws and assist Michaels in all reasonable manner for
Michaels to be in compliance with such Laws, it being agreed that Michaels will
retain financial responsibility if any arising from such compliance.

 

4.7          Changes
in Law.

 

(a)           Changes in Supplier Laws and Michaels Laws.  Michaels shall monitor and promptly identify
and notify Supplier of all changes in Michaels Laws.  Supplier shall monitor and promptly identify
and notify Michaels of all changes in Supplier Laws.

 

(b)           Effect of Changes in Laws.

 

(i)            Identification of Impact.  Supplier and Michaels shall work together to
identify the effect of changes in Laws on the provision or receipt of the
Services.

 

(ii)           Michaels Laws.  With respect to
changes in Michaels Laws, the Parties shall discuss modifications to the Services,
if any, necessary to comply with such changes. 
Supplier shall promptly thereafter propose any adjustment to the
applicable Fees associated with such modifications; provided that any such
adjustment shall be based solely 

 

6

 

upon Supplier’s incremental costs associated
with the implementation of such modifications. 
Upon Michaels’ consent, Supplier shall implement such modifications to
the Services in a timely manner.

 

(iii)    Supplier
Laws.  With respect
to changes in Supplier Laws, Supplier shall implement in a timely manner, at
its own cost and expense, any changes in the Services required to comply with
such changes; provided, that if such changes have a material effect on the
provision or receipt of the Services, Supplier shall obtain Michaels’ consent
before implementing such changes.

 

(iv)     Reduction in Services.  Notwithstanding any Michaels consent obtained
under Sections 4.7(b)(ii) and 4.7(b)(iii), if any
change in Law, change in the Services required to conform to any change in Law,
or failure of Supplier to obtain any Supplier Governmental Approval, results in
a reduction in the Services; in the level or quality of the Services; or in a
substantial increase in the Fees, then Michaels may elect either to:  (A) negotiate and implement an equitable
reduction to the applicable Fees (in the case of a reduction in the Services or
in the level or quality of the Services); or (B) terminate the affected
portion of the Services as of the date specified by Michaels in its notice of
termination without payment of any Termination Fees.

 

4.8          Standards
and Policies. 
Without limiting Supplier’s other obligations under this Agreement, in
performing the Services the Supplier shall comply with:  (a) Michaels’ information management,
technical architecture, change and problem management, and product standards
including those specified in Exhibit 7; (b) the policies and
procedures contained in the Policies and Procedures Manual; (c) all
Michaels Polices and any policies and procedures applicable at individual
Michaels Service Locations, including all such policies related to professional
conduct, safety, health, access to information systems, and access to physical
locations; and (d) all other Michaels policies, procedures, standards or
guidelines applicable to the provision or receipt of the Services.  Michaels shall provide Supplier the details
of Michaels policies, procedures, standards or guidelines in effect as of the
Effective Date of which Supplier’s compliance is required (by hard copies or
allowing access to electronic repositories) and notify Supplier of any changes
to any such Michaels policies, procedures, standards or guidelines (including
the addition of new policies, procedures, standards or guidelines).

 

5.             TRANSITION;
ACQUISITIONS AND DIVESTITURES; COOPERATION

 

5.1          Transition
Services.  For
each Statement of Work where Supplier is taking over services, functions or
responsibilities previously performed by Michaels (a “Transition”), the Parties shall develop and
agree upon a detailed transition plan that shall conform with the high-level
transition plan set forth in Exhibit 14 and contain the detailed
information specified therein (“Transition
Plan”) which shall be an Appendix to such Statement of Work.  The Transition Plan shall include a schedule
for the transition of the Services (the “Transition
Schedule”) and the specific tasks and resources required of
Michaels.  Supplier shall perform all
services, functions, and responsibilities necessary to accomplish the
transition of Services set forth in this Agreement, to Supplier (the “Transition Services”).  Supplier shall perform the Transition
Services in accordance with the Transition Plan and without causing material
disruptions to Michaels’ business operations. 
Supplier and Michaels shall each designate an individual who

 

7

 

shall be responsible for managing and
implementing the Transition Services on behalf of respective Party that he/she
represents (the “Transition Managers”),
as well as individuals for each of Michaels’ facilities and functions affected
by the transition (“Individual Transition
Managers”) who shall be responsible for managing and implementing
the Transition Services specific to such facilities and functions.  Unless otherwise expressly specified in the
Transition Plan, there should be no charges for the Transition Services other
than the Transition Charges.    Until the
completion of the applicable Transition Services, the Supplier Transition
Manager and each Individual Transition Manager shall review with the Michaels
Transition Manager and each Individual Transition manager of Michaels along
with Michaels Account Manager the status of the Transition Services as
requested by the Michaels Account Manager.

 

5.2          Transition
Milestones.  The
Transition Plan includes a list of milestones relating to Supplier’s
obligations under the Transition Plan. 
If Supplier fails to achieve any milestone designated as a Critical
Transition Milestone the completion date specified for such Critical Transition
Milestone in the Transition Plan (subject to a grace period of no more than two
weeks) Michaels shall not be required to pay any portion of any Transition
Charge associated with such Critical Transition Milestone unless and until
Supplier’s completion of the milestone is approved by Michaels.  If Supplier fails to achieve any Transition
Milestone for which a Transition Credit is due by the date specified for such
Critical Transition Milestone in the Transition Plan and such delay exceeds the
grace period of two weeks, then Supplier shall apply the Transition Credit
against the Fees.  If Supplier fails to
achieve any Critical Transition Milestone by the completion date specified for
such milestone in the Transition Plan, Michaels may, subject to allowing a
grace period of two weeks, elect to terminate the applicable Statement of Work
as of the date specified by Michaels in its notice of termination without
payment of any Termination Fee.  Michaels
agrees that Supplier shall not be responsible or liable for any delay or
failure in achieving a Transition Milestone, such delay or failure shall not be
a breach entitling Michaels to terminate the applicable Statement of Work if
and only to the extent that Section 4.3 or Section 9.4
applies to such delay or failure.  Where
any delay of more than 4 weeks to a Critical Transition Milestone arises
directly as a result of a delay or failure of Michaels (including any Michaels
Agents) to perform a tasks upon which the Supplier’s provision of the
Transition Services is dependent, as such tasks are specifically identified in
the Transition Plan, Michaels shall pay, any incremental increase in the cost
of Transition that arises as a result of any such delay; provided that Supplier
documents that incremental increase and takes such steps as are necessary to
mitigate the amount of that incremental increase.  Supplier shall, at the time of any such delay
to a Critical Transition Milestone, provide Michaels with specific notice of such
delay that describes to Michaels the Critical Transition Milestone impacted and
the expected nature and extent of the incremental cost to be charged by
Supplier to Michaels as a result of the delay to the Critical Transition
Milestone.

 

5.3          Transformation.
Supplier shall perform all services, functions, and responsibilities necessary
to accomplish the transformation of Michaels’ information technology operations
and capabilities, and Michael’s other business operations and capabilities set
forth in this Agreement, in accordance with the applicable Statement of Work
(the “Transformation Services”).  The Transformation Services shall form part
of the Services and shall be subject to the Service Levels agreed in the
applicable Statement of Work and be subject to the provisions of Section 4.3
and Section 9.4.  Unless otherwise
expressly specified in the Statement of Work, there should be no charges for
the Transformation Services other than the fees, if any, set forth in the
applicable Statement of 

 

8

 

Work.

 

5.4          New
Entities and Divestitures

 

(a)           New Entities.  With respect to Michaels’ acquisition of
other entities, or Michaels’ inclusion of additional Affiliates or Authorized
Users (collectively, “New Entities”),
Supplier shall, as requested by Michaels, provide support services as necessary
to incorporate the New Entities’ information technology systems into the
Systems, including those services specified in the Statements of Work and any
required planning and design services, and shall upon Michaels’ request,
provide the Services, whether all or a portion specified by Michaels, to the
New Entities in accordance with this Agreement. Michaels retains the financial
responsibility for the Services so provided and to cause each New Entities to
comply with all obligations of Michaels as they apply to such Services.  Suppliers’ 
charges as a result of the provision of the Services to a New Entity
shall be in accordance with this Agreement. 
Supplier may also charge additional one-time Fees for the completion of
any services, functions, and responsibilities necessary for the incorporation
of the New Entities’ information technology systems into the Systems where such
Fees have been agreed upon by Michaels and Supplier prior to Supplier
commencing the provision of any such services, functions or
responsibilities.  To the extent any
acquisition by Michaels results in additional Services or any New Services for
the Supplier under this Agreement, any due diligence activity performed by
Supplier on behalf of Michaels shall be at no cost to Michaels.  For clarity, if Michaels requires or requests
any other services, activity or responsibility in addition to due diligence,
Supplier shall be entitled to bill Michaels for such additional effort unless
Michaels permits Supplier to utilize the existing resources and personnel
already charged to Michaels.

 

(b)           Divestitures.  If Michaels divests itself of a business unit
or entity, or removes an Affiliate or Authorized Users from the scope of this
Agreement (collectively, “Divested Entities”),
Supplier shall continue to provide, at Michaels’ request, the Services to the
Divested Entity for up to 24 months from the effective date of such divestiture
or removal, as the case may be, under the then-current terms, conditions and
pricing of this Agreement.  Supplier
shall provide support services to Michaels, the Divested Entity, and, as
applicable, the acquiring entity as may be necessary to transfer the Divested
Entities’ information technology systems to a third party or enable such entity
to provide information technology services to itself, including those services
specified in the Statements of Work. 
Michaels retains the financial responsibility for the Services so
provided and to cause each Divested Entities to comply with all obligations of
Michaels as they apply to such Services; provided that if a Divested Entity
enters into a separate written agreement with Supplier for the ongoing
provision of such Services, Michaels shall have no obligation with respect to
such entity’s performance of its obligations or payment of fees associated with
such Services after such entity is divested or removed by Michaels.

 

5.5          Cooperation
with Third Parties. 
Michaels currently engages, or may from time to time in the future, hire
subcontractors, consultants, or other third parties (“Michaels Third Party Contractors”) to
perform services or provide products to Michaels.  Supplier shall cooperate with and work in
good faith with any Michaels Third Party Contractors.

 

9

 

6.             NEW
SERVICES

 

6.1          New
Services. 
Michaels may from time to time during the Term and the Termination
Assistance Period request that Supplier perform a New Service.  Within 10 days after receipt of such a
request from Michaels (or such other time as Michaels and Supplier may agree
depending on the nature and scope of the New Service), Supplier shall provide
Michaels with a written proposal for such New Service (a “New Service Proposal”) which proposal shall
be in the form of a new Statement of Work and include at minimum:

 

(a)           a description of the
services, functions and responsibilities Supplier anticipates performing in
connection with such New Service;

 

(b)           a schedule for
commencing and completing such New Service;

 

(c)           Supplier’s fees for
such New Service, including a detailed breakdown of such fees;

 

(d)           when appropriate, a
description of any new Software or Equipment to be provided by Michaels or
Supplier in connection with such New Service;

 

(e)           when appropriate,
the Software and Equipment and run-time requirements necessary to develop and
operate any new Software;

 

(f)            when appropriate, a
description of the human resources necessary to provide the New Service;

 

(g)           a description of
proposed service levels and associated measurement and monitoring tools for the
New Service;

 

(h)           when appropriate, a
list of any existing Software or Equipment included in or to be used in
connection with such New Service;

 

(i)            when appropriate,
acceptance test criteria and procedures for any new Software or any products,
packages or services; and

 

(j)            such other
information as reasonably necessary or otherwise reasonably requested by
Michaels.

 

Supplier shall not begin performing any New
Service until Michaels and Supplier have agreed upon the terms for such New
Service and the Michaels Account Manager has provided Supplier with written
authorization to commence the New Services by executing acceptance of the New
Service Proposal, a Statement of Work or other written authorization to
commence work.  Any New Service performed
by Supplier without such advance agreement to terms and authorization shall be
deemed part of the Services without incremental charge.

 

6.2          Fees
for New Services. 
Supplier’s charges and fees specified in any New Service Proposal shall
be, to the extent possible, determined in a manner consistent with the
applicable pricing formulas and methodologies (including agreed upon rate
cards) utilized in establishing the Fees and shall be no more than the charges
and fees for such services that Supplier provides to its 

 

10

 

customers that are acquiring services of a
similar type in similar volumes.  The
charges and fees for any such New Service shall take into account resources and
expenses of Supplier for then-existing Services that would no longer be
required if the New Service were performed by Supplier.  For clarity, the charges and fees for any New
Services shall be subject to those pricing mechanisms agreed to by Supplier in Exhibit 4.

 

6.3          Terms
for New Services. 
Any New Services authorized by Michaels in accordance with this Article 6
shall become part of the Services and shall be subject to the terms and
conditions of this Agreement unless and only to the extent the Parties agree
otherwise.

 

7.             MICHAELS
RESPONSIBILITIES.

 

7.1          Michaels
Account Manager.  Michaels
shall appoint an individual (the “Michaels
Account Manager”) who from the Effective Date of this Agreement
shall serve as the primary Michaels representative under this Agreement.  The Michaels Account Manager shall:  (a) have overall responsibility for
managing and coordinating the performance of Michaels’ obligations under this
Agreement; and (b) be authorized to act for and on behalf of Michaels with
respect to all matters relating to this Agreement.  Notwithstanding the foregoing, the Michaels
Account Manager may, upon notice to Supplier, delegate such of his or her
responsibilities to other Michaels Agents, as the Michaels Account Manager
deems appropriate.  Michaels may replace
the Michaels Account Manager upon notice to Supplier.

 

7.2          Michaels
Resources.

 

(a)           Michaels Facilities.  For Supplier Staff assigned to perform
Services at a Michaels Service Location as agreed under an applicable Statement
of Work or as otherwise approved by Michaels, beginning on the date a Supplier
Staff commences Services and continuing only as long as such Supplier Staff
requires the same for the performance of the Services, Michaels shall provide
to Supplier, at no charge to Supplier and subject to this Article 7,
the reasonably appropriate use of infrastructure and facilities where agreed to
as necessary based on role including, space designated by Michaels in the
applicable Michaels Service Locations, furnishings for Supplier’s use in
performing the Services and office equipment and facilities (such as required
office supplies, printing, telephone, fax and e-mail facilities, office space,
parking, and access to available cafeteria if any) and access to desktop
computers at Michaels Service Locations that are required to provide Supplier
Staff with access to the Michaels Systems and performing the Services (“Michaels Facilities”).

 

(b)           Systems. 
Michaels shall grant Supplier access to any Michaels Systems, solely for
the purpose of Supplier performing the Services, and Supplier’s access shall be
limited to those specific Systems as reasonably necessary for Supplier to
perform the Services including Systems identified in this Agreement and/or
applicable Statement of Work and the time periods and personnel designated by
Supplier and agreed to by Michaels and Supplier.  Supplier’s access shall be subject to the
Michaels Policies, and such business control and information protection
policies, standards, and guidelines as may be made available to Supplier by
Michaels from time to time.  Any other
use by Supplier of any other Michaels assets or property or systems is
prohibited.

 

11

 

7.3          Use
of Michaels Facilities.  Supplier
shall use the Michaels Facilities for the sole and exclusive purpose of
providing the Services; and comply with the obligations set forth below in this
Section 7.3.  Use of Michaels
Facilities by Supplier does not constitute a leasehold interest in favor of
Supplier or any Supplier Agents. 
Supplier shall comply with the following obligations:

 

(a)           Supplier and
Supplier Agents shall comply with the requirements related to Michaels
Facilities contained in this Agreement.

 

(b)           Supplier and
Supplier Agents shall use the Michaels Facilities in an efficient manner.  To the extent that Supplier or Supplier
Agents operate in such areas in a manner that unnecessarily increases facility
costs incurred by Michaels, Michaels reserves the right to require Supplier to
pay for such increased costs.

 

(c)           Supplier and
Supplier Agents shall keep the Michaels Facilities in good order, not commit or
permit waste or damage to such facilities, not use such facilities for any
unlawful purpose or act.

 

(d)           Supplier and Supplier
Agents shall comply with all of the Michaels Policies and all of Michaels’
standard and site-specific policies and procedures in effect from time to time
at the Michaels Service Locations, including procedures for the physical
security of the Michaels Service Locations.

 

(e)           Supplier and
Supplier Agents shall permit Michaels and Michaels Agents to freely enter the
Michaels Facilities at any time and without notice to perform
facilities-related services, conduct audits in accordance with Article 20,
and as otherwise as requested by Michaels.

 

(f)            Supplier and
Supplier Agents shall not make any improvements or changes involving
structural, mechanical or electrical alterations to the Michaels Service
Locations without Michaels’ written approval. 
Any such improvements or changes shall become the property of Michaels
or its lessors.

 

(g)           When the Michaels
Facilities are no longer required for performance of the Services, Supplier
shall return such areas to Michaels in substantially the same condition as when
Supplier began using such locations, subject to ordinary wear and tear.

 

8.             EQUIPMENT
AND THIRD PARTY CONTRACTS

 

8.1          Existing
Equipment

 

(a)           Michaels retains
financial responsibility for all Equipment required in connection with the
Services at any Michaels Service Location. 
In addition, Michaels also retains financial responsibility for any
special Equipment for Services or New Services introduced after the Effective
Date for performance at any Supplier Service Location, provided that the
requirement and necessity of each item of such special Equipment Parties shall
specifically be agreed within the applicable Statement of Work.  With
respect to Equipment that is owned or leased by Michaels, including Equipment
purchased for Michaels by Supplier pursuant to 

 

12

 

Section 8.2(b) (collectively, “Michaels Equipment”), Michaels grants to
Supplier during the Term the right to access and use the Michaels Equipment
solely to the extent necessary to perform the Services.

 

(b)           Supplier
acknowledges that it has no legal or equitable claim to the Michaels Equipment
and agrees not to contest ownership of such Equipment.

 

(c)           Throughout the Term,
and thereafter for the purposes of Termination Assistance Services, Supplier
shall keep any Michaels Equipment that is removed from Michaels premises or is
stored along with Supplier Equipment separate from the property of Supplier and
of third parties, and shall properly identify such Equipment as Michaels’
property.

 

(d)           Supplier shall not
purport to pledge, or in any way charge by way of security, permit any lien to
be placed on, or otherwise encumber or permit the encumbrance in any way, any
of the Michaels Equipment which shall at all times remain Michaels’ or the
applicable third party lessor’s property and shall irrevocably waive any rights
which may arise under Law to take a lien over the Michaels Equipment for any
sums due to Supplier pursuant to this Agreement.

 

8.2          Technology
Acquisitions

 

(a)           Each Party is
financially responsible for any refresh, replacement and maintenance of
Equipment and Software that it is required to provide under this Agreement
and/or an applicable Statement of Work. 
Supplier and Michaels each shall acquire at its costs and expense any
Equipment and Software required to fulfill its technology refresh obligations
specified in the applicable Statement of Work.

 

(b)           If Michaels requests
that Supplier obtain on Michaels’ behalf any Equipment or Software
(collectively, “New Equipment”)
Supplier shall:  (i) identify the
terms on which Supplier could purchase such New Equipment, which terms shall
include:  (A) the third party
invoice price for such New Equipment (adjusted for any rebates, volume or other
discounts, and other similar reductions in the price of such New Equipment
(collectively, “Discounts”)
whether provided at the time of purchase or thereafter)(“Invoice Price”); (B) Supplier’s
proposed markup (which shall in no event exceed a percentage to be mutually
agreed by the parties )(“Markup”);
and (C) any freight charges and taxes associated with the purchase (“Charges”); and (D) a proposal for
financing arrangement pursuant to which Michaels could pay Supplier the
purchase price of the New Equipment over a specified period of time, including
any associated financing fees (“Financing
Fees”); and (ii) upon Michaels’ request, acquire the New
Equipment on Michaels’ behalf on terms approved by Michaels.  Supplier will leverage any discounts or other
favorable purchasing arrangements it may enjoy through its relationships with
third parties to obtain favorable pricing for Michaels.  If the Invoice Price is subject to any
Discounts that are not expressly specified on the invoice (e.g., discounts that
will be realized by Supplier based on its volume of purchases of goods or
services other than or in addition to the New Equipment specified on the
invoice), Supplier shall provide Michaels with a description of how such
Discount is applied generally to Supplier purchases and how such Discount has
been applied specifically to Michaels’ purchase price for the applicable New
Equipment.  Michaels shall not be
required to pay any charges, 

 

13

 

fees or expenses for New Equipment other than the Invoice Price, the
Markup, the Charges, and the Financing Fees (if any).

 

(c)           Supplier shall, upon
Michaels’ request, and as directed by Michaels: 
(i) purchase the New Equipment on behalf of Michaels; (ii) lease,
or arrange for a third party to lease such New Equipment to Michaels; or (iii) license,
or arrange for a third party to license such New Equipment to Michaels.  Michaels shall pay to Supplier, the third
party supplier, third-party lessor or third-party licensor, as applicable, the
purchase, lease or license fees, price (as described in Section 7.2(b) as
applicable, for the New Equipment.

 

(d)           Except as otherwise
agreed by the Parties or as otherwise provided in this Agreement:  (i) all rights in and title to any New
Equipment purchased by Supplier on behalf of Michaels and paid for by Michaels
shall belong to Michaels; and (ii) all New Equipment shall be new.  Supplier shall ensure that all third-party
warranties with respect to New Equipment shall run to and be for the express
benefit of Michaels.

 

8.3          Managed
Agreements. 
Supplier shall administer the Managed Agreements and related invoices as
specified in this Section 8.3 and Section 8.4 on behalf
of Michaels and shall perform its obligations and responsibilities in
accordance with, and otherwise comply with, all terms of the Managed Agreements
applicable to Supplier’s provision of the Services and Supplier’s use of the
goods and services provided under the Managed Agreements (collectively “Applicable Terms”).  Supplier shall provide Michaels with
reasonable notice of any renewal, termination or cancellation dates and fees
with respect to the Managed Agreements. 
Supplier shall not renew, modify, terminate or cancel, or request or
grant any consents or waivers under, any Managed Agreements without the consent
of the Michaels Account Manager.  Any
fees or charges or other liability or obligation imposed upon Michaels in
connection with:  (a) any renewal,
modification, termination, or cancellation of, or consent or waiver under, the
Managed Agreements, obtained or given without Michaels’ consent as required
under the foregoing sentence; or (b) Supplier’s failure to comply with the
Applicable Terms, shall be paid or discharged, as applicable, by Supplier.

 

8.4          Managed
Agreement Invoices. 
Michaels shall notify Third Party Contractors of Supplier’s appointment
for managing the Managed Agreements and require them to submit the Managed
Agreement Invoices to Supplier at Supplier’s designated address.  Supplier shall:  (a) receive all Managed Agreement
Invoices; (b) review and correct any errors in any such Managed Agreement
Invoices in a timely manner; and (c) submit such Managed Agreement
Invoices to Michaels within a commercially reasonable period of time after
Supplier’s receipt thereof.  Michaels
shall pay the Managed Agreement Invoices received and approved by
Supplier.  Michaels shall only be
responsible for payment of the Managed Agreement Invoices and shall not be
responsible to Supplier for any management or administration fees of Supplier
in connection with the Managed Agreement Invoices.  Michaels shall not be responsible for any
late fees with respect to the Managed Agreement Invoices if Supplier failed to
submit the applicable Managed Agreement Invoices to Michaels for payment within
7 business days after receipt of the Managed Agreement Invoice where the nature
of the invoice does not require any error correction.  Where the nature of the invoice is such that Supplier
requires additional time to process the Managed Agreement Invoice,  Supplier shall provide Michaels with advance
written notice of the need for such additional time.  If Supplier fails to submit a Managed Agreement
Invoice to Michaels for payment in accordance 

 

14

 

with the preceding sentence, Supplier shall
be responsible for any discount not received with respect to such Managed
Agreement Invoice.  If Supplier fails to
submit any Managed Agreement Invoice to Michaels for payment more than 60 days
after Supplier’s receipt of such invoice and has not notified Michaels of any
specific error or problem that is causing the delay, Supplier shall be
responsible for payment of the entire amount of the invoice, including any late
fees and other associated charges.

 

8.5          Assigned
Agreements.  Exhibit 9
sets forth the list of Assigned Agreements assigned by Michaels to Supplier as
of the Effective Date.  Michaels shall
execute reasonable documentation requested by Supplier to give effect to the assignment
of Assigned Agreements.  No other
Michaels Third Party Contracts shall be considered as an Assigned Agreement
unless and until Supplier and Michael mutually agree on the assignment and
execute an appropriate assignment agreement for the applicable Michaels Third
Party Contract.  The effective date of
assignment shall be as set forth in such assignment agreement (“Assignment Date”).  With respect to each Assigned Agreement,
Michaels retains the responsibility and liability for obligations, performances
and liabilities relating to the period prior to the Assignment Date.  Supplier shall assume. all post assignment
obligations and post-assignment liability for each Assigned Agreement on and
from the Assignment Date of the Assigned Agreement.  Supplier shall agree to be bound by the terms
of such Assigned Agreement from and after the Assignment Date.  Any modification, termination or cancellation
fees or charges imposed upon Michaels in connection with any modification,
termination or cancellation of, or consent or waiver under, an Assigned
Agreement made by Supplier after the Assignment Date shall be paid by
Supplier.  Michael’s shall reimburse
Supplier for all damages, claims, costs and expenses asserted against Supplier
with respect to any claims that relate to the period prior to the Assignment
Date, except to the extent that such claim arises as a result of the acts or
omissions of Supplier.  If Michaels has
prepaid any amounts under any Assigned Agreement which apply to obligations to
be performed after the Assignment Date, Supplier shall reimburse or credit
Michaels (at Michaels’ discretion) for such amounts on the first invoice
provided by Supplier to Michaels after such amounts have been identified unless
the Parties have agreed to different stipulations in the relevant assignment
agreement.

 

8.6          Assigned
Agreement Invoices. 
Supplier shall, pay the invoices submitted by third parties in
connection with each Assigned Agreement that relate to the period after the
Assignment Date and shall be responsible for any late fees with respect to such
third party invoices.

 

8.7          Performance
Under Third Party Contracts.  Supplier shall promptly notify Michaels of
any breach of, or misuse or fraud in connection with any Third Party Contracts
of which Supplier becomes aware and shall cooperate with Michaels to prevent or
stay any such breach, misuse or fraud.

 

9.             SERVICE
LEVELS AND REPORTS.

 

9.1          Service
Levels.  Exhibit 3
sets forth the Service Level Methodology and the provisions for managing the
Service Levels agreed in a Statement of Work. 
Beginning on the first day following the end of the Transition Services
with respect to a 

 

15

 

Statement of Work (or such other date as
specified in applicable Statement of Work), Supplier shall be responsible for
and shall perform the Services in accordance with the Service Levels described
in the applicable Statement of Work and in accordance with the requirements of
the Service Level Methodology.  Supplier
shall perform all Services that do not have defined Service Levels in a manner
and at levels that equal or exceed the level of service being provided
internally by Michaels or through a third party prior to the Effective Date,
including with respect to accuracy, quality, completeness, timeliness, and
responsiveness.

 

9.2          Knowledge
Sharing.  At
least once in every 90-day period, and upon Michaels’ request, Supplier shall
meet with representatives of Michaels in order to:  (a) explain how the Systems work and are
operated; (b) explain how the Services are provided; and (c) provide
such training and documentation that Michaels may require for Michaels to
understand and operate the Systems and provide the Services after the
expiration or termination of this Agreement.

 

9.3          Reports.  Supplier shall provide to Michaels, in a
form and format acceptable to Michaels, the reports set forth in Exhibit 10,
any other reports identified in this Agreement, and any other reports Michaels
requests from time to time.  The delivery
schedule of the reports shall be as specified in Exhibit 10, and
where no such schedule is specified, as required by Michaels.

 

9.4          Relief
Events.

 

(a)           Supplier shall be
relieved of failures to comply with the Service Levels (or in the case of
Transition Services, the Transition Milestones) and no other liability shall
accrue, where the Savings provisions set forth in Section 4.3 or the Force
Majeure provisions set forth in Section 17.2 applies, or to the extent and
only to the extent that such failure arises as a direct results of:

 

(i) Execution of the Business Continuity
Plan, the execution of which is in support of a Michaels declared disaster, to
the extent that the implementation of the Business Continuity Plan prevents
Supplier from accessing the Systems or personnel necessary to provide the
Services in accordance with the Service Levels; provided that Supplier shall
not obtain such relief if the Parties agree in the Business Continuity Plan
that Supplier is to continue providing the Services in accordance with the Service
Levels;

 

(ii)  Service or Supplier Staff
reductions or reprioritizations requested by Michaels and agreed to by the
Parties in accordance with the Change Management Process; provided that
Supplier has previously notified Michaels as part of such Change Management
Process that the implementation of such Services or Supplier Staff reductions
would result in such failure to meet the Service Level; or

 

(iii) Where the Parties agree prior to
any activities and/or outages that the Service Levels shall not apply; provided
that Supplier notifies Michaels in advance of the likely impact of such
activities or outages on the Service Levels.

 

16

 

(b)           To obtain relief
from any Service Level in the case of the events described in Section 9.4(a),
Supplier must, in each instance:

 

(i)            provide
specific notification to Michaels that describes to Michaels the specific
Service Level impacted and the expected nature and extent of the reduction or
other effect on the applicable Service Level;

 

(ii)           have used
all reasonable efforts to perform the affected Service or resolve the problem
in accordance with the applicable Service Levels despite such events; and

 

(iii)         re-commence
the performance of the affected Service in accordance with the Service Levels,
immediately upon resolution or cessation of the event giving rise to the
relief.

 

10.          CUSTOMER
SATISFACTION AND BENCHMARKING.

 

10.1        Customer
Satisfaction Surveys.  Within 60 days after the Effective Date,
Supplier shall submit to Michaels, for Michaels’ approval, the content of the
customer satisfaction surveys and the process for conducting such customer
satisfaction surveys.  Supplier shall
complete within 30 days after the effective date of an applicable Statement of
Work an initial baseline customer satisfaction survey using the content and
process approved by Michaels.  Additional
customer satisfaction surveys will be performed six months (or other time
agreed by the Parties) in accordance with Exhibit 18 by
Supplier.  Supplier agrees that increased
measured customer satisfaction shall be a key component in Supplier’s program
for performance incentive for the compensation of the Key Supplier
Personnel.  Supplier shall be responsible
for all costs associated with conducting customer satisfaction surveys by
Supplier.

 

10.2        Disputes.  In the event that Michaels disputes the
results of a customer satisfaction survey, Michaels may, at its expense, engage
a third party unaffiliated with Michaels and that is not a Supplier Competitor
to conduct another customer satisfaction survey in accordance with Section 10.1,
and the results of such survey shall be binding on the Parties.  For clarity, disputes under this Section 10.2
do not include issues related to Supplier’s failure to perform customer
satisfaction surveys in accordance with the procedures set forth in Section 10.1.  In such event Supplier shall re-perform the
applicable survey in a manner that conforms to Section 10.1.

 

10.3        Benchmarking
Process.  At any
time after the first anniversary of the Effective Date, Michaels may in its
sole discretion, instruct the Benchmarker to conduct the Benchmarking Process
at any time and with regard to any Statement of Work or combination of
Statements of Work.

 

10.4        Benchmarking
Overview.  The
Parties, in conjunction with the Benchmarker, shall determine the Benchmarking
Process within 30 days after Michaels’ request. 
As part of the Benchmarking Process, the Benchmarker shall compare the
applicable fees to the fees of offerings of a like mix of volumes and types of
services offered by Tier One Offshore Service Providers (including Supplier) to
customers who are similarly situated to Michaels (“Comparable Deals”).  The
Benchmarker shall select a representative sample of Comparable Deals from no
less than 4 and no more than 6 Comparable Deals.  The Benchmarker shall normalize the fees 

 

17

 

of Comparable Deals utilizing factors
suggested by the Parties and approved by the Benchmarker as part of the determination
of the Benchmarking Process, which factors may include, the scope and volume of
the services, the service locations, the term of the agreement, transition
cost, service levels,  the service
delivery model and the commitments described in Section 18.10.  The Benchmarking Process shall be conducted
by a Benchmarker chosen by Michaels from the list of Benchmarkers specified on Exhibit 19,
and Michaels shall pay the fees charged by the Benchmarker to conduct the
Benchmarking Process.  If the Benchmarkers
are no longer providing the services required to conduct the Benchmarking
Process or are otherwise unavailable at the time Michaels elects to conduct the
Benchmarking Process, the Parties shall promptly designate a replacement
Benchmarker.  If the Parties do not agree
within 15 days on a replacement Benchmarker, Michaels shall designate the
Benchmarker in its sole discretion, provided that such Benchmarker shall not be
a Supplier Competitor.  Supplier shall at
its expense cooperate with and assist the Benchmarker and any other third
parties involved in the Benchmarking Process, including providing data relating
to the provision of the Services, as requested by Michaels or the
Benchmarker.  For clarity, Supplier shall
not be required to provide (a) data that reveals its cost to provide the
Services in connection with the Benchmarking Process except in the case of
Pass-Through Expenses or (b) data or information protected by
confidentiality obligations to other customers of Supplier.

 

10.5        Benchmark
Results Review and Adjustments.

 

(a)           Michaels and
Supplier shall review the Benchmark Results during the Benchmark Review
Period.  If either Party has reason to
believe that the Benchmarker’s report contains material errors (each, a “Claimed Error”), such Party shall notify
the Benchmarker during the Benchmark Review Period of such Claimed Error and
shall provide any documentation and information necessary to support the
Claimed Error and shall copy the other Party on all such correspondence.  The Benchmarker shall review any Claimed
Error and meet with the Parties for a time period determined by the Benchmarker
to resolve the Claimed Error and make corresponding adjustments to the
Benchmarker’s findings, if any, prior to issuing the final benchmarking report
(“Benchmarking Report”).  If either Party determines that any Claimed
Error is not likely to be resolved through additional consultation with the
Benchmarker, at such Party’s request, the Claimed Error will be resolved
through the alternative dispute resolution process described in Section 10.6
and the resolution of the Claimed Error as set forth in the final report of CPR
shall be incorporated into the Benchmarking Report and shall be binding on the
Parties.

 

(b)           If any Fees paid by
Michaels to Supplier with respect to a Statement of Work that is subject to the
Benchmarking Process are more than 10% higher than the pricing contained in the
Benchmark Results for such Statement of Work, Supplier shall then reduce the
Fees in a manner that Supplier’s Fees are no more higher than by 10% of the
Benchmark Results.  If any Service Levels
are lower than the applicable service levels contained in the Benchmark Results
for such Statement of Work, Supplier shall either increase the Service Levels
to match the applicable service levels contained in the Benchmark Results for
such Statement of Work, or reduce its Fees proportionately to adjust for the
difference between the Service Levels and the applicable service levels
contained in the Benchmark Results for such Statement of Work.  In no event will Supplier increase the Fees
as a result of any benchmarking.

 

18

 

10.6        Benchmarking
Disputes.  If
the Parties fail to agree on a replacement Benchmarker in accordance with Section 10.4,
or fail to agree to the Benchmarking Process within 30 days after Michaels
notifies Supplier that it intends to initiate the Benchmarking Process, or if
either Party disputes the Benchmark Results, the Parties shall immediately
escalate the disputed issues (“Issues”)
via the dispute resolution process set forth in Article 24;
provided that if any unresolved Issues remain after each Party has considered
the Issues in accordance with Section 24.1(c), then either Party
may submit such Issues to the International Institute for Conflict Prevention &
Resolution (www.cpradr.org, “CPR”)
and such Issues shall be finally resolved by arbitration in accordance with the
CPR Rules for Non-Administered Arbitration by three independent and
impartial arbitrators, of whom each Party shall designate one in accordance
with the ‘screened’ appointment procedure provided in CPR Rule 5.4.  The Parties shall use all reasonable efforts
to resolve the Issues within 30 days after their submission to arbitration
under this Section 10.6 and the decision of the arbitrators with
respect to such Issues shall be binding on the Parties.  The arbitration shall be governed by the
Federal Arbitration Act, 9 U.S.C. §§1 et seq. and judgment upon the decision rendered
by the arbitrator may be entered by any court having jurisdiction thereof.  The place of arbitration shall be Dallas,
Texas.  If a Party fails to participate
in the dispute resolution procedures described in Article 24, the
other Party can commence arbitration prior to the expiration of the time
periods set forth in Article 24.

 

11.          SERVICE
LOCATIONS.

 

11.1        Service
Locations.  The
Services shall be provided to Michaels solely from:  (a) the Michaels Service Locations; (b) Supplier
Service Locations; and (c) any other location for which Supplier has
received Michaels’ approval, to be given in Michaels’ sole discretion but
acting in good faith.  Exhibit 6,
which contains the list of Service Locations, will designate which Services may
be provided from each Service Location. 
Supplier and Supplier Agents may not provide or market services to a
third party or to itself from a Michaels Service Location without Michaels’
consent, to be given in Michaels’ sole discretion.

 

11.2        New
Service Locations. 
If Supplier requests Michaels’ approval to provide Services from a
location other than a location described in Section 11.1, Supplier
shall provide to Michaels a written relocation proposal that sets forth a
description of the proposed new location, the reasons for the proposed
relocation, how the relocation will be beneficial to Michaels in terms of
performance and other relevant measures, as well as any other information
requested by Michaels.  Supplier shall
specify in the relocation proposal the amount of Supplier’s cost reductions, if
any, resulting from the relocation that Supplier will pass-through to Michaels
in the form of reduced Fees.  Michaels
may, in its sole discretion but acting in good faith, approve or reject any
proposal submitted by Supplier pursuant to this Section 11.2.  Any incremental costs incurred by Michaels as
a result of a relocation requested by Supplier to any location other than the
locations described in Section 11.1 shall be paid by Supplier or
reimbursed to Michaels by Supplier unless otherwise agreed by the Parties.  If for reasons other than Supplier’s breach,
Michaels requires Supplier to relocate from an existing Michaels Service
Location to another Service Location, Michaels shall pay Supplier any
reasonable costs of that relocation and any incremental costs to Services
resulting from such relocation, in each case as agreed by the Parties in
advance.  If for reasons other than
Supplier’s breach, Michaels requires Supplier to relocate from an existing
Supplier Service Location to another Service Location, such relocation shall be
addressed through the Change Management Process.

 

19

 

11.3        Safety
and Security Procedures.  Supplier shall maintain and enforce at all
Supplier Service Locations safety and security procedures that are at least
equal to the most stringent of the following: 
(a) industry standards for locations similar to the applicable
Service Locations; (b) the procedures in effect at locations of other
Supplier customers receiving services similar to the Services; (c) those
procedures in effect at a Michaels Service Location, including applicable
procedures that implement Michaels Policies and the safety and security
procedures set forth in Exhibit 7; and (d) any higher standard
required by Law.  Michaels continues to
retain responsibility for maintaining and enforcing at all Michaels Service
Locations safety and security procedures consistent with the standards
prescribed in this Section 11.3.

 

12.          SUPPLIER
STAFF

 

12.1        Supplier
Account Manager. 
Supplier shall appoint an individual (the “Supplier Account Manager”) who from the Effective Date of this
Agreement shall serve, on a full-time basis, as the primary Supplier
representative under this Agreement. 
Supplier’s appointment of any Supplier Account Manager shall be subject
to Michaels’ prior approval.  The
Supplier Account Manager shall:  (a) have
overall responsibility for managing and coordinating the performance of
Supplier’s obligations under this Agreement; and (b) be a single point of
contact for and on behalf of Supplier with respect to all matters relating to
this Agreement.

 

12.2        Key
Supplier Personnel. 
With respect to the Key Supplier Personnel, the Parties agree as
follows:

 

(a)           All Key Supplier
Personnel shall be dedicated to the Michaels account on a full-time basis
unless otherwise specified on Exhibit 8.

 

(b)           Before assigning an
individual to a Key Supplier Personnel position, whether as an initial
assignment or as replacement, Supplier shall: 
(i) notify Michaels of the proposed assignment; (ii) introduce
the individual to appropriate representatives of Michaels; (iii) provide
Michaels with a resume and any information regarding the individual that may be
reasonably requested by Michaels; and (iv) obtain Michaels’ written
approval for such assignment.

 

(c)           Supplier shall not
replace or reassign:  (i) the
Supplier Account Manager for 36 months from the date such individual begins his
or her tenure in that position; (ii) the Supplier Transition Manager until
30 days after the completion of all Transition Services; or (iii) any
other Key Supplier Personnel for:  (A) 24
months from the date such individual begins his or her tenure in that position,
where such date occurs within Contract Year 1 or Contract Year 2; or (B) 18
months from the date such individual begins his or her tenure in that position,
where such date occurs in Contract Year 3 or at anytime thereafter, (and,
without limiting the foregoing 24 month-obligation or 18 month-obligation (as
the case requires), if any of the Key Supplier Personnel has duties in
connection with a particular discrete Project, until the completion of such
Project), unless, in each case, Michaels consents in its sole discretion to
such replacement or reassignment, or such individual:  (W) voluntarily resigns from Supplier; (X) is
terminated by Supplier (including being dismissed by Supplier for misconduct); (Y) fails
to perform his or her duties and responsibilities pursuant to this Agreement;
or (Z) is unable to work due to disability.

 

20

 

(d)           If Michaels
determines that any Key Supplier Personnel should not continue in his or her
position, Michaels may in its sole discretion based on reasonable business
judgment and upon notice to Supplier require the immediate removal of such Key
Supplier Personnel from the Supplier Staff.

 

(e)           Supplier shall
maintain backup procedures and conduct replacement procedures for Key Supplier
Personnel as necessary to assure an orderly succession for Key Supplier
Personnel removed from the account for any reason.  Upon Michaels’ request, Supplier shall make
such procedures available to Michaels.

 

(f)            Supplier shall make
the Key Supplier Personnel available for meetings with Michaels personnel in
accordance with Exhibit 5 and otherwise upon Michaels’ request.

 

12.3        Supplier
Staff.

 

(a)           Training and Skills; Removal; Confidentiality.  Supplier shall appoint to the Supplier Staff
only individuals with suitable training and skills to perform the
Services.  Supplier shall provide upon
Michaels’ request a list of all Supplier personnel dedicated full-time to the
Supplier Staff assigned to perform Services at a Michaels Service Location and
their respective job titles.  Supplier
shall notify Michaels as soon as possible after dismissing or reassigning any
member of the Supplier Staff whose work location is at a Michaels Service
Location.  Michaels may in its sole
discretion from time to time in its reasonable business judgment require
Supplier to remove any member of the Supplier Staff assigned to perform
Services at a Michaels Service Location from working on the Michaels account,
and Supplier shall complete such removal within 24 hours and replace such
individual as soon as practicable at no cost to Michaels.  If Michaels requires the removal of any Supplier
Staff assigned to perform at a Supplier Service Location, Michaels shall
provide Supplier with reasonable details of the reasons for removal.  In such cases, Supplier will promptly
investigate and propose a resolution for Michaels and if Michael does not agree
to the resolution, based on its business judgment, Supplier shall remove and
replace such Staff as soon as possible.  
Supplier shall ensure that each member of the Supplier Staff who
performs work under this Agreement is informed of Supplier’s confidentiality
obligations under this Agreement and agrees in writing to and does comply with
such obligations.

 

(b)           Background Checks.  Supplier certifies that it has conducted a
background check and drug screen that is at least as comprehensive as Michaels’
standard background check and drug screen policy set forth in Exhibit 7 with respect to each member of the
Supplier Staff that will work at a Michaels Service Location for 5 days or more
in accordance with the Michaels background screening requirements for
non-employees set forth in Exhibit 7
prior to such individual’s assignment to work at an Michaels Service Location.

 

12.4        Turnover
of Supplier Staff. 
Michaels and Supplier agree that it is in their best interests, in order
to maintain consistency within the Supplier Staff, to reduce to the extent
possible the number of staff assigned to the Michaels account who leave the
Michaels account during any Contract Year (i.e., the number of the Supplier
Staff that provide Services in a Contract Year that are no longer part of the
Supplier Staff at the end of such year excluding removals at the request of
Michaels and relieving upon completion of a project for which an individual was
assigned) (“Turnover”).  Accordingly, Supplier shall use all
reasonable efforts to 

 

21

 

keep the Turnover to a level acceptable to
Michaels.  Upon Michaels’ request, or if
the Turnover exceeds (a) in the case of the information technology
services, 20% per Contract Year (except as otherwise set forth in a Statement
of Work); and (b) in the case of the business process services, 25% per
Contract Year (except as otherwise set forth in a Statement of Work), Supplier
shall as soon as reasonably practicable:

 

(a)           provide to Michaels
sufficient data to establish the annual Turnover by Contract Year including, in
particular, the Turnover Rate among Key Supplier Personnel;

 

(b)           meet with Michaels
to discuss the impact of the level of the Turnover; and

 

(c)           submit to Michaels a
proposal for reducing the Turnover, which, upon approval by Michaels, shall
form part of this Agreement.

 

12.5        Conduct
of Supplier Personnel.

 

(a)           While at the
Michaels Service Locations, Supplier and Supplier Agents shall:  (i) comply with the requests, rules and
regulations of Michaels regarding safety and health, personal and professional
conduct (including adhering to the Michaels Policies and general Michaels
safety practices or procedures) generally applicable to such Michaels Service
Locations; and (ii) otherwise conduct themselves in a businesslike manner.

 

(b)           If Michaels notifies
Supplier that a particular member of the Supplier Staff is not conducting
himself or herself in accordance with Section 12.5(a), Supplier
shall promptly investigate the matter and take appropriate action which may
include:  (i) removing the
applicable person from the Supplier Staff and providing Michaels with prompt
notice of such removal and replacing the applicable person with a similarly
qualified individual; or (ii) taking other appropriate disciplinary action
to prevent a recurrence.  In the event of
multiple violations of Section 12.5(a) by a particular member
of the Supplier Staff, Supplier shall promptly remove the individual from the
Supplier Staff.

 

12.6        Assignment
to Competitors.    Supplier shall not assign any Key Supplier
Personnel to the account of any Michaels Competitor without Michaels’ prior
consent:  (a) while such Key
Supplier Personnel is assigned to the Michaels account; and (b) for a
period of 12 months following the date that such Key Supplier Personnel ceases
providing Services.

 

12.7        Subcontractors.

 

(a)           Michaels
acknowledges and agrees that certain Supplier Service Locations utilized to
provide the Service hereunder are owned and operated by Supplier’s corporate
parent Tata Consultancy Services Ltd (“TCSL”).  Supplier is permitted to utilize personnel
and resources of TCSL and Supplier’s other Affiliates as Supplier Agents and
the use of TCSL and Supplier’s other Affiliates as Supplier Agents shall not be
construed as subcontracting by Supplier requiring further approval of
Michaels.  Supplier shall directly render
all Services exclusively through its employees and Supplier Agents under its
control who are authorized in accordance with this Agreement.  Prior to subcontracting any of the Services,
Supplier shall notify Michaels of the proposed subcontract and shall obtain
Michaels’ approval of such subcontract, which approval may be given in
Michaels’ sole discretion.  Prior 

 

22

 

to making any material modification to any subcontract relating to the
Services including material changes to the volume or type of services provided
under such subcontract, Supplier shall notify Michaels of the proposed
modification and shall obtain Michaels’ approval thereof.

 

(b)           Subcontracting the
provision of any portion of the Services in accordance with this Agreement
shall not relieve Supplier of any of its obligations under this Agreement.  Supplier shall be responsible for the work
and activities of each of the Supplier Agents, including such agent’s
compliance with the terms of this Agreement (including but not limited to
confidentiality obligations).  Supplier
shall be responsible for all payments to Supplier Agent in connection with the
provision of Services.

 

(c)           Michaels may in its
sole discretion from time to time in its reasonable business judgment require
Supplier to replace any Supplier Agent (other than TCSL and Supplier’s other
Affiliates) and Supplier shall complete such replacement as soon as practicable
and at no cost to Michaels.  In the event
that, Michaels believes in its reasonable business judgment that any individual
who is a Supplier Agent is a threat to the health, safety or security of any of
Michaels’, an Affiliate’s or a third party’s personnel, data or property, or
threatens to be, or is in breach of the terms of this Agreement or any Michaels
policy or procedure which was previously provided to Supplier, then Supplier
shall have the obligation to remove that Supplier Agent from the provision of
the Services immediately and, without limiting the foregoing, Michaels shall
have the right to restrict such Supplier Agent’s access to any Michaels Service
Location or System in its sole discretion.

 

12.8        No
Termination of Employment.  For clarity, and without limiting Michaels’
rights under this Article 12 to require the removal of individuals
from the Supplier Staff, Michaels will not have the right under this Article 12
to require Supplier, or any Supplier Agent, to terminate any individual’s
employment relationship with Supplier or any Supplier Agent.

 

12.9        Non-Solicitation.  During the Term and Termination Assistance
Period and for 1 year thereafter:  (a) Michaels
shall not solicit the employment of any employee of Supplier or any Supplier
Agent whether as an employee or contractor of Michaels without the prior
consent of Supplier; and (b) Supplier and Supplier Agents shall not
solicit the employment of any employee of Michaels or Michaels Agents whether
as an employee or contractor of Supplier without the prior written consent of
Michaels.  It shall not be a violation of
this Section 12.9 for a Party to advertise for personnel in
generally available media and to hire the other Parties personnel that contact
that Party as a consequence of such advertising for so long as such
advertisement is not specifically targeted to such personnel of the other
Party.  The restrictions set forth in
this Section 12.9 shall not apply to the hiring by Supplier of any
Transitioned Employees.

 

12.10      Co-
Employment.  No
officer, director or employee of Supplier, Supplier Agent or Affiliate retained
by Supplier to provide services to Michaels pursuant to this Agreement,
including any Transitioned Employee, shall be deemed to be an employee, agent,
or contractor of Michaels.  Except for
the Transitioned Employees who become Supplier or its Affiliate’s employees
upon acceptance by them of an offer of employment made by Supplier pursuant to Exhibit 15,
no officer, director, employee or contractor of Michaels, Michaels’ Agent or
Affiliate (including any Affected Employees or Affected Contractors) shall be
deemed to be an 

 

23

 

employee or agent of Supplier. 
Nothing in this Agreement shall operate or be construed to limit either
Party’s  responsibility for the acts or
omission of its officer’s, directors or employees, agents or Affiliates, nor
shall this Agreement be construed to create a joint employment relationship or
otherwise impose liability on either Party 
as an employer with respect to the employees or agents of the other
Party.

 

12.11      Transitioned Employees.  The hiring and employment of Transitioned
Employees by Supplier shall be effected in accordance with the terms and
conditions set forth in Exhibit 15. 
Except as may be agreed by the Parties in accordance with Exhibit 15,
Supplier shall not be obligated to make offer of employment to any Affected
Employees or Affected Contractors.

 

13.          GOVERNANCE AND CHANGE
CONTROL

 

13.1        Governance.  Supplier shall implement a governance
structure and governance procedures as specified in Exhibit 5.  All governance meetings will be hosted at a
time and location acceptable to Michaels. 
Michaels and Supplier may replace or reassign its governance committee
members upon notice to the other Party, provided that Supplier shall not
replace or reassign its governance committee members unless Michaels consents
to such replacement or reassignment. 
Before assigning an individual to a governance committee, Supplier shall
notify Michaels of the proposed assignment, introduce the individual to
appropriate Michaels personnel, provide Michaels with any information regarding
the individual that may be reasonably requested by Michaels, and obtain
Michaels’ approval for such assignment.

 

13.2        Policies and Procedures
Manual.  Supplier shall develop and
provide the Policies and Procedures Manual, including the Change Management
Process therein, to Michaels for Michaels’ review and approval in accordance
with the requirements and delivery schedule specified in the Transition
Plan.  Thereafter Supplier shall update
the Policies and  Procedures Manual as
necessary and shall provide such updated manual to Michaels for its approval.

 

13.3        Change Management Process.  The Change Management Process shall provide,
at a minimum, that:

 

(a)           No
Change shall be implemented without Michaels’ approval, except as may be
necessary on a temporary basis to maintain the continuity of the Services.

 

(b)           With
respect to all Changes, Supplier shall:  (i) other
than those Changes made on a temporary basis to maintain the continuity of the
Services, schedule changes so as not to unreasonably interrupt Michaels’
business operations; (ii) prepare and deliver to Michaels each month a
rolling schedule for ongoing and planned Changes for the next 90-day period;
and (iii) monitor the status of Changes against the applicable schedule.

 

(c)           With
respect to any Change made on a temporary basis to maintain the continuity of
the Services, Supplier shall document and provide to Michaels notification of
the change no later than the next business day after the Change is made.

 

24

 

13.4        No Liability for Changes
Not Approved.  Michaels shall have no
liability for any activities of Supplier, including the provision of Systems or
Services, that are undertaken pursuant to a Change unless such Change has been
approved by Michaels in accordance with the Change Management Process.

 

14.          PROPRIETARY RIGHTS.

 

14.1        Ownership of Background
Technology and Derivative Works. 
Each Party shall have and retain exclusive ownership of its Background
Technology, including any Intellectual Property Rights therein.  Michaels shall have and retain exclusive
ownership of all Michaels Derivative Works, Michaels Software, Commissioned
Materials, and Work Product, in each case including any Intellectual Property
Rights therein.  Supplier shall have and
retain exclusive ownership of all of Supplier Software and Supplier Derivative
Works, including any Intellectual Property Rights therein.  All rights not expressly granted in this Article 14
with respect to the software, works and materials described in this Section 14.1
are reserved to the owner thereof.

 

14.2        Michaels Software.  Other than the standard Third Party Software
licensed by Supplier and used in the performance of Services, Michaels retains
the ownership and financial responsibility for procuring and providing to Supplier
any Third Party Software as necessary in connection with the performance of
Services, as mutually agreed by the parties, acting reasonably.  Any exception to the forgoing shall be agreed
to by the Parties within Exhibit 4 or applicable Statement of Work.  Michaels hereby grants to Supplier, during
the Term and Termination Assistance Period, a worldwide, fully-paid,
royalty-free, non-exclusive, non-transferable, license to Use the Michaels
Proprietary Software and, subject to the terms of the applicable third party
agreements (including the confidentiality and use restrictions therein), the
Michaels Third Party Software; in each case solely as necessary to provide the
Services.  Supplier may permit, subject
to the terms of the applicable third party agreements (including the
confidentiality and use restrictions therein), Supplier Agents to Use the
Michaels Software solely to provide those Services that such Supplier Agents
are responsible for providing.

 

14.3        Supplier Software.

 

(a)           Supplier
shall provide Michaels with access to Supplier Software during the Term and
Termination Assistance Period to the extent such access is reasonably necessary
for Michaels to receive or use the Services, including the Supplier commitments
under Section 18.10.  Prior
to using any Supplier Software to provide the Services, Supplier shall:  (i) provide Michaels with reasonable
details (including any cost upon termination) of  such Software to for Michaels’ review and
approval; (ii) with respect to Supplier Third Party Software, use all
reasonable efforts to obtain from the applicable vendor the right to assign to
Michaels or Successor at no cost the applicable software license agreement; (iii) obtain
the Supplier Consents; and (iv) if Supplier is unable to obtain such
right, prior to using such Software, notify Michaels of the approximate cost of
obtaining such right or obtaining a separate license to such Software.  Upon Michaels’ request, Supplier shall
provide Michaels with a list of all Supplier Software being used to provide the
Services to Michaels as of the date of such request.

 

25

 

(b)           Supplier
hereby grants to Michaels during the Term and Termination Assistance Period a
worldwide, fully paid , royalty-free, non-exclusive, non-transferable license
to use the Supplier Software if and to the extent necessary in connection with
the receipt and use of the Services, and to permit Authorized Users to access
and use the Supplier Software if and to the extent necessary in connection with
receipt of Services as contemplated in this Agreement.

 

14.4        Commissioned Materials.  Supplier shall provide to Michaels all
Commissioned Materials promptly after the completion thereof, including the
complete source code and object code of the Software therein.  Michaels hereby grants to Supplier during the
Term and Termination Assistance Period a worldwide, fully-paid, royalty-free,
non-exclusive, non-transferable, license to Use the Commissioned Materials solely
to provide the Services.  Supplier may
permit Supplier Agents to Use the Commissioned Materials solely to provide
those Services that such Supplier Agents are responsible for providing.

 

14.5        Michaels-Owned Materials.  Supplier hereby does, and shall cause all
Supplier Agents to, irrevocably and unconditionally assign to Michaels upon
creation without further consideration all right, title, and interest in any
Michaels Derivative Works, Commissioned Materials, and Work Product
(collectively, “Michaels-Owned Materials”),
and all Intellectual Property Rights therein. 
If any Intellectual Property Rights, including artists’ rights and moral
rights, in Michaels-Owned Materials, cannot (as a matter of law) be assigned by
Supplier or Supplier Agents to Michaels as provided above, then:  (a) Supplier unconditionally and
irrevocably does, and shall cause all Supplier Agents to, waive the enforcement
of such rights and all claims and causes of action of any kind against Michaels
with respect to such rights; and (b) to the extent that Supplier or Supplier
Agents cannot (as a matter of law) make such waiver, Supplier unconditionally
grants, and shall cause all Supplier Agents to grant, to Michaels an exclusive
(without reservation), perpetual, irrevocable, worldwide, fully-paid,
royalty-free, transferable license, with the right to sublicense through
multiple levels of sublicensees, under any and all such rights:  (i) to reproduce, create derivative
works of, distribute, publicly perform, publicly display, and digitally
perform, and otherwise use and exploit the Michaels-Owned Materials in any
medium or format, whether now known or hereafter discovered; (ii) to use,
make, have made, sell, offer to sell, import, and otherwise exploit any product
or service based on, embodying, incorporating, or derived from such Michaels
Owned Material or any derivative works thereof; and (iii) to exercise any
and all other present or future rights not yet known in the Michaels-Owned
Materials.    Supplier shall not include
any Supplier Background Technology in any Michaels-Owned Materials unless
Supplier grants to Michaels a perpetual, irrevocable license to exercise all
Intellectual Property Rights in such Background Technology, provided that
Michaels may not separate any Supplier Background Technology from the
applicable Michaels Owned Materials for use or commercial exploitation of such
Supplier Background Technology other than in connection with the Michaels Owned
Material in which such Supplier Background Technology is incorporated.  Supplier hereby assigns, and shall cause all
Supplier Agents to assign, to Michaels any and all claims, past, present, or
future, of any nature whatsoever, Supplier or Supplier Agents may have for
infringement, misappropriation, or violation of any Intellectual Property Right
assigned to Michaels pursuant to this Agreement.

 

14.6        Further Assurances.  Supplier shall, and shall cause all Supplier
employees, Supplier Agents and employees and contractors of Supplier Agents (in
each case, whether former or current) to: 
(a) cooperate with and assist Michaels and its designees, both
during and after the Term, in perfecting, maintaining, and enforcing Michaels’
or its designees’ rights in all right, title, and 

 

26

 

interest in any Michaels-Owned Materials,
including all Intellectual Property Rights thereto; and (b) execute and
deliver to Michaels any documents or take any other actions as may reasonably
be necessary, or as Michaels may reasonably request, to perfect, maintain,
protect, or enforce Michaels’ or its designees’ rights in such materials or
otherwise carry out the purpose of this Article 14.

 

14.7        Supplier IP.  Notwithstanding anything to the contrary
contained in this Agreement, Michaels acknowledges and agrees that nothing
contained in this Agreement shall be construed to effect a transfer or
conveyance by Supplier to Michaels and Supplier is not transferring the
ownership or title to or granting any exclusive license for, any of Supplier
Background Technology, Supplier Software or any other Supplier pre-existing
Intellectual Property material or Derivative Works thereof (collectively, “Supplier IP”).  The assignment and waiver provisions set
forth in this Agreement shall not apply to Supplier IP and nothing in this
Agreement shall be construed as preventing Supplier to continue to own and use
Supplier IP in any manner.  Supplier
agrees not to include any Supplier Software or any other Supplier pre-existing
Intellectual Property material or Derivative Works thereof in any Michaels
Owned Material without obtaining prior written approval of Michaels.  To the extent practicable, Supplier will make
good faith efforts to identify and obtain prior approval of Michaels for
incorporating Supplier Background Technology in any Michaels Owned
Material.  To the extent that any
Supplier IP is incorporated in any Michaels Owned Material,  Supplier hereby grants, and shall cause all
Supplier Agents to grant, to Michaels a non-exclusive, perpetual, irrevocable,
worldwide, fully-paid, royalty-free, transferable license, with the right to
sublicense through multiple levels of sublicensees, under any and all such
rights in the Supplier IP as incorporated in Michaels Owned Material and solely
in connection with the Use of such Michaels Owned Material :  (i) to reproduce, create derivative
works of, distribute, publicly perform, publicly display, and digitally
perform, and otherwise use and exploit the Michaels-Owned Materials in any
medium or format, whether now known or hereafter discovered; (ii) to use,
make, have made, sell, offer to sell, import, and otherwise exploit any product
or service based on, embodying, incorporating, or derived from such Michaels
Owned Material or any Derivative works thereof; and (iii) to exercise any
and all other present or future rights not yet known in the Michaels-Owned
Materials.  The license granted herein
does not authorize Michaels to separate any incorporated Supplier IP from the
applicable Michaels Owned Material for use or commercial exploitation of such
Supplier IP other than in connection with the Michaels Owned Material.

 

14.8        Residual Knowledge

 

Subject to patents owned by either Party, nothing contained in this
Agreement shall restrict a Party from the use of any general knowledge,
experience and know-how, as well as any knowledge retained in unaided human
memories including discoveries, methods, inventions, works, processes, ideas,
concepts, tools and techniques learnt or developed by Supplier in performing
the Services hereunder (collectively, “Residual Knowledge”), provided
that in doing so such party does not breach its obligations under Article 21
or infringe the Intellectual Property Rights of the other Party or third
parties who have licensed or provided materials to the other Party.

 

27

 

14.9        Framework Initiative Work
Products

 

Notwithstanding anything to the contrary
contained in this Agreement, project work products relating to Framework
Initiative as defined in Exhibit 4, and platform based solutions
developed as a result of Framework Initiative 
(collectively, “Framework Initiative
Work Product”) shall be exclusively owned by Supplier and subject to
the license granted to Michaels in this Section 14.9, the right
title and interest in the Intellectual Property in all Framework Initiative
Work Product shall be exclusively owned by Supplier.  Supplier hereby grants to Michaels a
non-exclusive, perpetual, irrevocable, worldwide, fully-paid, royalty-free,
transferable license to Use, reproduce, create Derivative Works, to make, have
made any product or service based on, embodying, incorporating, or derived from
such Framework Initiative Work Product solely for the benefit and use of
Michaels and its Affiliates and Authorized Users.  The license granted herein does not permit Michaels
to sell or sublicense the Framework Initiative Work Product to unaffiliated
third parties. Supplier agrees to provide Michaels with both object and source
code version of any Framework Initiative Work Product as part of Michaels
license granted hereunder.

 

15.          DATA

 

15.1        Ownership and Use of
Michaels Data.  All Michaels Data
shall remain the property of Michaels. 
Absent Michaels’ approval, to be given or withheld in Michaels’ sole
discretion, Michaels Data shall not be:  (a) used
by Supplier or Supplier Agents other than as required to provide the Services; (b) disclosed,
sold, assigned, leased or otherwise provided to third parties by Supplier or
Supplier Agents; or (c) commercially exploited in any form (including any
derivative, individualized, anonymized, or aggregated form) by or on behalf of
Supplier or Supplier Agents.  To the
extent that data developed or produced by Supplier as part of the Services
becomes Michaels Data Supplier hereby irrevocably assigns, transfers and
conveys all of its right, title and interest (if any) in and to Michaels Data.

 

15.2        Correction and
Reconstruction.

 

(a)           Supplier
shall, at its cost and expense, promptly correct any errors or inaccuracies in
the reports and other deliverables provided to Michaels under this Agreement
and such corrections shall be reported in reports at a frequency and in a form
and format reasonably acceptable to Michaels.

 

(b)           Supplier
shall, at its cost and expense:  (i) develop
and maintain procedures for the reconstruction of lost Michaels Data; and (ii) promptly
notify Michaels of any errors in, or destruction, loss, or alteration of, any
Michaels Data caused by Supplier or Supplier Agents and remediate such errors,
destruction, loss or alteration. 
Corrections shall be reported to Michaels in reports at a frequency and
in a form and format reasonably acceptable to Michaels.

 

(c)           For
Services charged to Michaels on a time and material rate basis, any billable
resources attributable to Supplier’s efforts to correct errors in or
reconstruct lost Michaels Data, which error or loss is described in Sections 15.2(a) or
15.2(b), shall be reflected as a credit to Michaels on the applicable
invoice.  At Michaels’ request and
expense, Supplier shall promptly assist 

 

28

 

Michaels to correct any errors in, or destruction, loss, or alteration
of, Michaels Data caused by Michaels.

 

15.3        Provision of Data.  Upon request by Michaels for any reason and
at any time during the Term and Termination Assistance Period, Supplier
shall:  (a) promptly provide to
Michaels, in the format and on the media reasonably requested by Michaels, all
or any part of Michaels Data; and (b) erase or destroy all or any part of
Michaels Data in Supplier’s possession, in each case to the extent so requested
by Michaels.  If any additional efforts
or resources are required to comply with such requests Parties shall follow the
Change Control Procedure.  Any archival
tapes containing Michaels Data shall be used by Supplier and Supplier Agents
solely for disaster recovery and business continuity purposes.  Supplier shall not withhold any Michaels Data
as a means of resolving any dispute.

 

15.4        Data Privacy.  Supplier shall comply with all applicable
Laws regarding the processing, storage, handling, collection, and transmission
of Michaels Data, including information therein that relates to, or is about,
an identified or identifiable person, including all applicable state and
federal laws and the Safe Harbor Principles outlined in the Safe Harbor
Agreement between the U.S. Commerce Department and the European Commission and
similar international agreements.

 

15.5        Data Security.  Supplier shall establish and maintain
technical and organizational security measures, and other safeguards against
the destruction, loss, alteration, unavailability and unauthorized access to
Michaels Data in the possession of or under the control of Supplier and during
the electronic transmission, storage, and shipping thereof that comply with the
Michaels Policies and all Michaels data security policies, standards,
requirements and specifications and that are at least equal to the highest of
the following:  (a) industry
standards for locations similar to the applicable Service Location; (b) security
management, including ISO 27001 (Information
technology — Security techniques — Information security management systems — Requirements),
ISO 27002 (Information technology - Security
techniques - Code of practice for information security management)
and payment card industry (“PCI”)
standards applicable to the Services; (c) those data security policies in
effect as of the Effective Date at each Michaels Service Location and Supplier
Service Location; (d) the data security procedures set forth in Exhibit 7;
and (e) any higher standard required by Law.  In the event Supplier or Supplier Agents
discovers or is notified of a breach or potential breach of security relating
to Michaels Data, Supplier shall immediately notify the Michaels Account Manager
of such breach or potential breach (including providing the Michaels Account
Manager with an initial security risk assessment form), investigate such breach
or potential breach and, in the case of an actual breach remediate the effects
of the breach.  In the event of a breach
attributable to an act or omission of Supplier, as part of such remediation,
Supplier shall:  (x) pay all expense
of Michaels’ compliance with any of Michaels’ notification obligations,
including Michaels’ compliance with Laws relating to the notification of
individuals and entities whose information may have been disclosed in
connection with the breach as well as any costs of credit monitoring services
for affected individuals; (y) provide Michaels with a root cause analysis
of the breach; and (z) provide Michaels with assurance satisfactory to
Michaels that such breach shall not recur. 
Michaels may establish backup security for Michaels Data and maintain
backup and files for such data.  If any
security breach requires Michaels to make a disclosure to any third party,
Michaels shall be solely responsible for making that disclosure and Supplier
and Supplier Agents shall cooperate with Michaels in formulating the
disclosure.  Supplier and Supplier 

 

29

 

Agents shall not make any disclosure
regarding a security breach without Michaels’ prior consent, which may be
withheld at Michaels’ sole discretion, unless such disclosure is required by
Law.

 

15.6        Protection of Michaels
Data.  Supplier shall develop and,
subject to Michaels’ prior approval, implement policies to:  (a) segregate all Michaels Data from
that of any other Supplier client; (b) screen Supplier Agents having
access to Michaels Data in accordance with Section 12.3(b); and (c) restrict
access to Michaels Data so that Supplier’s employees or Supplier Agents
providing services to any business that is competitive with Michaels do not
have access to Michaels Confidential Information.

 

16.          CONSENTS.  Michaels shall be responsible for obtaining
and maintaining all Consents at its own cost. 
Supplier shall, at Michaels request: 
(i) provide such assistance as is reasonably requested by Michaels
with respect to the Consents; and (ii) comply with any terms and
conditions of Consents as notified by Michaels to Supplier.  Supplier shall be responsible for obtaining
and maintaining all Supplier Consents. 
If Supplier is unable to acquire a Supplier Consent despite using all
commercially reasonable best efforts to do so, Supplier shall implement, at its
cost and expense, and subject to Michaels’ prior approval, alternative methods
as necessary to provide the Services in accordance with this Agreement without
such Supplier Consent.  If after
commercially reasonable best efforts, a required Consent is not available,
Michaels and Supplier shall discuss in good faith any alternative method that
can be implemented through Change management Process to continue the affected
Services without such Consent and if such alternative method is found not
feasible, to remove the affected Services from the scope of Supplier Services.

 

17.          CONTINUED PROVISION OF
SERVICES

 

17.1        Disaster Recovery Plan.  Supplier shall develop Disaster Recovery
Plans for each Statement of Work and provide such Plans for Michaels’ review
and approval prior to the Effective Date. 
Upon Michaels review and Supplier’s receipt of Michaels comments,
Supplier shall finalize and submit the final Disaster Recovery Plan for final
approval of Michaels.  Michaels and
Supplier agree to diligently work towards finalizing and agreeing upon the
final Disaster Recovery Plan prior to the Commencement Date for the Statements
of Work in Exhibit 2. 
Supplier shall implement each such plan within 30 days after Michaels’
approval thereof.  With respect to any
new Statement of Work, the applicable Disaster Recovery plan for such Statement
of Work shall be included in the Statement of Work. Supplier shall be
responsible for all disaster recovery activities relating to the Services at
the Supplier Service Locations as of the Commencement Date, provided that
during the period prior to the implementation of a Disaster Recovery Plan at a
given Supplier Service Location for the Services in accordance with this Section 17.1,
Supplier’s disaster recovery obligations with respect to such location and such
Services shall be to use its best efforts to provide disaster recovery services
at such location in the event of a disaster. 
Supplier shall:  (i) update
and test (and re-test as necessary) the operability of the Disaster Recovery
Plan in accordance with Exhibit 13; and (ii) certify to
Michaels at least twice during every 12-month period that each such Disaster
Recovery Plan is fully operational. 
Supplier shall immediately notify Michaels of any disaster and implement
the Disaster Recovery Plan upon the occurrence of a disaster.  Without limiting Supplier’s other obligations
under this Agreement, if Supplier does not begin implementing the agreed
Disaster Recovery Plan to reinstate the Services within 24 hours (or such other
period provided in the 

 

30

 

approved Disaster Recovery Plan) after the
occurrence of a disaster affecting a Service, Michaels may obtain substitute
services from an alternate supplier in accordance with Section 17.3.  In the event of a disaster, Supplier shall
not increase the Fees or charge Michaels usage or other variable fees.  In the event of uncertainty or a dispute
regarding whether an event constitutes a disaster under the Disaster Recovery
Plan, Michaels shall be entitled to determine in its reasonable discretion
whether such event constitutes a disaster and such determination shall be
binding on Supplier.  Supplier shall
cooperate and provide reasonable assistance to Michaels in as requested by Michaels,
with respect to the implementation of any of Michaels’ disaster recovery plans
at a Michaels Service Location.

 

17.2        Force Majeure.  If and to the extent that a Party’s
performance of any of its obligations pursuant to this Agreement is prevented,
hindered or delayed by fire, flood, earthquake, elements of nature or acts of
God, acts of war, terrorism, riots, civil disorders, rebellions or revolutions,
or a similar cause beyond the reasonable control of such Party (but
specifically excluding labor and union-related activities with respect to each
Party or its Agents’ workforces, failures of a Party’s  Agents, and inability to obtain supplies)
(each, a “Force Majeure Event”),
and such non-performance, hindrance or delay could not have been prevented by
reasonable precautions undertaken by the Party claiming a Force Majeure Event,
then such Party shall be excused for such non-performance, hindrance or delay
of those obligations affected by the Force Majeure Event for as long as such
Force Majeure Event continues and such Party continues to use all reasonable
efforts to recommence performance whenever and to whatever extent possible
without delay, including through the use of alternate sources, workaround plans
and other means.  The Party whose
performance is prevented, hindered or delayed by a Force Majeure Event shall
immediately notify the other Party of the occurrence of the Force Majeure Event
and describe in reasonable detail the nature of the Force Majeure Event.  The occurrence of a Force Majeure Event does
not excuse, limit or otherwise affect Supplier’s or Michaels (as applicable)
obligation to provide either normal recovery procedures or any other disaster
recovery services described in Section 17.1 unless the
implementation of normal disaster recovery or agreed disaster recovery plan
itself is prevented by the same or different Force Majeure Event.  The Supplier shall not have the right to any
additional payments from Michaels as a result of its efforts to provide
Services during a Force Majeure Event affecting a Service Location except to
the extent provided in the agreed Disaster Recovery Plan.  A Force Majeure Event affecting Michaels
shall not excuse Michaels from paying the applicable Fees during such period
(except the extent such Force Majeure Event directly affects the systems used
by such Michaels to remit payments).

 

17.3        Alternate Source.  If the performance of all or a portion of the
Services is prevented, hindered or delayed for more than 24 hours in the case
of critical Services, or more than 3 calendar days in the case of all other
Services, Supplier may, within 3 calendar days, propose and with approval from
Michaels, procure and provide affected Services from an alternate source,
failing which, Michaels may procure the affected Services from an alternate
source and Supplier shall reimburse Michaels for a period not to exceed 60 days
from the date that Michaels commences receiving the Services from the alternate
source or the termination of the affected Services, whichever is earlier, the
additional costs and expenses (the difference between the actual costs and
expenses and the costs and expenses that would have been payable to Supplier
for such Services under the Agreement) incurred by Michaels in procuring such Services.  If the performance of all or a portion of the
Services is prevented, hindered or delayed for more than 7 

 

31

 

calendar days, Michaels, at its sole
discretion, may:  (i) terminate any
portion of the Agreement affected by the nonperformance, hindrance or delay; or
(ii) terminate the entire Agreement, in each case as of the date specified
by Michaels in a notice to Supplier and without payment of any Termination Fee.

 

17.4        Allocation of Resources.  Whenever a Force Majeure Event or a disaster
causes Supplier to allocate limited resources between or among Supplier’s
customers, Supplier shall not provide to any other customers of Supplier
priority over Michaels.  Supplier shall
not redeploy or reassign any Key Supplier Personnel to another account in the
event of a Force Majeure Event.

 

18.          PAYMENTS

 

18.1        Fees.  In consideration of Supplier providing the
Services, Michaels shall pay to Supplier the Fees, Charges and Pass-Through
Expenses as expressly specified in this Agreement or Exhibit 4
and/or Pricing Exhibit to the applicable Statements of Work.  Except as expressly set forth in this
Agreement or Exhibit 4 and/or the Pricing Exhibit to the
applicable Statements of Work, there shall be no charges, fees or expenses
payable by Michaels in respect of Supplier’s performance of its obligations
pursuant to this Agreement.

 

18.2        Invoices.  For each month after the Commencement Date,
Supplier shall invoice Michaels for:  (a) the
Base Charges applicable to the Base Services provided during such month.  and any additional Fees payable under an
applicable Statement of Work; (b) the Charges applicable to the Consulting
Services provided during such month; and (c) any Pass-Through Expenses
payable during the month.  Supplier’s
monthly invoices shall:  (x) be
provided within 10 days after the last day of the month; (y) be in a form
and format requested by Michaels; and (z) contain detailed information
regarding the Fees and Pass-Through Expenses as is requested by Michaels,
including information necessary to determine the accuracy of the Fees and
Pass-Through Expenses in each such invoice.

 

18.3        Timeliness of Invoices.  Supplier shall invoice all Fees within 90
days after the month in which the Services were rendered or the expense
incurred.  If Supplier fails to invoice
such Fees within 90 days Michaels may decline to pay unless Michaels is
responsible for the delay.

 

18.4        Payment.  Subject to Section 18.5, Invoices
submitted by Supplier pursuant to this Section 18 for such month,
shall be due and payable to Supplier within forty-five (45) days after the date
Michaels receives Supplier’s invoice.  If
any invoice is not paid on the due date for payment, Interest shall accrue and
be payable on the amount of such invoice from the original due date to the date
paid.

 

18.5        Fee Disputes.  Michaels may withhold invoiced amounts or a
portion thereof that Michaels disputes in good faith.  Michaels shall pay undisputed portion of the
invoice when due and notify Supplier on or before the date of payment of
reasons for all such disputes.  The
Parties shall promptly and expeditiously seek to resolve such disputes and upon
resolution of the applicable dispute, Michaels shall pay Supplier the sum of
money as resolved.

 

32

 

18.6        Due Diligence.  Supplier hereby acknowledges and agrees that
Michaels has delivered or made available to Supplier all information and
documents Supplier has deemed necessary for Supplier to commit to its
obligations under this Agreement in accordance with its terms.  Supplier shall not be relieved of any of its
obligations under this Agreement, or alter, increase or add any fees or charges
related to this Agreement, as a result of its failure to review the foregoing
information and documents or any documents referred to therein or its failure
to request any information or documents from Michaels; except to the extent
that such failure of Supplier results from non-obvious material inaccuracies in
the information and documents made available by Michaels.

 

18.7        No Other Charges.  Except as otherwise expressly set forth in
this Agreement, all costs and expenses relating to Supplier’s performance of
the Services (including all costs and expenses related to the acquisition,
maintenance and enhancement of Software and Equipment, travel and lodging,
document reproduction and shipping, computers and office equipment used by
Supplier Staff, and all telephone charges) are included in the Base Charges and
Charges and shall not be charged to or reimbursed by Michaels.  Except as expressly provided in Exhibit 4,
there shall be no periodic adjustments to the Fees during the Term (e.g.,
cost-of-living increases or inflation indexes).

 

18.8        No Payment for Unperformed
Services.  If Supplier fails to
provide the Services in accordance with this Agreement, the Fees shall be
adjusted in a manner such that Michaels is not responsible for the payment of
any Fees for Services that Supplier fails to provide, except as expressly set
forth in this Agreement or Exhibit 4 and/or the Pricing Exhibit to an
applicable Statement of Work.

 

18.9        Most Favored Customer.  Supplier agrees that Michaels shall be
treated as a most favored customer of Supplier and to this end Supplier shall
provide to Michaels the same or better pricing, service availability, service
quality, and agreement terms as Supplier provides to its customers that
purchase comparable services in comparable quantities.  Comparability shall be measured by the
financial responsibilities and commitments, volume, nature of services and
other pertinent comparatives.  Upon
Michaels’ request, Supplier shall certify to Michaels in writing that Supplier
is not in violation of this Section 18.9.  If Supplier is unable to provide such
certification because of a transaction entered into between Supplier and a
Supplier customer that contradicts this Section 18.9, Supplier
shall offer to Michaels a reduction in the Fees, increases in service
performance, and any Michaels-favorable change to the terms of this Agreement
that would be required to permit Supplier to give such certification.

 

18.10      Certain Commitments By
Parties.  Supplier and Michaels
agrees to the commitments of each Parties set forth on Exhibit 4.

 

19.          TAXES

 

19.1        Taxes.  Supplier is responsible for and shall pay any
sales, use, gross receipts, excise, import, export, value-added, withholding,
personal property or other taxes that are: 
(a) based upon or measured by Supplier’s cost in acquiring, using
or providing Equipment, Software, materials, supplies, facilities, or services
used by Supplier or Supplier Agents in performing or furnishing the Services,
including all personal property and sales or use taxes on Supplier Equipment
and Supplier Software but excluding any such 

 

33

 

taxes on Equipment purchased by Supplier on
behalf of Michaels pursuant to Section 8.2 and/or any facility,
Equipment, Software or other material provided or required to be provided by
Michaels to Supplier (collectively, “Supplier
Consumption Taxes”), however levied or assessed.  Each Party shall cooperate with the other in
minimizing any applicable Taxes.

 

The Fees and Charges payable to Supplier by Michaels for Services are
exclusive of any service, sales, use, value added or similar taxes assessed on
the provision or use of the Services or on Supplier’s Charges to Michaels under
this Agreement (collectively, “Service Taxes”),
however levied or assessed.

 

Michaels shall be responsible for and pay (a) any and all taxes
imposed by any taxing authority based on Michaels income (b) franchise
taxes applicable to Michaels and (c) any Services Taxes excluding India
Services Taxes.

 

Supplier is responsible for and pay (a) all Supplier Consumption
Taxes, (b) any and all taxes imposed by any taxing authority based on
Supplier’s income (c) franchise taxes applicable to Supplier, and (d) any
and all Service Taxes imposed on either Party by any taxing authority in India
(“India Service Taxes”).

 

Notwithstanding the forgoing, if and to the extent that India Service
Taxes become applicable as a result of Michaels starting its business
operations in India at any time (other than the outsourcing of Services
contemplated in this Agreement), Michaels will be responsible to pay or
reimburse Supplier of any such India Service Taxes.

 

Each Party shall cooperate with the other in minimizing any applicable
taxes.

 

19.2                        Relocation
of Services.  Any incremental Taxes,
Service Taxes or India Service Taxes assessed on the provision of the Services
for a particular site resulting from Supplier’s relocating or rerouting the
delivery of Services for Supplier’s convenience to, from or through a location
other than the Service Location identified in this Agreement shall be paid by
Supplier.  Any incremental Taxes assessed
on the provision of the Services for a particular site resulting from Supplier’s
relocating or rerouting the delivery of Services as required by Michaels for
its convenience shall be the responsibility of Michaels.

 

19.3                        Other
Taxes.  Michaels and Supplier shall
each bear sole responsibility for all taxes, assessments and other real
property-related levies on its respective owned or leased real property.

 

19.4                        Segregation
of Fees.  Supplier shall segregate
the Fees into the following separate payment streams as follows:  (a) those for taxable Services; (b) those
for nontaxable Services; (c)  those that relate to a capital expenditure
versus an expense; (d) those for which a sales, use or other similar tax
has already been paid; and (e) those for which Supplier functions merely as
a paying agent for Michaels in receiving goods, supplies or services (including
leasing and licensing arrangements) that otherwise are nontaxable or have
previously been subject to tax.  In
addition, Michaels and Supplier shall cooperate to more accurately determine a
Party’s tax liability and to minimize such liability, to the extent legally
permissible.  Each Party shall provide
and make available to the other Party any resale certificates, information
regarding out-of-state sales or use of equipment, materials or services, and
any 

 

34

 

other exemption certificates or information
requested by a Party.

 

20.                               AUDITS

 

20.1                        Services.  Upon reasonable notice from Michaels,
Supplier and Supplier Agents shall promptly provide Michaels, Michaels Agents
(including any external auditors of Michaels and any internal Michaels Agents
responsible for evaluating compliance), and any of Michaels’ regulators
(collectively, “Auditors”)
with:  (a) access to any facilities,
personnel and information technology systems used for providing the Services
and under Supplier or Supplier Agents’ control; 
and (b) any assistance and information the Auditors may require, in
each case for the purpose of performing audits or inspections of the Services,
the Service Locations, the Systems, and the business of Michaels relating to
the Services (including to verify performance of the Services, the Fees, the
use of Michaels resources, and regulatory compliance).  If any audit by an auditor designated by
Michaels, a Michaels Agent or a regulatory authority results in Supplier being
notified that Supplier or Supplier Agents are not in compliance with any Law or
audit requirement, Supplier shall, and shall cause Supplier Agents to, promptly
take actions to comply with such Law or audit requirement.

 

20.2                        Fee
Records.  Fee Audits may be performed
by Michaels for a period not to exceed three years preceding the date of audit
(“Audit Period”).  Upon notice from Michaels, Supplier shall
promptly provide Michaels and Auditors with access to such financial records
and supporting documentation as may be reasonably requested by Michaels, and
Michaels or Auditors may audit the Fees invoiced to and paid by Michaels to
determine if such Fees are accurate and in accordance with this Agreement.  If any such audit reveals that Supplier has
overcharged Michaels, Michaels shall notify Supplier of the amount of such
overcharge and unless Supplier disputes such finding in good faith, Supplier
shall promptly pay to Michaels the amount of the overcharge during the Audit
Period, plus Interest calculated from the date of receipt by Supplier of the
overcharged amount until the date of payment to Michaels.  If any such audit reveals an overcharge to
Michaels of an amount equal to 5% of the Fees, whether internal or external,
associated with the audited Services for the Audited Period, Supplier shall
reimburse Michaels for the cost of such audit.

 

20.3                        SAS 70
Reports; .

 

(a)                                  If
Supplier is performing such SAS 70 Type II audit at Supplier’s enterprise,
Supplier shall provide Michaels with a SAS 70 Type II service auditor’s report
as it relates to Services, at no cost to Michaels.  If such a report is not available, Supplier
shall at no additional cost to Michaels, provide Michaels with any reports and
assistance reasonably requested by Michaels in connection with Michaels’s
obtaining a SAS 70 Type II audit report (“Standard
SAS 70 Type II Reports”) for all accounting or internal control
activities related to the provision of Services by Supplier or Supplier
Agents.  All third party costs for
Standard SAS 70 Type II Reports required by Michaels will be borne by
Michaels.  If obtaining a SAS 70 type II report
for any particular accounting or internal control activity is not practical,
Supplier will provide any reports or assistance reasonably requested by
Michaels or Michaels’ auditors for Michaels auditor’s verification that internal
controls are in place and functioning as designed.

 

35

 

(b)                                 With
respect to information technology services (“IT
Services”) provided as part of the Services, the reports and other
assistance required for facilitating Michaels to obtain a Standard SAS 70 Type
II Report, should at a minimum, include the following IT Services control
objectives:  (i) security
management; (ii) asset classification and management/data security; (iii) personnel
security; (iv) physical/environmental security; (v) operations
management, including change control procedures; (vi) system access
management and network security; (vii) communications security; (viii) applications
development, maintenance and implementation event journaling; (ix) data
center operations controls; (x) system software controls; (xi) access
security controls; (xii) application system development and maintenance
controls; and (xiii) such other matters as are requested by Michaels.  Supplier shall consult with Michaels
regarding the inclusion of appropriate Michaels-specific transactions to be
sampled in connection with the assistance required.  Assistance and reports for the Standard SAS
70  Type II Reports shall be provided as
at the end of the end of Michaels’ fiscal year end.  In the event that assistance and reports
required from Supplier are provided as of a date other than Michaels year end,
Supplier shall provide Michaels, a written statement by an officer of Supplier
that there has been no change in Supplier’s internal controls and that such
controls and systems have functioned correctly since the date of the most
recent Standard SAS 70 Report. Supplier agrees, on 30 days written notice to
Supplier to change the due date for reports and assistance as necessary to
facilitate Michaels’ year end financial statement certification requirements.
For clarity, it is agreed that any cost and expenses internally incurred by
Supplier in connection with the assistance and reports contemplated in this Section 20.3
will be borne by Supplier and if such assistance and report reasonably require
Supplier to engage any third parties, including third party auditors, the cost
and expenses of such third parties will be borne by Michaels.

 

(c)                                  With
respect to non-IT Services provided as part of the Services, the assistance and
reports provided for Michaels obtaining its SAS 70 Type II Reports (“Custom SAS 70 Type II Reports”) shall
include testing of Supplier’s operations in connection with the Services
against the control objectives agreed for that non-IT Service on Exhibit 2
and include other matters and the control objectives requested by Michaels
(“Control Objectives”).  The assistance and reports for the Custom SAS
70 Type II Reports shall cover the period July through
January, or such other dates as reasonably determined by Michaels to
comply with Michaels year end reporting requirements and certifications.  . 
In the event that assistance and reports required from Supplier are
provided as of a date other than Michaels year end, Supplier shall provide
Michaels, a written statement by an officer of Supplier that there has been no
change in Supplier’s internal controls and that such controls and systems have
functioned correctly since the date of the most recent Standard SAS 70 Report.  Reports
and assistance to Michaels will be delivered promptly, but in no instance later
than 10 days after Michaels fiscal year end. 
For clarity, it is agreed that any cost and expenses internally incurred
by Supplier in connection with the assistance and reports contemplated in this Section 20.3
will be borne by Supplier and if such assistance and report reasonably require
Supplier to engage any third parties, including third party auditors, the cost
and expenses of such third parties will be borne by Michaels.

 

(d)                                 Supplier
is not obligated to provide assistance and reports for the Custom SAS 70 Type
II Report regarding the non-IT Services until 6 months after the Commencement
Date that applies to those non-IT Services. 
Instead, Supplier covenants that its operations with respect to the
non-IT Services shall conform to the applicable Control Objectives as of the Commencement

 

36

 

Date.  Supplier shall perform a
self assessment (and provide Michaels with a copy of the written report
resulting from such self assessment) of its operations with respect to the
non-IT Services to determine compliance with the Control Objectives based on
the conduct of such operations during the first 30 days after the Commencement
Date and, where required by Michaels, Supplier shall, at Michaels’s cost and
expense, provide an audit conducted by an independent third party (“Control Audit”) on the accounting and
internal controls used by the Supplier for non-IT Services.  Supplier shall consult with Michaels prior to
conducting each Control Audit regarding the scope of the audit and any Michaels
requirements for the audit report. 
Unless otherwise agreed, Supplier shall with respect to each Control
Audit, provide a report complying with the requirements of Michaels, and
including statements on:

 

(i)                                    the
fairness of presentation of the controls for each Control Objective;

 

(ii)                                the
design of the controls with regard to their ability to meet defined Control
Objectives; and

 

(iii)                            the
operational effectiveness of those controls over the period for the Control
Audit.

 

The report shall be completed and delivered to Michaels on or before
the date nominated by Michaels, or such other date agreed with Supplier.

 

20.4                        Certain
Audits

 

(a)                                  Without
limiting Supplier’s obligations under Section 20.1, upon Michaels’
request, Supplier shall provide Michaels or Michaels Agents access to any
facilities and personnel and equipment used to provide the Services and under
Supplier or Supplier Agents’ control and any assistance and information
Michaels or the Auditors may reasonably require in order to conduct an audit
and test (collectively, “Test”) of
the Services (including Tests at all Michaels Service Locations) for the
purpose of determining Michaels’ compliance with the Sarbanes-Oxley Act of 2002
and the rules and regulations promulgated thereunder or any successor or
similar Laws (collectively, “Sarbanes Oxley”).  If any Test reveals deficiencies or
weaknesses in internal controls and procedures relating to the Services (as
such deficiencies or weaknesses are characterized under the standards of the
Public Company Accounting Oversight Board; the standards and rules of the
Securities and Exchange Commission; or the standards used by Michaels
management or Michaels’ registered public accounting firm to evaluate Michaels’
internal control structure or any other applicable standards, collectively “Standards”), Supplier shall develop and
submit to Michaels a plan to cure such deficiencies or weaknesses (the “Cure Plan”) within 30 days after Michaels’ notice of the
deficiencies or weaknesses and commence implementation of the Cure Plan at its
own cost and expense immediately after Michaels’ approval of such plan, or
within another time period agreed by the Parties.  After Supplier has implemented the Cure Plan
in accordance with this Section 20.4(a), Michaels may conduct
additional Tests of the Services (including Tests at all Michaels Service
Locations) to determine Michaels’ compliance with Sarbanes Oxley as such
compliance relates to the Services, the costs of such tests to be borne by
Supplier.  If such Tests reveal
deficiencies or weaknesses in internal controls and procedures relating to the
Services (as such deficiencies or weaknesses are characterized under the
Standards), 

 

37

 

which deficiencies or weaknesses arise from Supplier’s failure to
implement a Cure Plan properly or Supplier’s failure to perform any other
obligations under the Agreement, Supplier shall promptly develop a plan to
remedy such deficiencies or weaknesses and implement such plan upon Michaels’
approval as soon as reasonably practicable.

 

(b)                                 In
addition to Supplier’s obligations under Section 20.4(a), Supplier
shall correct promptly any deficiencies or weaknesses in internal controls and
procedures relating to the Services that are identified:  (i) by Michaels during the Term in
connection with any internal control assessment, audit or similar review
conducted or report prepared by Michaels or a Michaels Agent pursuant to
Sarbanes-Oxley; or (ii) by Supplier or Supplier Agents (including and
internal or external auditor of Supplier). 
Without limiting the generality of the preceding sentence, if at any
time Michaels determines that any matter identified in an audit conducted
pursuant to this Article 20 would:

 

(i)                                    be
considered a significant deficiency or a material weakness in Michaels’
internal control structure and procedures for financial reporting (as such
deficiency is characterized under the Standards);

 

(ii)                                require
Michaels to disclose the risk of non-compliance to any regulatory body;

 

(iii)                            prevent
Michaels management from evaluating and affirming to the effectiveness of its
internal control structure and procedures for financial reporting pursuant to
Sarbanes-Oxley; or

 

(iv)                               prevent
Michaels’ registered public accounting firm from providing an affirmative
attestation opinion with respect to Michaels’ evaluation described in Section 20.4(b)(iii),

 

then Supplier shall submit to Michaels a Cure Plan within 10 days after
Michaels’ notice thereof, such that Michaels is able to complete the management
evaluation and attestation required by Sarbanes-Oxley and Supplier shall
implement such Cure Plan at its own cost and expense immediately after Michaels’
approval of such plan, or within another time period agreed by the
Parties.  After Supplier has implemented
the Cure Plan in accordance with this Section 20.4(a), Michaels may
conduct additional Tests of the Services (including Tests at all Michaels
Service Locations) to determine Michaels’ compliance with Sarbanes Oxley as
such compliance relates to the Services, the costs of such Tests as it relates
to verification of implementation of cure in accordance with Cure Plan shall be
borne by Supplier. If such deficiency is not resolved immediately, or within
another time period agreed by the Parties, without limiting Michaels’ other
rights and remedies, Michaels may terminate this Agreement without payment of
any Termination Fees.

 

20.5                        Record
Retention.  Supplier shall retain
records and supporting documentation:  (a) sufficient
to satisfy the requirements set forth in this Article 20; (b) as
necessary to document the Services and the Fees paid or payable by Michaels
under this Agreement, including all third party invoices with respect to
Pass-Through Expenses; (c) in accordance with Michaels’ retention policies
and procedures as in effect from time to time; (d) as required by Law; and
(e) in any event for at least 6 years after the End 

 

38

 

Date (unless a longer or shorter period is specified in Michaels’
retention policies and procedures).  At
any time after one year from the completion of Termination Assistance Services,
Supplier may at its cost and option deliver to Michaels any and all documents
that are the subject of record retention requirement under this Agreement and
upon such delivery, Supplier shall be relieved of any further obligations with
respect to record retention.

 

20.6                        Facilities.  Supplier shall provide to Michaels and
Michaels Agents, on Supplier’s premises (or, if the audit is being performed on
a Supplier Agent, the Supplier Agent’s premises if necessary), space, office
furnishings (including lockable cabinets), and utilities as Michaels or such
Michaels Agents may reasonably require to perform the audits described in this Article 20.

 

20.7                        General
Audit Procedures.

 

(a)                                  Michaels
shall not be given access to:  (i) the
proprietary information of other Supplier customers; (ii) Supplier Service
Locations that are not related to Michaels or the Services; or (iii) Supplier’s
internal costs (except to the extent that such costs are claimed as a
Pass-Through Expense by Supplier) or Supplier’s proprietary information
unrelated to the Services, except as necessary to audit amounts that are
invoiced to Michaels.  Except with
respect to any security audit, Michaels shall provide reasonable advance notice
to Supplier for any forthcoming audit. 
All audit reports shall be treated as confidential information of
Supplier and Michaels.

 

(b)                                 In
performing audits, the Auditors shall use commercially reasonable efforts to
avoid unnecessary disruption of Supplier’s operations and unnecessary
interference with Supplier’s ability to perform the Services in accordance with
the Service Levels.  Where an Auditor
desires to install any audit Software within Supplier’s environment, the
installation and operation of such Software shall be subject to Supplier’s
approval through its change management process and Michaels will be responsible
for any damage to Software or Equipment or loss of data caused by the
installation or operation of such Software.

 

(c)                                  Following
any audit, Michaels shall provide a copy of the audit report to Supplier and
conduct (in the case of an internal audit), or request its external auditors or
examiners to conduct, a conference with Supplier to review any issues
identified in the audit that Michaels will request Supplier to remediate;
provided that Michaels shall not be obligated to provide any information that
in Michaels’ reasonable opinion relates to, or may relate to, a dispute between
Supplier and Michaels.  Where required by
Michaels, Supplier shall submit to Michaels a remediation plan setting out the
actions required to be performed by Supplier to address any deficiencies,
weaknesses, concerns or recommendations of any audit (“Remediation Plan”).  Upon approval of the Remediation Plan by
Michaels, Supplier shall, at its own cost and expense perform the actions
detailed in that Remediation Plan in accordance with that Remediation Plan and
the dates set out therein.  After Supplier
has implemented the Remediation Plan in accordance with this Section 20.4(a),
Michaels may conduct additional Tests of the Services (including Tests at all
Michaels Service Locations) the costs of such Tests shall be borne by Supplier
..

 

39

 

(d)                                 In
performing audits, the Auditors and their internal and external auditors,
inspectors, regulators or other representatives shall comply with Supplier’s
standard, reasonable physical and information security procedures and shall
cause external Auditors (other than government Auditors) to execute a
confidentiality agreement substantially similar to the agreement set forth on Exhibit 11
(“Michaels Agent NDA”).  External Auditors designated by Michaels
shall not be a Supplier Competitor unless otherwise agreed by Supplier;
provided that if a Supplier Competitor is in Michaels’ reasonable judgment the
only entity that can perform an audit effectively with respect to a portion of
the Services (e.g., because such Supplier Competitor is the only party able to
assess a technology platform competently), such Supplier Competitor may perform
the audit so long as such Supplier Competitor executes the Michaels Agent NDA.

 

(e)                                  Supplier
shall not be obligated to disclose any information or material that is a
confidential information of Supplier’s other customers or information the
disclosure of which would be a breach of Supplier’s confidentiality obligation
to Supplier’s other customers or third parties unrelated to the Services.  Any entity that serves as Michaels’ regular
independent external auditor is conclusively presumed to be acceptable to
Supplier as an independent external auditor for the purpose of this Section 20.7(e).

 

20.8                        Supplier
Audits.  Within 10 days following receipt,
unless prevented by any applicable Laws or regulations, Supplier shall make
available to Michaels the findings of any review or audit conducted on
Supplier, Supplier Affiliates or Supplier Agents (including internal and
external auditors), to the extent such findings cover the Agreement or the
Services, unless disclosure of such audit is not permitted .

 

21.                               CONFIDENTIALITY

 

21.1                        General
Obligations.  All Confidential
Information relating to or obtained from Michaels or Supplier shall be
protected from unauthorized use and disclosure by the receiving Party to the
same extent and in at least the same manner as such Party protects its own
confidential information of a similar nature (and in no event with less than
reasonable care), and neither Party shall use the Confidential Information of
the other Party except as necessary to provide, receive or use the Services as
applicable based on the purpose of disclosure. 
Neither Michaels nor Supplier shall disclose, publish, release, transfer
or otherwise make available Confidential Information of, or obtained from, the
other in any form to, or for the use or benefit of, any person or entity
without the disclosing Party’s consent. 
Each Party shall, however, be permitted to disclose relevant aspects of
the other Party’s Confidential Information to its officers, directors, agents,
professional advisors, contractors (including the Benchmarker), subcontractors
and employees and to the officers, directors, agents, professional advisors,
contractors, subcontractors and employees of its affiliates (collectively, “Permitted Parties”), to the extent such
disclosure is not restricted under any Assigned Agreements, any Managed
Agreements, any Consents or any Laws or Governmental Approvals and only to the
extent that such disclosure is reasonably necessary for the performance of its
duties and obligations or the determination, preservation or exercise of its
rights and remedies under this Agreement; provided that such Permitted Parties
that are employees, officers, or directors of a Party are under a duty to
maintain the confidentiality of such information that is no less restrictive
than the obligations contained in this Section 21.1 and all other
Permitted Parties have previously executed a written confidentiality agreement
with respect to Confidential Information that imposes confidentiality obligations
no less restrictive than those contained in this Section 21.1; and
provided further that the receiving 

 

40

 

Party shall take all reasonable measures to
ensure that Confidential Information of the disclosing Party is not disclosed
or duplicated in contravention of the provisions of this Agreement by any of
the receiving Party’s Permitted Parties The receiving Party shall be liable for
any act by a Permitted Party to whom it has disclosed the disclosing Party’s
Confidential Information which act constitutes a breach of the obligations
under this Section 21.1.  The
obligations in this Section 21.1 shall not restrict any disclosure as
required by any Law (provided that the recipient shall give prompt notice to
the disclosing Party of such requirement and cooperate, upon the disclosing
Party’s request, in obtaining a protective order with respect to such
information).

 

21.2                        Unauthorized
Acts.  Without limiting either Party’s
rights with respect to a breach of this Article 21, each Party
shall:

 

(a)                                  promptly
notify the other Party of any unauthorized possession, use or knowledge, or
attempt thereof, of the other Party’s Confidential Information by any person or
entity that may become known to such Party;

 

(b)                                 promptly
furnish to the other Party full details of the unauthorized possession, use or
knowledge, or attempt thereof, and assist the other Party in investigating or
preventing the recurrence of any unauthorized possession, use or knowledge, or
attempt thereof, of Confidential Information;

 

(c)                                  cooperate
with the other Party in any litigation and investigation against third parties
deemed necessary by the other Party to protect its proprietary rights; and

 

(d)                                 promptly
use its best efforts to prevent a recurrence of any such unauthorized
possession, use or knowledge, or attempt thereof, of Confidential Information.

 

Each Party shall bear the cost it incurs as a result of compliance with
this Section 21.2.

 

21.3                        Injunctive
Relief.  The Parties acknowledge and
agree that monetary damages may be inadequate to compensate for a breach of the
provisions contained in this Article 21 or other confidentiality
provisions of this Agreement.  In the
event of such breach, the injured Party may be entitled to seek injunctive
relief and any and all other remedies available at law or in equity.  This Section 21.3 in no way
limits the liability or damages that may be assessed against a Party in the
event of a breach by the other Party of any of the provisions of this Article 21.

 

21.4                        Return of
Confidential Information.  Except as
necessary for Michaels to receive the benefit of the Termination Assistance
Services or the licenses granted under Article 27 or Article 14,
the receiving Party shall return or destroy (at the disclosing party’s option)
Confidential Information of the disclosing party in the receiving party’s (or
its agents’) possession:  (a) upon
the request of the disclosing party with respect to all or the requested
portion of such Confidential Information (provided that such request would not
hinder the delivery or receipt of the Services or a Party’s other obligations
under this Agreement); and (b) on the End Date with respect to all such Confidential
Information.

 

41

 

22.                               REPRESENTATIONS
AND WARRANTIES

 

22.1                        By
Michaels.  Michaels represents and
warrants that:

 

(a)                                  Michaels
is a corporation duly incorporated, validly existing and in good standing under
the Laws of the State of Delaware;

 

(b)                                 Michaels
has all requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement and the execution, delivery and
performance of this Agreement by Michaels has been duly authorized by Michaels;

 

(c)                                  Michaels
is duly licensed, authorized or qualified to do business and is in good
standing in every jurisdiction in which a license, authorization or
qualification is required for the ownership or leasing of its assets or the
transaction of business of the character transacted by it, except where the
failure to be so licensed, authorized or qualified would not have a material
adverse effect on Michaels’ ability to fulfill its obligations under this
Agreement; and

 

(d)                                 Michaels
is in compliance with all Laws applicable to Michaels’ obligations under this
Agreement and has obtained or will obtain all applicable material permits and
licenses required of Michaels in connection with its obligations under this
Agreement.

 

22.2                        By
Supplier.  Supplier represents and
warrants that:

 

(a)                                  Supplier
is a corporation duly incorporated, validly existing and in good standing under
the Laws of the State of New York;

 

(b)                                 Supplier
has all requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement and the execution, delivery and
performance of this Agreement by Supplier has been duly authorized by Supplier
and shall not conflict with, result in a breach of, or constitute a default
under any other agreement to which Supplier is a party or by which Supplier is
bound;

 

(c)                                  Supplier
is duly licensed, authorized or qualified to do business and is in good
standing in every jurisdiction in which a license, authorization or
qualification is required for the ownership or leasing of its assets or the
transaction of business of the character transacted by it, except where the
failure to be so licensed, authorized or qualified would not have a material
adverse effect on Supplier’s ability to fulfill its obligations under this
Agreement;

 

(d)                                 Supplier
is in compliance with all Laws applicable to Supplier’s obligations under this
Agreement and has obtained all applicable material permits and licenses
required of Supplier in connection with its obligations under this Agreement;

 

(e)                                  there
is no outstanding litigation, arbitrated matter or other dispute to which
Supplier is a party which, if decided unfavorably to Supplier, would reasonably
be expected to have a material adverse effect on Supplier’s ability to fulfill
its obligations under this Agreement; and

 

42

 

(f)                                    Supplier
and Supplier Agents have full power and authority to grant Michaels the rights
granted herein without the consent of any other party and Supplier has not
created or permitted any restrictions, settlements, judgments or adverse claims
on any materials developed or furnished by Supplier and Supplier Agents to
Michaels.

 

22.3                        DISCLAIMER.  EXCEPT AS SPECIFIED IN SECTION 22.1
AND SECTION 22.2, NEITHER Michaels NOR SUPPLIER MAKES ANY OTHER
WARRANTIES WITH RESPECT TO THE SERVICES OR THE SYSTEMS OR EQUIPMENT AND EACH
EXPLICITLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

 

23.                               ADDITIONAL
COVENANTS.

 

23.1                        By
Michaels.  Michaels covenants and
agrees with Supplier that during the Term and the Termination Assistance Period
Michaels shall comply with all Laws applicable to Michaels, and, except as
otherwise provided in this Agreement, shall obtain all Michaels Government
Approvals, Consent and other applicable material permits and licenses required
of Michaels in connection with its obligations under this Agreement.

 

23.2                        By
Supplier.  Supplier covenants and
agrees with Michaels that during the Term and the Termination Assistance
Period:

 

(a)                                  Supplier
shall provide the Services with promptness, diligence and in a professional
manner, in accordance with the practices and professional standards used in
well-managed operations performing services similar to the Services, and
Supplier shall use adequate numbers of qualified individuals with suitable
training, education, experience and skill to perform the Services;

 

(b)                                 Supplier
shall comply with all Laws applicable to Supplier in the performance of this
Agreement and shall obtain all applicable Supplier Consents, Supplier
Government Approvals and permits and licenses required of Supplier in
connection with its obligations hereunder;

 

(c)                                  the
Services, Supplier Software, Supplier Equipment, Commissioned Materials, Work
Product and any other resources or items used by Supplier or furnished to
Michaels by Supplier or Supplier Agents in providing the Services shall not
infringe upon the proprietary rights of any third party (except to the extent
such claim is based on:  (i) a
modification to the Services, Supplier Software, Supplier Equipment,
Commissioned Materials, Work Product: (A) by Michaels or Michaels Agents
(other than Supplier); or (B) that was not made by or at the written
direction of the Supplier; (ii) compliance by Supplier with written
specifications provided by Michaels; (iii) Michaels’ combination of the
Services, Supplier Software, Supplier Equipment, Commissioned Materials, Work
Product with items not provided or recommended by Supplier; (iv) Michaels’
use of the Services, Supplier Software, Supplier Equipment, Commissioned
Materials, Work Product other than in a manner that is permitted by this
Agreement;(v) infringement arising from Michaels Software or other material
provided by Michaels for access and use of Supplier in connection with the
Service; provided, that the exclusions described in clauses (i)(B) and (ii) will
not apply in the event that Supplier 

 

43

 

knew, or ought to have known, that such materials infringed upon the
proprietary or other rights of a third party);

 

(d)           Supplier shall
promptly notify Michaels if Supplier learns of any claim, pending or
threatened, or any fact upon which a claim could be made, that asserts that the
Services, Supplier Software, Supplier Equipment, Commissioned Materials, Work
Product and any other resources or items used by Supplier or furnished to
Michaels by Supplier or Supplier Agents in providing the Services, or Michaels’
receipt and use of the foregoing as contemplated under this Agreement may
infringe upon the proprietary rights of any third party;

 

(e)           without limiting
Supplier’s obligations under any applicable Statements of Work, Supplier shall
take all commercially reasonable best efforts to prevent any viruses, trojan
horses, worms, spyware, back doors, email bombs, malicious code or similar
items (collectively, “Malware”) to
be coded or introduced into the Systems by Supplier or Supplier Agents, and
shall use all reasonable efforts to prevent Malware from being introduced into
the System by any third parties; provided that in the event that Malware is
found to have been introduced into the Systems, Supplier shall use all
commercially reasonable best efforts to mitigate the effects of the Malware
and, if the Malware causes a loss of operational efficiency or loss of data,
mitigate and make all commercially reasonable best efforts to restore such lost
data;

 

(f)            Supplier shall take
all commercially reasonable best efforts to prevent any Software or Equipment
that would have the effect of disabling or otherwise shutting down all or any
portion of the Services is coded or introduced into the Systems.  With respect to any disabling code that may
be part of the Software, Supplier shall not invoke such disabling code at any
time (whether during or after the Term) for any reason.  If at any time the licensor of any Supplier
Third Party Software shall invoke or threaten to invoke any disabling code in
Supplier Third Party Software licensed to Supplier which could adversely affect
the Services, Supplier shall use its best efforts to preclude such action on
the part of such licensor;

 

(g)           neither Supplier nor
any Supplier Agents shall make any unauthorized representations on Michaels’
behalf or about Michaels, nor commit or bind Michaels other than as
specifically authorized;

 

(h)           Supplier or Supplier
Agents shall not, without the prior approval of Michaels (such approval to
include where approved as part of an applicable Statement of Work or Project or
where such Software is provided to Supplier by Michaels) include in any
Commissioned Materials or Michaels Derivative Works any software that is
subject to any “copyleft” or other obligation or condition (including any
obligation or condition under any “open source” license such as the GNU Public
License, Lesser GNU Public License, or Mozilla Public License) that:  (i) requires or conditions the use or
distribution of such software on the disclosure, licensing, or distribution of any
source code for any portion of such software; or (ii) could otherwise
impose any limitation, restriction, or condition on the right or ability of
Michaels to use or distribute such software;

 

(i)            any Commissioned
Materials and other deliverables provided by Supplier pursuant to this
Agreement shall:  (i) when delivered
and for an agreed warranty period of three months be free from defects in
materials, design, and workmanship; 

 

44

 

(ii) when delivered and for an agreed warranty period of three
months, perform in conformance with any applicable documentation, manuals,
specifications or requirements; and (iii) be free and clear of any liens,
claims, charges, debts or other encumbrances created or permitted by
Supplier.  If Michaels notifies any
errors or non-conformities during the testing period or applicable warranty
period, supplier shall as part of the Services, correct such error or
non-conformity, provided that Michaels shall compensate Supplier for any
additional efforts required by Supplier resulting directly from any
modification or misuse of the Commissioned Material or deliverable by Michaels;

 

(j)            With respect to a
Commissioned Material or deliverable agreed as part of New Services where the
pricing is on a fixed fee basis, unless otherwise agreed by the Parties, with
respect to any such Commissioned Materials: 
(i) if there is any defect or nonconformity during the applicable
warranty period, upon notice from Michaels, Supplier shall promptly, at its
sole cost and expense, correct or replace any such defect or nonconformity; and
(ii) if Supplier fails to do so within 15 days from receipt of notice (or
other time period agreed by the Parties), Michaels may at its option either
obtain from Supplier any amounts reasonably expended to correct or replace such
defect or nonconformity, or terminate the applicable New Service Proposal and
obtain a refund of amounts paid for such Commissioned Materials, provided that
the provisions of this Section 23.2(j) shall not apply and Michaels
shall compensate Supplier for any additional efforts required by Supplier
resulting directly from any modification or misuse of the Commissioned Material
by Michaels; and

 

(k)           all facilities at
Supplier Service Locations will be maintained and operated in accordance with all
applicable building codes and ordinances.

 

24.          DISPUTE
RESOLUTION.

 

24.1        Resolution
Procedures.  Except as otherwise
provided below, the Parties shall initially attempt to resolve any dispute
arising under or related to this Agreement (a “Dispute”) in accordance with the procedures set forth in this Section 24.1.

 

(a)           Account Managers.  Within 5 business days after either Party
furnishes to the other notice of a Dispute, the Michaels Account Manager and
the Supplier Account Manager shall consider the Dispute in person or by
telephone and shall attempt in good faith to resolve the Dispute for a period
of 5 business days.  If the Dispute is
not resolved, as agreed by the Parties, within such 5 business day period, the
Dispute shall be escalated in accordance with Section 24.1(b).

 

(b)           Vice Presidents.  If a Dispute is not resolved in accordance
with Section 24.1(a), a Vice President level executive of each of
Michaels and Supplier shall meet within 5 business days after a Party’s request
to discuss the Dispute in person at a Michaels Service Location designated by
Michaels (or by telephone if agreed by Michaels) and shall attempt in good
faith to resolve the Dispute for a period of 5 business days.

 

(c)           Supplier President.  If a Dispute is not resolved in accordance
with Section 24.1(b), Supplier shall make available within 5
business days after Michaels’ request Supplier’s President or Supplier’s ISU
Head to discuss the Dispute in person 

 

45

 

at a Michaels Service Location designated by Michaels (or by telephone
if agreed by Michaels) and the Parties shall attempt in good faith to resolve
the Dispute for a period of 5 business days. 
Unless the Parties otherwise agree, either Party may pursue its rights
and remedies under this Agreement after the expiration of such 5 business day
period.

 

24.2        Exclusions.  Notwithstanding the foregoing, no Dispute
relating to Section 15.3, Article 21, or Article 27
shall be subject to Section 24.1. 
In addition, nothing in this Agreement shall limit either Party’s right
to seek immediate injunctive or other equitable relief whenever the facts or
circumstances would permit a Party to seek such relief in a court of competent
jurisdiction.

 

24.3        Continuity
of Services.  Supplier acknowledges
that the timely and complete performance of its obligations pursuant to this
Agreement is critical to the business and operations of Michaels.  Accordingly, in the event of a Dispute
between Michaels and Supplier, Supplier and Michaels shall continue to perform
their respective obligations under this Agreement in good faith during the
resolution of such Dispute unless and until this Agreement is terminated in
accordance with the provisions hereof. 
This provision shall not operate or be construed as extending the Term
or prohibiting or delaying a Party’s ability to exercise an otherwise valid
right to terminate under this Agreement.

 

25.          TERMINATION.

 

25.1        Termination
for Convenience.  Michaels may terminate
this Agreement, in whole or in part, for convenience by giving Supplier notice
of the termination at least 120 days prior to the termination date specified in
the notice.

 

25.2        Termination
for Change in Control of Michaels. 
In the event of a Change in Control of Michaels, Michaels may terminate
this Agreement by giving Supplier notice of the termination at least 120 days
prior to the termination date specified in the notice.

 

25.3        Termination
for Change in Control of Supplier. 
In the event of a Change in Control of Supplier, Supplier shall notify
Michaels of such Change in Control and Michaels may terminate this Agreement by
giving Supplier notice of the termination at least 60 days prior to the
termination date specified in the notice provided Michaels exercises its
termination rights within 180 days after the receipt of notice of Change in
Control of Supplier from Supplier.

 

25.4        Termination
for Cause.

 

(a)           If Supplier fails to
perform any of its obligations under this Agreement in any material respect or
repeatedly fails to perform any of its obligations under this Agreement and the
cumulative effect thereof could reasonably be considered material, and does not
cure such breach within 30 days after receipt (the “Supplier Default Cure Period”) of a notice of breach from
Michaels (the “Supplier Default Notice”),
then Michaels may, without limiting Michaels’ other rights or remedies under
this Agreement, by giving notice to Supplier, terminate this Agreement, in
whole or in part, as of the termination date specified in the notice and
without payment of any Termination Fee.

 

46

 

(b)           If Michaels fails to
perform any of its obligations under this Agreement in any material respect
including failure to make payment of undisputed Fees and Charges due to
Supplier and does not cure such default within 30 days after receipt (the “Michaels Default Cure Period”) of a notice
of breach or default from Supplier (the “Michaels
Default Notice”), then Supplier may, by giving notice to Michaels,
terminate this Agreement in whole or part, as of the termination date specified
in the notice of termination.  The
foregoing is the only circumstance in which Supplier may terminate this
Agreement.

 

25.5        Termination
in Case of Insolvency.  Michaels or
Supplier may, by giving notice thereof to the other Party, terminate this
Agreement as of the date specified in such termination notice, if:

 

(a)           The other
Party:  (i) shall admit in writing
its inability to, or be generally unable to, pay its debts as such debts become
due; or (ii) shall:  (A) apply
for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee, examiner or liquidator of itself or of all or a
substantial part of its property or assets; (B) make a general assignment
for the benefit of its creditors; (C) commence a voluntary case under the
U.S. Bankruptcy Code; (D) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution,
arrangement or winding-up, or composition or readjustment of debts; (E) fail
to controvert in a timely and appropriate manner, or acquiesce in writing to,
any petition filed against it in an involuntary case under the Bankruptcy Code;
or (F) take any corporate, partnership or other action for the purpose of
effecting any of the foregoing; or

 

(b)           a proceeding or case
shall be commenced, without the application or consent of Supplier, in any
court of competent jurisdiction seeking: 
(i) its reorganization, liquidation, dissolution, arrangement or
winding-up, or the composition or readjustment of its debts; (ii) the
appointment of a receiver, custodian, trustee, examiner, liquidator or the like
of Supplier or of all or any substantial part of its property or assets; or (iii) similar
relief with respect to Supplier under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of debts,
and such proceeding or case shall continue undismissed, or an order, judgment
or decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 or more days; or

 

(c)           an order for relief
against the other Party shall be entered in an involuntary case under the
Bankruptcy Code.

 

25.6        Service
Level Failures.  Michaels may,
without limiting Michaels’ other rights or remedies under this Agreement, by
giving notice to Supplier, terminate the applicable Statement of Work or the
Agreement (if in connection with an IT or IS Statement of Work), in whole or in
part, as of the termination date specified in the notice and without payment of
any Termination Fee, if:  (a) there
are 3 consecutive Critical Service Level Defaults with respect to the same
Critical Service Level ; or (b) there are 6 Critical Service Level
Defaults with respect to any Critical Service Levels within any rolling 6-month
period, or (c) 75% percentage points or more of the Pool Percentage
Available for Allocation are accrued from Service Level Credits in any rolling
12 month period.]

 

47

 

25.7        Effect
of Termination. 
Upon termination of this Agreement or a portion thereof for any reason,
Michaels shall pay in accordance with Section 18, any Base Charges,
Charges and Pass-Through Expenses that are accrued through to the End Date with
respect to the terminated Services.  The
effect of termination on commitments pursuant to Section 18.10 are set
forth in Exhibit 4.

 

26.          TERMINATION
FEES

 

26.1        Termination
Fees.  Exhibit 4
sets forth the Termination Fees that may be payable to Supplier if this
Agreement is terminated pursuant to Section 25.1 or Section 25.2.  Any Termination Fees payable in accordance
with Exhibit 4 shall be due and payable on the End Date.

 

26.2        No
Other Termination Fees.  Except for the Termination Fees specified in Exhibit 4,
and the fees provided in Section 25.7, no termination fee or other
charge shall be payable by Michaels in connection with the termination of this
Agreement.  In addition, Supplier shall
not charge Michaels more than once for any amount included in any fee owed
pursuant to Exhibit 4 that relates to any resource for which
Supplier has already received or shall receive payment.

 

27.          TERMINATION
ASSISTANCE AND EXIT RIGHTS

 

27.1        Termination
Assistance.  Upon Michaels’ request at any time during the
Termination Assistance Period, Supplier shall provide, and shall cause Supplier
Agents to provide, all necessary assistance to allow the Services to continue
without interruption or adverse effect and to facilitate the orderly transfer
of the Services to Michaels or its designee (the “Successor”) during the Termination Assistance Period,
including the Termination Assistance Services, regardless of the reason for the
termination, expiration or cessation of Services.  The quality and level of performance of the
Services during the Termination Assistance Period shall be consistent with the
general quality and level of performance of the Services during the Term taking
into account the dependencies and activities of transition.  If this Agreement or any portion thereof is
terminated by Supplier pursuant to Section 25.4(b), prior to
requiring Supplier to perform any Termination Assistance Services, Michaels
shall pay all undisputed amounts then due and in such cases the fees for
Termination Assistance Services shall be paid in advance during each month that
Michaels requests Termination Assistance Services (subject to month end
adjustments).

 

27.2        Payment.  The Base Charges and the Charges and
applicable Pass-Through Expenses include all Termination Assistance Services
provided by Supplier during the Term, and Supplier shall not charge Michaels
any variable or other fees for such services unless mutually agreed by the
Parties through the Change Management Process for an agreed Statement of
Work.  For Termination Assistance
Services provided by Supplier after the last day of the Term, Supplier shall
provide such services:  (a) in the
case of Termination Assistance Services that are Services, at the rates in
effect for such Services immediately prior to termination or expiration of the
Agreement and (b) for Termination Assistance Services for which no rates
exist immediately prior to such termination or expiration, at Supplier’s
standard commercial rates then in effect, subject to discounts consistent with
the discounts applied under this Agreement or Supplier’s most favorable rates
for similarly situated customers for all other services, whichever is 

 

48

 

lower. 
Termination Assistance Services provided after the last day of the Term
shall be subject to the provisions of the Agreement as such provisions would
have been applicable to the Services prior to the effective date of termination
or expiration.   Notwithstanding the
foregoing, if Michaels terminates this Agreement pursuant to Section 25.4(a),
Supplier shall provide all Termination Assistance Services (other than the
Services) to Michaels without charge. 
After the End Date, Supplier shall: 
(x) answer questions from Successors regarding the Services at the
applicable time and materials rates for such services set forth in the
Agreement; and (y) deliver to Michaels or Successor any Michaels-Owned
Materials and any other remaining Michaels-owned reports and documentation
still in Supplier’s possession; and (z) notify Michaels of all records,
supporting documentation and Confidential Information of Michaels retained by
Supplier pursuant to Section 20.5, or to which Section 21.4
applies and return all such records, supporting documentation and Confidential
Information to Michaels upon Michaels’ request.

 

27.3        Exit
Rights.

 

(a)           Provision of Michaels Materials.  At Michaels’ request at any time during the
Termination Assistance Period, Supplier shall, and shall cause Supplier Agents
to, deliver to Michaels, at no cost to Michaels, a current copy of the
Michaels-Owned Materials not previously delivered to Michaels and any other
materials in Supplier’s possession to which Michaels obtains a license pursuant
to this Agreement or otherwise has the right to possess a copy of, in the form
used to provide the Services as of the time of Michaels’ request, in object
code form in the case of any of the foregoing that are Software).  If such request is made after the last day of
the Term, Supplier shall provide all such materials used to provide the
Services as of the last day of the Term as well as all such materials developed
or used to provide the Services during the Termination Assistance Period.  The rights granted to Supplier and Supplier
Agents in Article 14 shall immediately terminate on the End Date,
and Supplier shall, and shall cause Supplier Agents to, destroy or erase all
copies of the Michaels-Owned Materials then in Supplier’s or Supplier Agents’
possession.  Supplier shall, upon
Michaels’ request, certify to Michaels that all such copies have been destroyed
or erased.

 

(b)           Supplier Proprietary Software.   Upon Michaels’ request at any time during
the Termination Assistance Period, Supplier shall offer to grant to Michaels or
Successor, subject to parties entering into Supplier’s standard software
license agreement used by Supplier, any commercially offered Supplier
Proprietary Software and any non-commercially offered Supplier Proprietary
Software for maintenance purposes only at Supplier’s then current price for
similar license and/or maintenance , as applicable, offered on a Most Favored
Customer pricing,, any or all Supplier Proprietary Software used to provide the
Services as of the time of Michaels’ request, or, if such request is made after
the last day of the Term, used to provide the Services as of the last day of
the Term, in each case as requested by Michaels.  Upon Michaels’ request, Supplier shall
provide to Michaels or Successor support and maintenance services for any
Supplier Proprietary Software licensed under this Section 27.3(b) on
terms, conditions, and prices agreed upon by Supplier and Michaels or
Successor, as applicable, which shall in no event be less favorable to Michaels
or Successor than Supplier’s most favorable terms, conditions, and prices for
such services provided to similar customers.]

 

49

 

(c)           Supplier Third Party Software.  Upon Michaels’ request at any time
during the Termination Assistance Period, with respect to Supplier Third Party
Software used to provide the Services as of the time of Michaels’ request, or,
if such request is made after the last day of the Term, then used to provide
the Services as of the last day of the Term, Supplier shall, and shall cause
Supplier Agents to:

 

(i)            assign
to Michaels or Successor, at Michaels’ option, the license agreements for which
Supplier obtained assignment rights pursuant to Section 14.3
applicable to such Software, and

 

(ii)           use
commercially reasonable best efforts to obtain for Michaels on reasonable
terms, licenses for all applicable Supplier Third Party Software not subject to
assignment under Section 27.3(c)(i), such that:  (A) Michaels may Use, and sublicense to
third parties the right to Use, such Software in connection with Michaels’ use,
provision (to itself) or receipt from Successor of services similar to the
Services; or (B) Successor may Use, and sublicense to third parties the
right to Use, such Software in connection with the provision of services
similar to the Services to Michaels

 

Upon Michaels’ request, Supplier shall reasonably assist Michaels or
Successor in obtaining directly from third parties any Software or substitute
therefor for which Michaels or Successor does not assume the applicable third
party agreements.

 

(d)           Leases, Service Agreements, and Equipment.  Upon Michaels’ request at any time during the
Termination Assistance Period, Supplier shall, and shall cause Supplier Agents
to:  (i) assign to Michaels or its
designee leases for the Equipment used primarily to provide the Services as of
the last day of the Term; (ii) assign to Michaels any contracts for
services provided by third parties dedicated to the Services; and (iii) sell
to Michaels, at the lesser of Supplier’s then-current book value or fair market
value, some or all of the Equipment owned by Supplier or Supplier Agents and
used primarily to provide the Services (and all user and other documentation in
its possession that relates to such Equipment) free and clear of all liens,
security interests or other encumbrances. 
Supplier shall grant to Michaels a warranty of title with respect to all
such Equipment.  Supplier shall also represent
and warrant that any leases associated with any such Equipment are not in
default and that all payments thereunder have been made through the date of
transfer to Michaels.  Upon Michaels’
request, Supplier shall, and shall cause Supplier Agents to, reasonably assist
Michaels or Successor in obtaining directly from third parties any third party
services.

 

(e)           Network Services.  To the extent that Supplier has incorporated
Michaels’ network into any Supplier network, Supplier shall, and shall cause
Supplier Agents to, continue to provide up to 2 years of continued network
services after the End Date at the then current rates in the Agreement for such
service as requested by Michaels, in order to permit Michaels or Successor to
establish its own network in an orderly manner.

 

28.          INDEMNITIES.

 

28.1        Indemnity
by Michaels.  Michaels shall
indemnify Supplier, its Affiliates, and their respective directors, officers
and employees from, and defend and hold Supplier harmless from and against, any
Losses suffered, incurred or sustained by Supplier 

 

50

 

or to which Supplier becomes subject,
resulting from, arising out of or relating to any third party claim:

 

(a)           that the Michaels
Software, Systems or other material provided by Michaels infringes upon the
proprietary rights of any third party except to the extent caused by:  (i) a modification to the Michaels
Software:  (A) by Supplier or
Supplier Agents; or (B) that was not made by or at the written direction
of Michaels or as expressly authorized under the applicable Statement of Work; (ii) 
compliance by Michaels with written specifications provided by Supplier]; (iii) Supplier’s
combination of the Michaels Software with items not provided or recommended by
Michaels; or (iv) Supplier’s use of the Michaels Software other than in a
manner that is permitted by this Agreement;

 

(b)           relating to the
material inaccuracy, untruthfulness or breach of any representation or warranty
made by Michaels in Article 22;

 

(c)           relating to:  (i) a violation of Law for the
protection of persons or members of a protected class or category of persons by
Michaels or Michaels Agents, including unlawful discrimination; (ii) accrued
employee benefits not expressly assumed by Supplier; (iii) any
representations, oral or written, made by Michaels or Michaels Agents to the Affected
Employees or Affected Contractors; and (iv) any other aspect of the
Affected Employees’ or Affected Contractors’ (including Transitioned Employees)
employment or other relationship with Michaels or termination thereof by
Michaels (including claims for breach of an express or implied contract of
employment);

 

(d)           relating to Michaels’
or Michaels Agents’ failure to obtain, maintain or comply with the Michaels
Governmental Approvals or failure to obtain or maintain the Consents;

 

(e)           relating to any amounts,
including taxes, interest and penalties, assessed against Supplier which are
the obligation of Michaels pursuant to Article 19;

 

(f)            relating to personal
injury (including death) or property loss or damage resulting from Michaels’ or
Michael’s Agent’s acts or omissions;

 

(g)           relating to a breach
of Article 21;

 

(h)           relating to a breach
of any of the covenants in Section 23.1;

 

(i)            relating to any
claim under an Assigned Agreement that relates to the period prior to the
Assignment Date, except to the extent that the Parties agree otherwise;

 

(j)            arising out of
Supplier’s compliance with any written instructions or written guidelines
provided to Supplier by Michaels regarding the performance or completion of any
business process (as part of the business process services); except to the
extent that Supplier knew, or ought to have known, that such instructions
infringed upon the proprietary or other rights of a third party; and

 

(k)           relating to a breach
of a Managed Agreement by Michaels.

 

51

 

Michaels shall indemnify Supplier from any costs and expenses incurred
in connection with the enforcement of this Section 28.1.

 

28.2        Indemnity
by Supplier.  Supplier shall
indemnify Michaels, its Affiliates and their respective directors, officers and
employees from, and defend and hold Michaels harmless from and against, any
Losses suffered, incurred or sustained by Michaels or to which Michaels becomes
subject, resulting from, arising out of or relating to any third party claim:

 

(a)           that the Services,
Supplier Software, Supplier Equipment, Commissioned Materials, Work Product and
any other resources or items used by Supplier or furnished to Michaels by
Supplier or Supplier Agents in the provision of the Services (collectively, “Materials”) infringe upon the proprietary
or other rights of any third party (except to the extent such claim is based
on:  (i) a modification to the
Materials: (A) by Michaels or Michaels Agents (other than Supplier); or (B) that
was not made by or at the written direction of the Supplier; (ii) compliance
by Supplier with written specifications provided by Michaels; (iii) Michaels’
combination of the Materials with items not provided or recommended by
Supplier; (iv) Michaels’ use of the Materials other than in a manner that
is permitted by this Agreement; or (v) infringement arising from any
Michaels Software or Michaels Owned Material: 
provided, that the exclusions described in clauses (i)(B) and (ii) will
not apply in the event that Supplier knew, or ought to have known, that such
materials infringed upon the proprietary or other rights of a third party);

 

(b)           relating to the
Services or this Agreement brought by a Supplier Agent or personnel thereof,
including any disputes between Supplier and Supplier Agents;

 

(c)           by a Supplier
customer to whom Supplier provides services from a Supplier Service Location,
which claim relates to any Michaels Data at such location or Supplier’s
provision of Services to Michaels from such location;

 

(d)           relating to the
inaccuracy, untruthfulness or breach of any representation or warranty made by
Supplier in Article 22;

 

(e)           relating to Supplier’s
or Supplier Agents’ failure to obtain, maintain or comply with the Supplier
Consents and Supplier Governmental Approvals or to comply with the Consents;

 

(f)            relating to:  (i) a violation of Law for the
protection of persons or members of a protected class or category of persons by
Supplier or Supplier Agents, including unlawful discrimination; (ii) accrued
employee benefits not expressly retained by Michaels; (iii) any
representations, oral or written, made by Supplier or Supplier Agents to
Michaels employees or contractors, including the Affected Employees and
Affected Contractors; and (iv) any other aspect of the Affected Employees’
or Affected Contractors (including Transitioned Employees) employment or other
relationship with Supplier or termination thereof by Supplier;

 

(g)           relating to any
amounts, including taxes, interest and penalties, assessed against Michaels that
are the obligation of Supplier pursuant to Article 19;

 

52

 

(h)           relating to personal
injury (including death) or property loss or damage resulting from Supplier’s
or Supplier Agents’ acts or omissions;

 

(i)            relating to a
breach of Supplier’s obligations with respect to Michaels Data (including Article 15);

 

(j)            relating to any
fine or other penalty imposed by Law arising as a result of a breach of any of
Supplier’s obligations under this Agreement;

 

(k)           relating to a breach
of Article 21;

 

(l)            relating to a
breach of any of the covenants in Sections 23.2(b) and 23.2(g);

 

(m)          relating to a breach
of Supplier of its obligation with respect to Managed Agreements ; or

 

(n)           relating to Supplier’s
failure to comply with the terms of an Assigned Agreement as they relate to the
period after the date of assignment.

 

Supplier shall indemnify Michaels from any costs and expenses incurred
in connection with the enforcement of this Section 28.2.

 

28.3        Obligation
to Replace.  In
the event that any use of the Services, any technology used to provide the
Services, or any item provided to Michaels by Supplier or Supplier Agents, in
the provision of the Services is, or in Michaels’ opinion is likely to be found
to infringe upon or misappropriate the Intellectual Property Rights of any
third party or enjoined, Supplier shall, with Michaels’ consent and at Supplier’s
own cost and expense and in such a manner as to minimize disturbance to
Michaels’ business activities:

 

(a)           obtain for Michaels
the right to continue using the Services, any technology used to provide the
Services, or any item provided to Michaels by Supplier or Supplier Agents; or

 

(b)           modify or replace
the Services, any technology used to provide the Services, or any item provided
to Michaels by Supplier or Supplier Agents, so that it is no longer infringing
(provided that such modification or replacement does not degrade the
functionality, performance or quality of the affected component of the
Services).

 

In addition to the remedies set forth above, Supplier shall remain
responsible for providing Services in accordance with this Agreement.  If Supplier is unable, after using all
reasonable efforts, to promptly implement the measures described in Sections 28.3(a) or
28.3(b) Michaels may, upon notice to Supplier:  (i) obtain from a third party or itself
provide those Services which Supplier failed to provide, and adjust the Fees to
account for the corresponding reduction in Services after good faith
discussions with Supplier regarding such adjustment; or (ii) terminate
this Agreement, in whole or in part, without payment of any Termination Fee, as
of the date specified by Michaels in its notice of termination.

 

53

 

28.4        Indemnification
Procedures.  If
any third party claim is commenced against a person or entity entitled to
indemnification under Section 28.1 or Section 28.2 (the
“Indemnified Party”), notice
thereof shall be given to the Party that is obligated to provide
indemnification (the “Indemnifying Party”)
as promptly as practicable.  If, after
such notice, the Indemnifying Party acknowledges that this Agreement applies
with respect to such claim, then the Indemnifying Party shall be entitled, if
it so elects, in a notice promptly delivered to the Indemnified Party, but in
no event less than 10 days prior to the date on which a response to such claim
is due, to immediately take control of the defense and investigation of such
claim and to employ and engage attorneys reasonably acceptable to the
Indemnified Party to handle and defend the same, at the Indemnifying Party’s
sole cost and expense.  The Indemnified
Party shall cooperate, at the cost of the Indemnifying Party, in all reasonable
respects with the Indemnifying Party and its attorneys in the investigation,
trial and defense of such claim and any appeal arising therefrom; provided,
however, that the Indemnified Party may, at its own cost and expense,
participate, through its attorneys or otherwise, in such investigation, trial
and defense of such claim and any appeal arising therefrom.  No settlement of a claim that involves a
remedy other than the payment of money by the Indemnifying Party shall be
entered into without the consent of the Indemnified Party.  After notice by the Indemnifying Party to the
Indemnified Party of its election to assume full control of the defense of any
such claim, the Indemnifying Party shall not be liable to the Indemnified Party
for any legal expenses incurred thereafter by such Indemnified Party in
connection with the defense of that claim. 
If the Indemnifying Party does not assume full control over the defense
of a claim subject to such defense as provided in this Section 28.4,
the Indemnifying Party may participate in such defense, at its sole cost and
expense, and the Indemnified Party shall have the right to defend the claim in
such manner as it may deem appropriate, reserving its right to claim the cost
and expense of the Indemnifying Party from the Indemnifying Party.

 

29.          DAMAGES.

 

29.1        Consequential
Damages.  Neither Michaels nor
Supplier shall be liable for any indirect, incidental, special, or
consequential damages (including lost profit or loss of data), arising out of
or relating to its performance or failure to perform under this Agreement, even
if advised of the possibility of such damages.

 

29.2        Direct
Damages.

 

(a)           Definition of Direct Damages.  Each Party shall be liable to the
other Party for any direct damages arising out of or relating to such Party’s
performance or failure to perform under this Agreement.  The following shall be deemed to be direct
damages of a Party:  (i) costs of
reconstructing or reloading data; (ii) costs of implementing and
performing work-arounds regarding a service failure; (iii) costs of
replacing lost, stolen or damaged goods or materials; (iv) costs to
procure replacement services from an alternate source as a result of a failure
to perform, to the extent in excess of the applicable Fees; (v) overtime,
straight time and related expenses and allocated overhead (including travel,
lodging, wages) as a result of a failure to perform; (vi) payments or
penalties imposed by a governmental or regulatory body as a result of a failure
to comply; and (vii) in the case of Michaels, costs incurred by Michaels
in transitioning the Services to another supplier or to Michaels’ internal
staff in connection with Michaels’ termination of this Agreement in whole or in
part in accordance with Section 25.4(a).

 

54

 

(b)           Cap on Direct Damages.  Notwithstanding Section 29.2(a),
the aggregate and total liability of each of Michaels and Supplier under this
Agreement, whether based on an action or claim in contract, equity, negligence,
tort or otherwise, for any event, act or omission shall not exceed an amount
equal to the sum of the aggregate of:  (i) Fees
paid for the 15 consecutive month-period immediately preceding the date of the
first occurrence of the applicable event, act, or omission giving rise to such
damages (or if less than 15 months have elapsed since the Effective Date, then
15 times the average monthly Fees paid during the elapsed time since the
Effective Date); and (ii) the Service Level Credits incurred to date by
Supplier on the date such damages are awarded.

 

29.3        Exclusions.  The limitations or exculpations of liability
set forth in Section 29.1 and Section 29.2 shall not
apply to:  (a) the failure of:  (i) Michaels to make payments of
undisputed Fees; or (ii) Supplier to issue credits (including Reduced
Resource Credits and Service Level Credits) or otherwise make payments due
under this Agreement; (b) a Party’s indemnification obligations, as set
forth in Article 28; (c) breaches of Articles 14
and 21, and Sections 4.5 and 4.6; (d) Supplier
obligations with respect to Michaels Data (including Sections 15.4 and
15.5); (e) any amounts, including taxes, interest and penalties,
assessed against a Party that are the obligation of the other Party pursuant to
Article 19; (f) liability resulting from the fraud, – gross
negligence intentional or willful misconduct of a Party;  or (g) fines, sanctions, damages,
judgments or other penalties imposed on a Party by a Governmental Authority as
a result of a breach of such party’s obligations under this Agreement .

 

Further, the Cap on Direct Damages set forth in Section 29.2(b) shall
not apply for (a) liability of either Party for wrongful termination of
this Agreement or a Statement of Work; or (b) Supplier’s abandonment of
its obligation to provide the Services or to perform any other work or refusal
to provide the Services in breach of this Agreement.

 

30.          INSURANCE.

 

30.1        Documentation.  Supplier shall provide to Michaels within 10
business days after the Effective Date evidence of all insurance required hereunder,
and thereafter at any time any insurance policy covered in this Article 30
is renewed, or upon request by Michaels, during the Term and the Termination
Assistance Period (except with respect to “claims made” policies for which
Supplier shall provide evidence of insurance for 3 years after the End
Date).  The insurance companies providing
such insurance must have an A.M. Best rating of A-IX or better and be licensed or authorized
to conduct business in all states in which Michaels does business.  Michaels shall have the right to require
Supplier to obtain the insurance required under this Article 30
from another insurance carrier in the event Michaels determines that Supplier’s
then current insurance carrier does not have an A.M. Best rating of A-IX or better or is not licensed or
authorized to conduct business in all states in which Michaels does
business.  All policies and certificates
of insurance shall be written as primary policies with respect to Services performed
and products supplied by Supplier and Supplier Agents and not written as
policies contributing to, or to be used in excess of the Michaels insurance
policies or any self-insurance program in which Michaels may participate with
respect to such Services and products, unless due to the gross negligence or
willful misconduct of Michaels.  The
provisions of this Article 30 shall in no way limit the liability
of Supplier.  The obligations under this Article 30
are mandatory; failure of Michaels to request certificates of insurance or
insurance policies shall not constitute a waiver of

 

55

 

Supplier’s obligations and requirements to
maintain the minimal coverages specified. 
Supplier shall maintain, in its files, evidence of all subcontractors’
insurance coverage.

 

30.2        Types
and Amounts. 
During the Term and the Termination Assistance Period, and at its own
cost and expense, Supplier shall, and shall cause all Supplier Agents to,
obtain and maintain the following insurance coverage:

 

(a)           Commercial General
liability insurance with a combined single annual aggregate limit of not less
than $5,000,000 (“CGL”).

 

(b)           Errors and Omission
insurance, including unauthorized use of or unauthorized access to Supplier’s
computer systems that results in a breach of privacy, in an amount not less
than $10,000,000 per claim and not less than $10,000,000 in the aggregate.

 

(c)           Workers’
compensation insurance and other insurance as required by statute in the state
in which the work shall be performed. 
Coverage shall include Employers Liability with a limit not less than
$1,000,000 for each occurrence (“WCEL”).

 

(d)           Automobile Liability
insurance covering owned and unowned vehicles with a combined single limit of
not less than $1,000,000 for each occurrence (“BAL”).

 

(e)           Excess risk property
insurance covering all risk of physical loss or damage, including as a result
of flood or earthquake, for the replacement value of any Michaels-owned
property at Supplier’s premises.

 

(f)            All risk property
insurance covering all risk of physical loss or damage, including as a result
of flood or earthquake, for the replacement value of any Michaels-owned
property and papers on Supplier’s premises.

 

(g)           Employee Dishonesty
coverage, naming Michaels as loss payee, for loss arising out of, or in
connection with, any fraudulent or dishonest acts committed by Supplier
employees acting alone or with others, including loss of property that is owned
by Michaels or held by Michaels in any capacity for which Michaels is legally
liable, in the amount of $5,000,000 per occurrence.

 

(h)           If Supplier
purchases “claims made” insurance, all acts and omissions of Supplier and its
representatives and agents, shall be, during the Term and the Termination
Assistance Period, “continually covered” notwithstanding the termination of
this Agreement or the provisions of this Agreement allowing Supplier to
purchase “claims made” insurance coverage. 
In order for the acts and omissions of Supplier and its representatives
and agents to be “continually covered” there must be insurance coverage for the
entire period commencing on the Effective Date of this Agreement and ending on
the date that is at a minimum three years after the End Date, and such
insurance must satisfy the liability coverage requirements provided for in this
Agreement.  Supplier acknowledges and
agrees that the provisions of this Article 30 may require Supplier
to purchase “tail insurance” if its coverage lapses or “nose insurance” or “tail
insurance” if Supplier changes insurance carriers, even after this Agreement is
terminated.  Upon any failure by Supplier
to obtain and maintain any insurance coverage specified in this Section 30.2,
without limiting Michaels’ other rights and remedies, Michaels may, at its sole
discretion (following cure notice of not less than 15 days): (i) purchase
such insurance coverage on 

 

56

 

Supplier’s behalf and deduct any such purchase and maintenance costs
from the Fees; or (ii) terminate this Agreement without payment of any
Termination Fees.

 

30.3        Policy
Requirements. 
Michaels and Michaels Agents shall be listed on all such insurance
policies (except workers’ compensation insurance) obtained by Supplier and
Supplier Agents as “Additional Insureds” up to the amount required of Supplier
under this Agreement, and such policies shall expressly reference this
Agreement with respect to Michaels’ status as “Additional Insured”.  If a “claims made” policy is purchased, then
Supplier shall also purchase adequate “tail coverage” for claims made against
Michaels after such policy has lapsed or been canceled or this Agreement is no
longer in effect.  The provisions of Section 30.2
shall not be deemed to limit the liability of Supplier hereunder, or limit any
rights that Michaels may have including, without limitation, rights of
indemnity or contribution.

 

30.4        Risk
of Loss.  Each
Party is responsible for the risk of loss of, or damage to, any property of the
other Party in the possession or control of the first Party, unless such loss
or damage was caused by the acts or omissions of the other Party or its Agent.

 

31.          MISCELLANEOUS
PROVISIONS.

 

31.1        Assignment.  Neither Party shall, without the consent of
the other Party, assign this Agreement, except that Supplier may assign this
Agreement, in whole or part, to an Affiliate or business unit of Supplier and
that Michaels may assign this Agreement, in whole or in part, to:  (a) an Affiliate or business unit of
Michaels; or (b) pursuant to a Change in Control of Michaels, a
reorganization of Michaels, or a transfer or sale of any business unit, line of
business, product line, or substantial portion of its assets, without such
consent.  Assignment of this Agreement
shall not release a Party from any obligation or liability under this
Agreement.  The consent of a Party to any
assignment of this Agreement shall not constitute such Party’s consent to
further assignment.  This Agreement shall
be binding on the Parties and their respective successors and permitted
assigns.  Any assignment in contravention
of this Section 31.1 shall be void.

 

31.2        Notices.  Wherever under this Agreement one Party is
required to give notice to the other, such notice shall be deemed
effective:  (a) 3 calendar days
after deposit in the United States Mail, postage prepaid, certified or
registered mail, return receipt requested; (b) 1 business day after
deposit with a national overnight courier; (c) if given by facsimile, that
day such facsimile is sent, provided confirmation of such notice is also sent
by national overnight courier or delivered in person; or (d) upon delivery
if delivered in person or by messenger, in each case, addressed to the
following addresses (or such other address as either party may be notified of
as described above):

 

	
  To Michaels:

  	
  Michaels Stores, Inc

  
	
   

  	
  Attention:

  
	
   

  	
   

  
	
  With a copy to:

  	
  Michaels Stores, Inc

  
	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  
	
  To Supplier:

  	
  Tata America International Corporation

  
	
   

  	
  Attn: General Counsel

  

 

57

 

Either Party may change its address or
facsimile number for notification purposes by giving the other Party 10 days
notice of the new address or facsimile number and the date upon which it shall
become effective.

 

31.3        Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one single agreement between the Parties.

 

31.4        Relationship.  The Parties intend to create an independent
contractor relationship and nothing contained in this Agreement shall be
construed to make either Michaels or Supplier partners, joint venturers,
principals, agents (except as expressly set forth in Article 8) or
employees of the other.  No officer,
director, employee, agent, affiliate or contractor retained by Supplier to
perform work on Michaels’ behalf under this Agreement shall be deemed to be an
employee, agent or contractor of Michaels. 
Neither Party shall have any right, power or authority, express or
implied, to bind the other.

 

31.5        Severability.  If any provision of this Agreement is held by
a court of competent jurisdiction to be contrary to Law, then the remaining
provisions of this Agreement, if capable of substantial performance, shall
remain in full force and effect.

 

31.6        Waivers.  No delay or omission by either Party to
exercise any right or power it has under this Agreement shall impair or be
construed as a waiver of such right or power. 
A waiver by any Party of any breach or covenant shall not be construed
to be a waiver of any succeeding breach or any other covenant.  All waivers must be signed by the Party
waiving its rights.

 

31.7        Timing
and Cumulative Remedies.  No right or remedy herein conferred upon or
reserved to either Party is exclusive of any other right or remedy, and each
and every right and remedy shall be cumulative and in addition to any other
right or remedy under this Agreement, or under applicable law, whether now or
hereafter existing.

 

31.8        Entire
Agreement.  This
Agreement and the Exhibits to this Agreement represent the entire agreement
between the Parties with respect to its subject matter, and there are no other
representations, understandings or agreements between the Parties relative to
such subject matter.

 

31.9        Amendments.  No amendment to, or change, waiver or discharge
of, any provision of this Agreement shall be valid unless in writing and signed
by, in the case of Michaels, the Michaels Account Manager, and in the case of
Supplier, the Supplier Account Manager.

 

31.10      Survival.  The terms of Sections  1, 14,
15, 18.2, 18.3, 18.4, 19.1, 20.5, 21,
22.3, 26,  27, 28, 29 and 31 shall
survive the expiration or termination of this Agreement.

 

31.11      Third
Party Beneficiaries. 
Except with respect to the Affiliates, each Party intends that this
Agreement shall not benefit, or create any right or cause of action in or on
behalf of, any person or entity other than the Parties.

 

58

 

31.12      Governing Law and Venue.  The rights and obligations of the parties
under this Agreement shall be governed in all respects by the laws of the
United States and the State of Texas, without regard to conflicts of laws
principles that would require the application of the laws of any other
jurisdiction.  Supplier agrees that it
shall only bring any action or proceeding arising from or relating to this
Agreement in a federal court in Dallas, Texas, and Supplier irrevocably submits
to the personal jurisdiction and venue of any such court in any such action or
proceeding or in any action or proceeding brought in such courts by
Michaels.  Supplier further irrevocably
consents to the service of process from any of the aforesaid courts by mailing
copies thereof by registered or certified mail, postage prepaid, to Supplier at
its address designated pursuant to this Agreement, with such service of process
to become effective 30 days after such mailing. TO THE FULLEST EXTENT PERMITTED
BY LAW, EACH PARTY HEREBY WAIVE ITS RIGHT TO SEEK JURY TRIAL IN ANY PROCEEDINGS
RELATING TO OR ARISING FROM THIS AGREEMENT.

 

31.13      Covenant
of Further Assurances. 
Michaels and Supplier covenant and agree that, subsequent to the
execution and delivery of this Agreement and, without any additional
consideration, each of Michaels and Supplier shall execute and deliver any
further legal instruments and perform any acts that are or may become necessary
to effectuate the purposes of this Agreement.

 

31.14      Export.  Supplier shall not knowingly export or
re-export any personal computer system, part, technical data or sub-elements
under this Agreement, directly or indirectly, to any destinations prohibited by
the United States Government.  The term “technical
data” in this context, means such data as is defined as technical data by
applicable United States export regulations.

 

31.15      Conflict
of Interest. 
Supplier shall not pay any salaries, commissions, fees or make any
payments or rebates to any employee or agent of Michaels, or to any designee of
such employee or agent, or favor any employee or agent of Michaels, or any
designee of such employee or agent, or otherwise provide any gifts,
entertainment, services or goods to such employees or agents that are of a
value in excess of that which is reasonable and customary in Michaels’
industry, which might unduly influence Michaels’ actions with respect to
Supplier, which might embarrass Michaels if revealed publicly, or which might
violate any Law (collectively, “Gratuities”).  Supplier agrees that its obligation to
Michaels under this Section 31.15 shall also be binding upon
Supplier Agents.  Supplier further agrees
to insert the provisions of this Section 31.15 in each contract
with a Supplier Agent.  If Supplier has,
before or after the Effective Date, provided any Gratuities in violation of
this Section 31.15, Michaels may, upon notice to Supplier,
terminate this Agreement, in whole or in part, without payment of any
Termination Fee, as of the date specified by Michaels in its notice of
termination.

 

31.16      Publicity
..  Supplier will
not use Michaels’ trade name, brands, or company logo in any manner whatsoever,
except as agreed by Michaels in a separate written communication by a Vice
President or above.  Michaels may revoke
any approval previously provided by Michaels upon reasonable notice to
Supplier.  Except as provided in such
approval by Michaels, Supplier shall not make any statement, advertisement or
publicity, nor issue any marketing letter disclosing the existence, terms or
the subject matter of this Agreement without the specific prior approval of
Michaels.  [The next page is the signature page.]

 

59

 

IN WITNESS WHEREOF,
each of Michaels and Supplier has caused this Agreement to be signed and
delivered by its duly authorized representative.

 

 

	
  Tata
  America International Corporation,

  operating as TCS America

  	
   

  	
  Michaels
  Stores, Inc

  and its Subsidiaries

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Satyanarayan S. Hegde

  	
   

  	
  /s/ Elaine D. Crowley

  
	
  Signature

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
    Satyanarayan S. Hegde

  	
   

  	
     Elaine D. Crowley

  
	
  Name

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  
	
  General Counsel &
  Senior Vice President

  	
   

  	
  EVP & CFO

  
	
  Title

  	
  Date
  January 16, 2009

  	
   

  	
  Title

  	
  Date
  January 16, 2009

  
					

 

60

EXECUTION COPY

 

 

DEFINITIONS

 

EXHIBIT
1

 

TO

 

MASTER SERVICES AGREEMENT

 

 

BY AND BETWEEN

 

 

MICHAELS STORES, INC

 

 

AND

 

 

TATA AMERICA INTERNATIONAL CORPORATION

 

 

JANUARY 16, 2009

 

 

“Affected
Contractors” means those Michaels contractors some or
all of whose functions, services or responsibilities become the Services to be
performed by Supplier after the Effective Date as contemplated and in
accordance with the provisions of the Agreement.

 

“Affected
Employees” means those Michaels employees some or all
of whose functions, services or responsibilities become the Services to be
performed by Supplier after the Effective Date as contemplated and in
accordance with the provisions of the Agreement.

 

“Affiliate”
means, with respect any entity, any other entity that now or in the future is
Controlling, Controlled by, or under common Control with the entity, and in the
case of Michaels, includes any other entity that now or in the future:  (a) is managed or operated by Michaels,
or (b) is owned through stock ownership by a shareholder of Michaels.

 

“Agreement”
has the meaning set forth in the Preamble of the Agreement.

 

“Applicable
Terms” has the meaning set forth in Section 8.3
of the Agreement.

 

“Assigned
Agreements” means the third party agreements that are
assigned to Supplier in connection with the Agreement, if any, and designated
as Assigned Agreements in Exhibit 9.

 

“At Risk
Amount” means, with respect to a Statement of Work,
for any month during the Term, 10% of the Fees paid or payable by Michaels
under that Statement of Work in that month.

 

“Auditors”
has the meaning set forth in Section 20.1
of the Agreement.

 

“Authorized
Users” means Michaels, Michaels Agents and customers,
business partners, vendors and joint venture partners whose relationship with
Michaels involves the use of or interaction with the Services, including
Michaels Third Party Contractors (to the extent that such Michaels Third Party
Contractors are performing services for Michaels and need access to Michaels
systems).

 

“Background
Technology” of a Party means all Intellectual Property
that:  (a) is:  (i) owned or licensed by such Party; and
(ii) in existence in electronic or written form on or prior to the
Effective Date; or (b) is conceived and reduced to practice, developed,
acquired, or licensed by such Party after the Effective Date independently of
the work undertaken pursuant to the Agreement.

 

“Base
Charges” means the monthly charges for the Base
Services which charges are calculated in accordance with Exhibit 4
and/or the Pricing Exhibit to the applicable Statement of Work.

 

“Base
Services” means the services and Supplier’s obligations thereto
covered by the Base Charges as specified or described in Exhibit 4 and/or
in the Pricing Exhibit to the applicable Statement of Work included in Exhibit 2,
including the application of Section 4.1 of the Agreement, as
applicable.

 

1

 

“Benchmark
Results” means the final results of the Benchmarking
Process delivered by the Benchmarker in a written report to Michaels and
Supplier, including any supporting documentation requested by Michaels or
Supplier to analyze the results of the Benchmarking Process.

 

“Benchmark
Review Period” means the 30-day period following
receipt by Michaels and Supplier of the Benchmark Results.

 

“Benchmarker”
means a third Party specified on Exhibit 19 that shall conduct the
Benchmarking Process.

 

“Benchmarking
Process” means the objective measurement and
comparison process established in accordance with Section 10.3 of
the Agreement that measures the performance and cost to Michaels of the
Services against the performance and cost of similar services in the industry.

 

“Change
Management Process” means the process and procedures
applicable to all Changes, including changes in the Systems, the Services and
the Michaels information technology environment, as such process is set forth
in Exhibit 5.

 

“Change in
Control” means any event or series of events that
result directly or indirectly in a change in the management or Control of a Party.  Without limiting the generality of the
foregoing, the following shall be considered a Change in Control:  (a) the consolidation or merger of a
Party with or into any entity; (b) the sale, transfer or other disposition
of all or substantially all of the assets of a Party; or (c) any change in
the beneficial ownership of 50% or more (or such lesser percentage that
constitutes Control) of the outstanding voting securities or other ownership
interests of a Party.  Notwithstanding
the foregoing, any corporate reorganization among Affiliates shall not be
considered to be a Change in Control.

 

“Change(s)”
means any change to the Services, including changes to the Software, Systems or
Equipment used to provide the Services if such change would alter in any material
respect:  (a) the functionality,
performance standards or technical environment of the Software, Systems or
Equipment used to provide the Services; (b) the manner in which the
Services are provided; (c) the composition of the Services; or (d) the
cost to Michaels of the Services.

 

“Charges”
means the monthly charges associated with the Services under a Statement of
Work, based on the pricing and rate card set forth in Exhibit 4 and
within the Pricing Exhibit of the applicable Statement of Work.

 

“Commencement
Date” means the date on which Supplier assumes
responsibility for the provision of the Services under a Statement of Work as
such date is specified in the Transition Plan for those Services.

 

“Commissioned
Materials” means any Software, associated
Documentation, or other materials developed by or on behalf of Supplier and
Supplier Agents:  (a) pursuant to Article 6;
(b) pursuant to specifications or other directions provided by Michaels or
Michaels 

 

2

 

Agents, whether such
specifications or directions are developed alone by such parties or jointly
with the Supplier (regardless of whether or not developed pursuant to Article 6);
or (c) pursuant to a Project that is part of the Services; in each case whether
developed independently or jointly with Michaels or Michaels Agents.

 

“Confidential
Information” of Michaels or Supplier means all
information and documentation of Michaels and Supplier, respectively, whether
disclosed to or accessed by Michaels or Supplier in connection with the
Agreement, including:  (a) with
respect to Michaels and Supplier (i) information regarding its business,
projects, operations, finances, activities, affairs, research, development,
products, technology, network architecture, internal procedures, business
models, business plans, business processes, marketing and sales plans,
customers, finances, personnel data, computer system and program designs,
processing techniques and generated outputs, procurement processes or strategies
or suppliers, and any ideas, trade secrets,
inventions (whether or not patentable), patent applications, proposals,
techniques, formulas, methods of operation and other intellectual property; and
(ii) any information that Michaels or Supplier is required by Law or
company policy to maintain as confidential, including personnel and payroll
records, and any other information that relates to or is about, an identified
or identifiable person;  (b) pricing
and commitments under the Agreement; (c) any information developed by
reference to or use of Michaels’ or Supplier’s Confidential Information; (d) with
respect to Michaels, all Michaels Data and all information of Michaels or its
respective customers, suppliers, contractors and other third parties doing
business with Michaels; provided, however, that except to the extent otherwise
provided by Law, the term “Confidential Information” shall not include
information that:  (w) is
independently developed by the recipient, as demonstrated by the recipient’s
written records, without violating the disclosing Party’s proprietary rights; (x) is
or becomes publicly known (other than through unauthorized disclosure); (y) is
already known by the recipient at the time of disclosure (other than through
unauthorized disclosure), as demonstrated by the recipient’s written records,
and the recipient has no obligation of confidentiality other than pursuant to
the Agreement or any confidentiality agreements between Michaels and Supplier
entered into before the Effective Date; or (z) is rightfully received by a
Party free of any obligation of confidentiality.

 

“Consents”
means all licenses, consents, permits, approvals and authorizations necessary
to allow Supplier and Supplier Agents to access and/or use any of the following
solely to provide the Services: Michaels Data, Michaels Facilities, Michaels
Software, Michael Service Locations, Michaels-Owned Material, Michaels
Equipment and other materials made available by Michaels to Supplier and
services provided under Michaels third party services contracts. Michaels
Consent includes consent of third parties required for Michaels to assign the
Assigned Agreements to Supplier and Supplier to manage and administer the
Managed Agreements pursuant to Article 8 of the Agreement.

 

“Consulting
Services” means the services and Supplier obligations
specified or described in the applicable Statement of Work included in Exhibit 2
including the application of Section 4.1 of the Agreement, as
applicable.

 

3

 

“Contract
Year” means a fiscal year of Michaels (ending on the
Saturday closest to January 31) during the Term, except that the first
Contract Year shall begin on the Effective Date and end on January 30,
2010.

 

“Control”
means, with respect to any entity, the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such entity, whether through the ownership of voting securities (or other
ownership interest), by contract, or otherwise.

 

“Critical
Service Level” means any Service Level designated as a
“critical” Service Level”.

 

“Critical
Service Level Default” means a failure by Supplier to
meet the specified Service Level target for a Critical Service Level.

 

“Critical
Transition Milestone” means any milestone in the
Transition Plan designated as a “critical” milestone.

 

“Current
and Planned Projects” has the meaning set forth in Section 4.2(e) of
the Agreement.

 

“Derivative
Work” means
any work based upon one or more preexisting works, or any other form in which a
work is recast, transformed, revised, adapted or otherwise changed.

 

“Disaster
Recovery Plan” means the plan approved by Michaels to
restore the Services, Software and Systems to a pre-established level in the
event that all or a portion of the Services, Software or Systems are
unavailable.

 

“Dispute” has
the meaning set forth in Section 24.1 of the Agreement.

 

“Divested
Entities” has the meaning set forth in Section 5.4(b) of
the Agreement.

 

“Documentation”
means, with respect to Software and tools, all materials, documentation,
specifications, technical manuals, user manuals, flow diagrams, file
descriptions and other written information that describes the function and use
of such Software or tools.

 

“Effective
Date” means January 16, 2009.

 

“End Date”
means the last day of the Termination Assistance Period.

 

“End Users”
means the Authorized Users and all of their employees, agents, representatives
or other persons who are authorized to access the Systems and/or Services on
behalf the Authorized Users.

 

“Equipment”
means computers and related equipment, including central processing units and
other processors, controllers, modems, communications and telecommunications
equipment (voice, data and video), cables, storage devices, printers, terminals,
other 

 

4

 

peripherals and input and
output devices, and other tangible mechanical and electronic equipment intended
for the processing, input, output, storage, manipulation, communication,
transmission and retrieval of information and data.

 

“Executive
Steering Committee” means a committee established by
the parties pursuant to Exhibit 5 with an equal number of members
from Michaels and Supplier.

 

“Extension
Period” means the First Extension Period and the
Second Extension Period.

 

“Fees”
means amounts payable by Michaels to Supplier pursuant to the Agreement, and Exhibit 4,
as those Fees are more specifically described with respect to a Statement of
Work in the Pricing Exhibit to the applicable Statement of Work.

 

“First
Extension Period” has the meaning set forth in Section 2.2
of the Agreement.

 

“Force
Majeure Event” has the meaning set forth in Section 17.2
of the Agreement.

 

“Governmental
Approvals” means all licenses, consents, permits,
approvals and authorizations of any Governmental Authority, or any notice to
any Governmental Authority, the granting of which is required by Law, including
Regulatory Requirements, for the consummation and performance of the
transactions contemplated by the Agreement or the provision of Services under
the Agreement.

 

“Governmental
Authority” means any Federal, state, municipal, local,
territorial, or other governmental department, regulatory authority, or
judicial or administrative body, whether domestic, foreign, or international.

 

“Gratuities”
has the meaning set forth in Section 31.15
of the Agreement.

 

“Indemnified
Party” has the meaning set forth in Section 28.4
of the Agreement.

 

“Indemnifying
Party” has the meaning set forth in Section 28.4
of the Agreement.

 

“Individual
Transition Manager” has the meaning set forth in Section 5.1
of the Agreement.

 

“Initial
Agreement Expiration Date” means the date that is the
end of Michaels’ fiscal year 2013, which is the Saturday closest to January 31
in 2014.

 

“Initial
Agreement Term” has the meaning specified in Section 2.1
of the Agreement.

 

“Intellectual
Property Rights” means all past, present, and future
rights of the following types, which may exist or be created under the laws of
any jurisdiction in the world:  (a) rights
associated with works of authorship, including exclusive exploitation rights,
copyrights, moral rights, and mask works; (b) trademark and trade name
rights and similar rights; (c) trade secret rights; (d) patents and
industrial property rights; (e) other proprietary rights in intellectual
property of every kind and nature; and (f) rights in or relating to
registrations, renewals, extensions, combinations, divisions, and reissues of, and
applications for, any of the rights referred to in 

 

5

 

subsections (a) through
(e) of this sentence.

 

“Intellectual
Property” means all algorithms, APIs, apparatus,
circuit designs and assemblies, Confidential Information, databases and data
collections, designs, diagrams, documentation, drawings, flow charts, formulae,
ideas and inventions (whether or not patentable or reduced to practice),
know-how, materials, marketing and development plans, marks (including brand
names, product names, logos, and slogans), methods, models, network
configurations and architectures, procedures, processes, protocols, schematics,
software code (in any form including source code and executable or object
code), specifications, subroutines, techniques, tools, uniform resource
identifiers, user interfaces, web sites, works of authorship, and other forms
of technology and intellectual property.

 

“Interest”
means simple interest at the rate of 1% per month, but in no event to exceed
the maximum rate of interest allowed by Law.

 

“Key
Supplier Personnel” means the Supplier Account Manager
and such other members of the Supplier Staff designated as Key Supplier
Personnel on Exhibit 8.

 

“Law”
means any declaration, decree, directive, legislative enactment, order,
ordinance, regulation, rule, requirement or other binding restriction of or by any
Governmental Authority, including any modified or supplemented version of the
foregoing and any newly adopted Law replacing a previous Law.

 

“Losses”
means any and all damages, fines, penalties, deficiencies, losses, liabilities
(including settlements and judgments) and expenses (including interest, court
costs, reasonable fees and expenses of attorneys, accountants and other experts
and professionals or other reasonable fees and expenses of litigation or other
proceedings or of any claim, default or assessment).

 

“Malware” has
the meaning set forth in Section 23.2(e) of the Agreement.

 

“Managed
Agreement Invoice” means any invoice submitted by
third parties in connection with the Managed Agreements.

 

“Managed
Agreements” means the third party agreements
designated as managed agreements in Exhibit 9.

 

“Michaels”
means Michaels Stores, Inc.

 

“Michaels
Account Manager” has the meaning set forth in Section 7.1
of the Agreement.

 

“Michaels
Agent NDA” has the meaning set forth in Section 20.7(d) of
the Agreement.

 

6

 

“Michaels Agents” means the employees,
agents, contractors, subcontractors, consultants, personnel and representatives
of Michaels, other than Supplier and Supplier Agents.

 

“Michaels
Data” means:  (a) all
data and information:  (i) submitted
or made available to Supplier or Supplier Agents by or on behalf of Michaels; (ii) obtained,
developed or produced by Supplier or Supplier Agents for Michaels in connection
with the Agreement; or (iii) to which Supplier or Supplier Agents have
access in connection with the provision of the Services; and (b) all
derivatives of any of the foregoing.

 

“Michaels
Default Cure Period” has the meaning set forth in Section 25.4(b) of
the Agreement.

 

“Michaels
Default Notice” has the meaning set forth in Section 25.4(b) of
the Agreement.

 

“Michaels
Derivative Works” means any Derivative Works of
Michaels Software or Michaels Background Technology and related Documentation
developed pursuant to the Agreement by or on behalf of Supplier or Supplier
Agents, whether developed independently or jointly with Michaels or Michaels
Agents, excluding in all cases, Commissioned Materials.

 

“Michaels
Equipment” has the meaning set forth in Section 8.1(a) of
the Agreement.

 

“Michael
Facilities” has the meaning set forth in Section 7.2
of the Agreement.

 

“Michaels
Governmental Approvals” has the meaning specified in Section 4.5
of the Agreement.

 

“Michaels
Laws” has the meaning set forth in Section 4.6
of the Agreement.

 

“Michaels-Owned
Materials” has the meaning specified in Section 14.5
of the Agreement.

 

“Michaels
Policies” means the Michaels corporate policies listed
on Exhibit 7, as such policies are made available to Supplier
during the Term and Termination Assistance Period, as well as any related
Michaels procedures communicated to Service Provider that implement such
policies.

 

“Michaels
Proprietary Software” means Software and any
associated Documentation that is owned, acquired or developed by Michaels and
used in connection with the provision of the Services.

 

“Michaels
Service Location(s)” means locations at which Services
are provided to Michaels, as those locations at the Effective Date are set out
on Exhibit 6, which Exhibit may be amended or changed from time to
time by Michaels in accordance with the Agreement.

 

7

 

“Michaels
Software” means the Michaels Proprietary Software, the
Michaels Third Party Software, and the Michaels Derivative Works, collectively.

 

“Michaels
Third Party Contractors” has the meaning set forth in Section 5.5
of the Agreement.

 

“Michaels
Third Party Software” means the Software and
Documentation that is licensed or leased by Michaels from a third party and
used in connection with the provision of the Services.

 

“New
Entities” has the meaning specified in Section 5.4(a) of
the Agreement.

 

“New
Equipment” has the meaning set forth in Section 8.2(b) of
the Agreement.

 

“New
Service Proposal” has the meaning specified in Section 6.1
of the Agreement.

 

“New Services”
means any new service or significant change to the Services requested by
Michaels:  (a) that is materially
different from the Services; (b) that requires materially different levels
of effort or resources from Supplier; and (c) for which there is no current
Resource Baseline or charging methodology. 
New Services shall not include (y) increases in the volume of
Services, or (z) the disaggregation of an existing Service from a category
of Services (or other functional service area). For further clarity, New
Services shall not include the additional Services identified on Exhibit 21.

 

“Parties”
means Michaels and Supplier, collectively.

 

“Party”
means either Michaels or Supplier, as applicable.

 

“Pass-Through
Expense” means cost or an expense which Michael has an
obligation to reimburse Supplier as a result of such cost or expense expressly
being designated as a pass-through expense in the Agreement, Exhibit 4
or the applicable Statement of Work.

 

“Permitted
Parties” has the meaning specified in Section 21.1
of the Agreement.

 

“Policies
and Procedures Manual” means the manual prepared by
Supplier in accordance with the Agreement and the requirements in Exhibit 5
that contains the Change Management Process and related procedures that
Supplier must follow in connection with changes to the Services, the Systems
and the Michaels information technology environment.

 

“Project”
means any discrete set of development services (such as design, development or
enhancement of software or solution). 
Each of the Current and Planned Projects is a Project.

 

“Regulatory
Requirements” means the Laws to which Michaels is
required to submit, or voluntarily submits, from time to time.

 

“Remediation
Plan” has the meaning set forth in Section 20.7(c) of
the Agreement.

 

8

 

“Resource
Baseline” means a baseline volume for a specific
category of services, as such baseline volumes are set forth in Exhibit 4.

 

“Sarbanes-Oxley”
has the meaning set forth in Section 20.4
of the Agreement.

 

“Second
Extension Period” has the meaning set forth in Section 2.2
of the Agreement.

 

“Service
Category” means a grouping of elements of the
Services, as specified in Exhibit 2.

 

“Service
Level” means a component of the Services that is
measured in accordance with the criteria specified in Exhibit 3.

 

“Service
Level Credit” means a credit applied against the
Charges or Fees as specified in the Agreement, Exhibit 3 or an
applicable Statement of Work.

 

 “Service Level Default”
shall have the meaning assigned to it in Exhibit 3.

 

“Service
Location(s)” means any Michaels Service Location or
Supplier Service Location, as applicable.

 

“Services”
has the meaning specified in Section 4.1 of the Agreement.

 

“Software”
means:  (a) the source code and
object code versions of any applications, operating system software, computer
software languages, utilities, other computer programs, in whatever form or
media, including the tangible media upon which the foregoing are recorded,
together with all corrections, improvements, updates and releases thereof; (b) any
software development and performance testing tools, and related know-how,
methodologies, processes, technologies or algorithms; and (c) any
Documentation related to any of the foregoing.

 

“Statements
of Work” mean the descriptions of certain Base
Services, Consulting Services and Supplier obligations set forth in Exhibit 2,
additional Services described in Exhibit 21 for which Parties may
enter into a new Statement of Work or amendment of an existing Statement of
Work in Exhibit 2, and New Services for which additional Statements of
Work as agreed to by the Parties in accordance with Article 6 of
the Agreement.

 

“Standards”
has the meaning set forth in Section 20.4 of the Agreement.

 

“Successor”
has the meaning specified in Section 27.1 of the Agreement.

 

“Supplier”
means Tata America International Corporation, operating as TCS America, a New
York corporation.

 

“Supplier
Account Manager” has the meaning specified in Section 12.1
of the Agreement.

 

9

 

“Supplier
Agents” means the employees, agents, contractors,
subcontractors, consultants, personnel and representatives of Supplier.

 

“Supplier
Competitor” means the competitors of Supplier set
forth on Exhibit 12.

 

“Supplier
Consents” means all licenses, consents, permits,
approvals and authorizations that are necessary to allow:  (a) Supplier and Supplier Agents to
use:  (i) the services provided for
the benefit of Michaels under Supplier’s third party services contracts; (ii) the
Supplier Software and Supplier tools; (iii) any assets owned or leased by
Supplier; and (iv) any other Software or Equipment provided by Supplier in
connection with the Services; (b) Supplier and Supplier Agents to:  (i) use any third party services retained
by Supplier to provide the Services during the Term and the Termination
Assistance Period; and (ii) grant to Michaels the rights (including
assignments of Intellectual Property Rights) in the Michaels-Owned Materials
and other Intellectual Property transferred or licensed to Michaels hereunder;
and (c) Supplier to fulfill its obligations under Article 27
of the Agreement.

 

“Supplier
Default Cure Period” has the meaning set forth in Section 25.4(a) of
the Agreement.

 

“Supplier
Default Notice” has the meaning set forth in Section 25.4(a) of
the Agreement.

 

“Supplier
Derivative Works” means Derivative Works of Supplier
Software, Supplier Background Technology, and associated Documentation
developed pursuant to the Agreement by or on behalf of Supplier or Supplier
Agents.

 

“Supplier
Equipment” means that Equipment leased or owned by
Supplier and Supplier Agents that is used by Supplier and Supplier Agents to
provide the Services.

 

“Supplier
Governmental Approvals” has the meaning set forth in Section 4.5
of the Agreement.

 

“Supplier
Laws” has the meaning set forth in Section 4.6
of the Agreement.

 

“Supplier
Proprietary Software” means the Software owned,
acquired or developed by or on behalf of Supplier and used in connection with
the Services.

 

“Supplier
Service Location” means a Supplier service location
identified in Exhibit 6 or any new Supplier Service Location
thereafter added pursuant to Article 11 of the Agreement.

 

“Supplier
Software” means the Supplier Proprietary Software, the
Supplier Third Party Software, and the Supplier Derivative Works, collectively.

 

“Supplier
Staff” means the personnel of Supplier and Supplier
Agents who provide the Services.

 

10

 

“Supplier
Third Party Software” means the Software and
Documentation licensed, leased or otherwise obtained by Supplier from a third
party that is used in connection with the Services or with any Supplier
Software or Michaels Software.

 

“Systems”
means the Software, tools and the Equipment, collectively, used in connection
with the Services.

 

“Taxes” has
the meaning set forth in Section 19.1 of the Agreement.

 

“Term”
means the Initial Agreement Term and any renewal terms agreed by the Parties in
accordance with Section 2.2 of the Agreement.

 

“Termination
Assistance Period” means a period of time designated
by Michaels, commencing on a date designated by Michaels, after Michaels has
determined that there shall be a termination or expiration of the Agreement or
any other cessation of all or any part of the Services (including due to a
divestiture or partial termination by Michaels), in each case as requested by
Michaels and continuing for up to 18 months after the last day of the Term, and
which may be extended by Michaels for up to an additional 6 months, during
which Supplier shall provide the Termination Assistance Services with respect
to any part of the Services being terminated.

 

“Termination
Assistance Services” means Supplier’s (and Supplier
Agents’) provision of:  (a) the
Services (and any replacements thereof or substitutions therefore); (b) cooperation
with Michaels and Successor as necessary to facilitate the smooth and orderly
transition of the Services to Successor; (c) information relating to the
number and function of each of the Supplier Staff; (d) subject to the
approval of Michaels, a plan for the smooth and orderly transition of the
performance of the Services from Supplier to Michaels or Successor; (e) training
for personnel of Michaels and/or Successor in the performance of the Services
being transitioned to Successor; (f) access to Transitioned Employees who
remain at that time as the Supplier Staff so that Michaels or its designees may
extend offers of employment to such Transitioned Employees; waivers of Section 12.9
of the Agreement with respect to such Transitioned Employees; waivers of any
prohibitions in any employment agreements of such Transitioned Employees that
may restrict such individuals from accepting offers from Michaels or Successor;
cooperation with Successors efforts to hire such Transitioned Employees,
including not making counter offers; (g) information related to the
Services that will assist Michaels in drafting requests for proposals relating
to the Services, and cooperation with, and due diligence information for,
recipients of such requests for proposals; and (h) other services
requested by Michaels necessary to facilitate the transfer of Services.

 

“Termination
Fee” means a fee specified in Exhibit 4 that
Michaels shall pay to Supplier in the event Michaels terminates the Agreement
pursuant to Section 25.1 or Section 25.2 of the Agreement.

 

“Third
Party Contracts” means the Assigned Agreements and the
Managed Agreements, collectively.

 

11

 

“Tier One
Offshore Service Providers” means suppliers providing
services in offshore locations who are generally considered in standard
industry benchmarkers (such as Gartner Reports) as tier one service providers,
including, but not limited to: Accenture; Computer Sciences Corporation; IBM;
Infosys Technologies; Wipro; and Unisys Corporation.

 

“Transformation
Services” has the meaning set forth in Section 5.3
of the Agreement.

 

“Transition
Charge” means a charge for the Transition Services
specified in Exhibit 4.

 

“Transition
Credit” means a credit applied against the Fees as a
result of Supplier’s failure to meet a Transition Milestone, which credit is
specified in the Transition Plan.

 

“Transition
Manager” has the meaning set forth in Section 5.1
of the Agreement.

 

“Transition
Plan” has the meaning given in Section 5.1
of the Agreement.

 

“Transition
Milestones” means milestones, including Critical
Transition Milestones, relating to Supplier’s obligations to complete certain
Transition Services on certain dates in accordance with the Transition
Plan.  The Transition Milestones are set
forth in the Transition Plan

 

“Transition
Services” has the meaning set forth in Section 5.1
of the Agreement.

 

“Transitioned
Employees” means certain Michaels employees listed in Exhibit 15
who become employees of Supplier or Affiliates of Supplier in accordance with Exhibit 15.

 

“Turnover”
has the meaning set forth in Section 12.4 of the Agreement.

 

“Use”
means the right to use, execute, reproduce, perform, display, maintain, modify,
enhance, create Derivative Works of, make and have made.

 

“Work
Product” means any manuals, reports, diagrams, data
models, schematics, training materials and similar items created by Supplier or
Supplier Agents in the course of performing the Services, excluding Software,
Supplier IP and any Supplier Background Technology that is contained in such
Work Product.

 

12

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