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EXHIBIT 10.2
MANAGEMENT SERVICES AGREEMENT
This MANAGEMENT SERVICES AGREEMENT, dated as of November 5, 1999 (this
"Agreement"), is entered into by and among XXXXXXXXXXXXXXX.XXX, LLC., a Delaware
limited liability company ("LEC"), a subsidiary of XXXXXXXXXXXXXXX.XXX HOLDINGS
LLC., a Delaware limited liability company ("LECH"), LECH and THE LEARNING
EXPRESS, INC. a Massachusetts corporation ("LEI").
BACKGROUND
A. LEI has developed plans, manuals, methods, systems and procedures, a
uniform and recognizable marketing image and reputation for toy stores
and the sale of related products and services under the name, trademark
and service xxxx "Learning Express" (referred to herein as the
"System") and has (i) licensed the System to franchisees
("Franchisees") who own and operate retail toy stores under the name
Learning Express (the "Retail Stores") and (ii) established a network
of service providers ("Regional Owners") responsible for marketing
local store franchises, making proper disclosures under state and
federal franchise laws, assisting in site selection and lease
negotiations, assisting in pre-opening operations and training, and
furnishing on-going support in various regions of the United States.
B. LEC wishes to develop, operate and promote an Internet-based on-line
store (the "On-Line Store") to adapt the System for electronic commerce
and, accordingly, LEC has licensed from LEI certain of LEI's
intellectual property pursuant to the terms and conditions of a License
Agreement, dated as of the date hereof (the "License Agreement"), by
and between LEI and LEC.
C. In order to facilitate the development of the On-Line Store, LEC wishes
to have LEI contract with such of the Franchisees as are agreeable (any
such Franchisee is a "Participating Franchisee") to (a) provide space
for an Internet kiosk and certain related services in each Retail Store
such Participating Franchisee operates to enable access to the On-Line
Store, (b) promote the On-Line Store in such Participating Franchisee's
advertising materials, including but not limited to such Participating
Franchisee's catalogues, direct mail, and other printed materials, (c)
cooperate with LEC in promotions and other similar activities and (d)
support product fulfillment and returns for customers of the On-Line
Store, all as described in this Agreement and in the form of the
Amendment to Franchise Agreement (and attachments thereto) attached
hereto as EXHIBIT A (the "Franchise Amendment").
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X. XXX believes that the development of the On-Line Store will enhance the
business of its Franchisees and thereby LEI's own business and,
accordingly, LEI is willing to facilitate cooperation among LEI's
franchisees and LEC on the terms set forth in this Agreement and in the
Franchise Amendment and to make certain arrangements with the Regional
Owners as set forth in an amendment to the Regional Franchise License
Agreement between each Regional Owner and LEI (each such amendment is a
"Regional Amendment").
X. XXXX desires to enhance and enable the business plan of its subsidiary,
LEC, through LECH's compliance with the terms and conditions of this
Agreement.
Now therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the
meanings set forth below:
"Franchise Agreement" shall have the meaning set forth in Section 2(a).
"Franchise Amendment" shall have the meaning set forth in paragraph C of the
introductory paragraphs to this Agreement.
"Franchisees" shall have the meaning set forth in paragraph A of the
introductory paragraphs to this Agreement.
"Regional Amendment" shall have the meaning set forth in paragraph D of the
introductory paragraphs to this Agreement.
"New Agreement" shall have the meaning set forth in Section 2(b).
"New Franchisee" shall have the meaning set forth in Section 2(b).
"On-Line Commission" shall have the meaning set forth in Section 3(b).
"On-Line Store" shall have the meaning set forth in paragraph B of the
introductory paragraphs to this Agreement.
"On-Line Store Date" shall mean the date on which the On-Line Store first
commences operation on the Internet for the sale of Products to the general
public.
"Participating Franchisee" shall have the meaning set forth in paragraph C of
the introductory paragraphs to this Agreement.
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"Person" shall mean a natural person, corporation, association, trust,
(including a business trust), partnership, limited liability company, joint
stock company, organization or proprietorship or similar entity.
"Product" shall mean any product sold through the On-Line Store.
"Protected Territory" shall have the meaning set forth in Section 3(a)(i).
"System" shall have the meaning set forth in paragraph A of the introductory
paragraphs to this Agreement.
"Term" shall have the meaning set forth in Section 10(a).
2. COVENANTS OF LEI.
(a) Participating Franchisees. As soon as practicable after the date
hereof, and subject to LECH's compliance with the Securities Act of 1933 and all
applicable state securities laws related to LECH's issuance of securities of
LECH to the Participating Franchisees, LEI shall exercise best efforts so that
each Franchisee existing as of April 10, 2000 execute an amendment to such
Franchisee's existing franchise agreement or agreements (prior to such
amendment, the "Franchise Agreement") in the form of the Franchise Amendment. In
connection with the execution of each such Franchise Amendment, LEI shall ensure
that (i) the "Commission Territory" shall be defined therein so as not to cause
the On-Line Commission to be due with respect to more than one Retail Store for
a single sale and (ii) the Commission Territory shall not encompass any zip code
that is not at least partially within the applicable Participating Franchisee's
"Protected Territory," as defined in the applicable Franchise Agreement.
(b) New Franchisees. LEI shall ensure that any agreement with any new
franchisee for any Retail Store (a "New Franchisee") shall obligate such New
Franchisee to support the operations of the On-Line Store to the same extent as
all Participating Franchisees; provided that the On-Line Commission for New
Franchisees shall be the same as the On-Line Commission paid to Participating
Franchisees and the New Franchisees shall not be entitled to receive Common
Shares or other equity of LECH (any franchise agreement with a New Franchisee on
terms consistent with this Section 2(b) is a "New Agreement").
(c) Amendments to Learning Express Confidential Operations Manual. From
time to time LEI may materially modify the Learning Express Confidential
Operations Manual sections that require Franchisees to support and promote the
On-Line Store ("On-Line Store Sections"), provided that LEC shall have consented
to any such modification, which consent shall not be unreasonably withheld. LEI
shall modify the On-Line Store Sections in accordance with LEC's reasonable
requests.
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(d) LEI's Operation of Retail Stores. If and to the extent LEI becomes
a direct operator of any Retail Store, LEI shall agree to and abide by all the
provisions of the Franchise Agreement, as amended by the Franchise Amendment,
with respect to the On-Line Store, including without limitation with respect to
all matters addressed in the Manual Amendment, as defined in the Franchise
Amendment; provided that LEI shall not be entitled to receive Common Shares or
other equity of LECH.
(e) Business Information of LEI Relevant to the System. Throughout the
Term, LEI shall make appropriate staff available at reasonable times and places
to provide information (including information received from Franchisees and
Regional Owners) to LEC regarding the current operation of the System by LEI,
the Franchisees and the Regional Owners, including information with respect to
LEI's sales, buying programs, marketing programs, customers, vendors and
services. LEC may use such information for its own business purposes throughout
the Term provided that such use is consistent with the terms and conditions of
(1) the License Agreement and (2) this Agreement, including without limitation
the provisions of Section 9 hereof.
(f) Marketing and Promotion of the On-Line Store. Throughout the Term,
LEI shall promote LEC and the On-Line Store in all marketing, advertising and
promotion campaigns relating to the Retail Stores. The foregoing shall include
without limitation a prominent listing of the name, URL and a brief description,
such as "Shop for Learning Express toys and games on-line at
xxx.XxxxxxxxXxxxxxx.xxx," for the On-Line Store in all catalogs, periodic
product newsletters and any other marketing, advertising or promotional
materials prepared by or on behalf of LEI for use by the Regional Owners,
Franchisees and/or Retail Stores.
3. COVENANTS OF LEC.
(a) On-Line Commission to LEI.
(i) LEC shall pay to LEI a commission (the "On-Line
Commission") with respect to each calendar month (or portion thereof)
during the Term (in each case within 20 days following the end of such
calendar month), equal to a "Percentage" of "Net Sales in Territory"
accrued during such month (or portion thereof during the Term).
"Percentage" shall mean (a) five percent (5%) through the second
anniversary of On-Line Store Date and (b) for the period thereafter,
LEC presently intends to maintain the Percentage at the 5% level but
reserves the right to have the Board of Managers of LEC establish a
different level from time to time based on experience of sales and cash
flow of the On-Line Store, provided, however, that such percentage
determined by the Board of Managers shall not be less than 2.5%. "Net
Sales in Territory" shall mean (A) LEC's gross revenues from the sale
through the On-Line Store of Products ordered by customers of the
On-Line Store whose "xxxx-to" address for the applicable order is
within any "Protected Territory" as
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defined in the Franchise Amendments as then in effect minus (B)
all costs and charges incurred in connection with returned
products and shipping and handling charges in connection
therewith.
(ii) Within ninety (90) days following the end of each fiscal
year during the Term (or portion of such fiscal year if the Term
does not extend during an entire fiscal year), LEC shall
transmit to LEI a statement certified by LEC's chief financial
officer detailing the calculation of Net Sales for such fiscal
year then ended.
(iii) LEC shall maintain accurate books and records supporting
the calculations of Net Sales set forth in the foregoing
subsection throughout the Term and for a period of two (2) years
following the fiscal years for which such determinations have
been made and permit LEI and its representatives, upon at least
10 days prior written notice to LEC, to make examinations of
such books and records during usual business hours and at the
place at which LEC usually keeps its books and records.
(b) Throughout the Term and to the extent reasonable practicable, LEC
shall include in marketing, advertising and promotional campaigns relating to
the On-Line Store statements to encourage consumers to shop at Retail Stores
operated by Franchisees.
(c) LEC shall post on the On-Line Store, and update within a reasonable
period of time after LEI provides updated information, a listing of the names,
addresses and telephone numbers for the Retail Store(s) operated by each
Franchisee.
(d) LEC shall share with LEI information with respect to LEC's sales,
inventory, customers, vendors and products to the extent consistent with any
confidentiality or other contractual arrangements with the parties providing
such information to LEC. LEI may use such information for LEI's own business
purposes throughout the Term provided that such use is consistent with the terms
and conditions of this Agreement, including without limitation the provisions of
Section 9 hereof.
(e) Regarding Retail Stores. Promptly following full execution of each
Franchise Amendment and each New Agreement, LEC shall (i) assist Participating
Franchisees and New Franchisees with the procurement, installation and operation
of the Kiosk Equipment and the Kiosk throughout the Term as provided in the
Manual Amendment (or the sections corresponding thereto in the applicable New
Agreement), (ii) provide all reasonable cooperation, assistance and payments to
the applicable Participating Franchisee or New Franchisee as may be required to
effectuate the provisions of the applicable Franchise Amendment and the Manual
Amendment, as defined therein, (and/or the sections corresponding thereto in the
applicable New Agreement), and (iii) effectuate and otherwise make all payments
required to be made to the applicable Participating Franchisee or New Franchisee
in connection with the Product order,
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fulfillment and return functions described in the Manual Amendment (or the
sections corresponding thereto in the applicable New Agreement);
4. COVENANTS OF LECH
(a) Subject to LECH's compliance with the Securities Act of 1933 and
all applicable state securities laws, issue to each Participating Franchisee who
has executed a Franchise Amendment, upon such execution or as soon as shall be
practicable thereafter, Common Shares of LECH in accordance with the terms and
conditions of Section 5(a) of such Franchisee's Franchise Amendment.
(b) Subject to LECH's compliance with the Securities Act of 1933 and
all applicable state securities laws, issue to each Regional Owner who has
executed a Regional Amendment upon such execution or as soon as shall be
practicable thereafter, Common Shares of LECH in accordance with the terms and
conditions of Section 2(a) of the applicable Regional Amendment.
5. FURTHER COOPERATION. Each of the parties hereto covenants and agrees that it
shall furnish to the other party hereto such reasonably necessary information
and reasonable assistance, including without limitation execution of documents,
certificates and instruments, as such other party may reasonably require to
effectuate the provisions of this Agreement.
6. REPRESENTATIONS AND WARRANTIES BY LEI
(a) General. LEI represents and warrants to LEC and LECH that: (i) LEI
is a corporation duly organized and validly existing under the laws of the
Commonwealth of Massachusetts; (ii) LEI has the requisite corporate power and
authority to execute and deliver, and to perform LEI's obligations under, this
Agreement; and (iii) neither the execution and delivery of this Agreement by LEI
nor the performance by LEI of LEI's obligations hereunder will violate or
conflict with (A) the provisions of any agreement to which LEI is a party, or
(B) the provisions of any law, statute, rule, regulation, judgment, order, or
decree of any domestic or foreign governmental, administrative, or judicial
authority which, if violated, would have a material adverse effect on the
ability of LEI to perform LEI's obligations hereunder.
7. REPRESENTATIONS AND WARRANTIES BY LEC. LEC represents and warrants to LEI
that: (i) LEC is a limited liability company duly organized and validly existing
under the laws of the State of Delaware; (ii) LEC has the requisite limited
liability company power and authority to execute and deliver, and to perform
LEC's obligations under, this Agreement; and (iii) neither the execution and
delivery of this Agreement by LEC nor the performance by LEC of LEC's
obligations hereunder will violate or conflict with (A) the provisions of any
agreement to which LEC is a party, or (B) the provisions of any law, statute,
rule, regulation, judgment, order, or decree of any domestic or foreign
governmental, administrative, or judicial authority which, if
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violated, would have a material adverse effect on the ability of LEC to perform
LEC's obligations hereunder.
8. REPRESENTATIONS AND WARRANTIES BY LECH. LECH represents and warrants to LEI
that: (i) LECH is a limited liability company duly organized and validly
existing under the laws of the State of Delaware; (ii) LECH has the requisite
limited liability company power and authority to execute and deliver, and to
perform LECH's obligations under, this Agreement; and (iii) neither the
execution and delivery of this Agreement by LECH nor the performance by LECH of
LECH's obligations hereunder will violate or conflict with (A) the provisions of
any agreement to which LECH is a party, or (B) the provisions of any law,
statute, rule, regulation, judgment, order, or decree of any domestic or foreign
governmental, administrative, or judicial authority which, if violated, would
have a material adverse effect on the ability of LECH to perform LECH's
obligations hereunder.
9. CONFIDENTIALITY.
(a) Except as expressly provided in this Agreement, no party hereto,
without the prior written consent of the other parties hereto, shall disclose to
any third party (i) any information regarding the terms of this Agreement or
exchanged in connection with the negotiation of this Agreement or regarding the
transactions contemplated hereby (such information the "Agreement-Specific
Information"), or (ii) any information regarding the actual or anticipated
business or technology of the other party(ies), in either case to the extent
disclosed by such other party(ies) in connection with the transactions
contemplated hereby or the performance by the other party of such other
party(ies)'s obligations hereunder, including, without limitation, information
regarding or which includes customers, business practices, business prospects,
financial condition, pricing policies, processes, technical data or
specifications, source code or any other proprietary information (such
information is, the "Proprietary Information").
(b) Notwithstanding the foregoing, each party hereto may (i) disclose
the Proprietary Information of the other party(ies) to such party's employees,
directors, advisers, consultants, and representatives with a "need to know,"
including without limitation Franchisees and Regional Owners and who agree to be
subject to the confidentiality restrictions set forth in this Section 9, (ii)
disclose all or such portion of the Agreement-Specific Information or the
Proprietary Information of the other party(ies) as such party shall be ordered
to disclose to a judicial or administrative agency of competent jurisdiction,
provided that such party shall give the original disclosing party reasonable
notice of such order and a timely opportunity to attempt to preclude or limit
such production, (iii) disclose the terms hereof to the extent necessary to
comply with any applicable securities laws; and (iv) disclose the existence,
general terms and the length of term of this Agreement to such party's current
and prospective business partners and investors.
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(c) The obligations in this Section 9 shall not apply to any
information disclosed by any party to any other party hereunder to the extent
that, and after such time as, such information (i) becomes publicly available
other than by a breach of this Agreement, (ii) is rightfully received by the
non-disclosing party from a third party who is not under an obligation of
confidentiality with respect thereto, (iii) can be demonstrated to have been
independently developed by the non-disclosing party without access to or use of
any of the Proprietary Information of the other party, or (iv) is known to the
non-disclosing at the time of disclosure, provided that the non-disclosing party
shall have promptly delivered to the other party written notice of such prior
knowledge.
(d) Each party agrees (except to the extent that such party has rights
to such Proprietary Information in accordance with this Agreement) to (i) cease
using the Proprietary Information of the other party(ies) upon the expiration or
termination of this Agreement and (ii) promptly return to the applicable other
party all materials embodying the Proprietary Information of such other party
upon the expiration or termination of this Agreement and, at any time prior
thereto, promptly upon the written request of such other party (except to the
extent the non-disclosing party has rights to such Proprietary Information in
accordance with this Agreement).
10. TERM AND TERMINATION.
(a) This Agreement shall commence on the date hereof and continue for
an indefinite period in full force and effect until it is terminated in
accordance with this Section 10 (such period is, the "Term").
(b) Any party shall have the right but not the obligation to terminate
this Agreement immediately if at any time: (i) any other party shall be in
material breach of any of its obligations hereunder or under the License
Agreement, and such breach shall not be cured within 20 days following receipt
of written notice thereof; (ii) any other party shall be the subject of a
voluntary petition in bankruptcy or any voluntary proceeding relating to
insolvency, receivership, liquidation or assignment for the benefit of
creditors; (iii) any other party shall become the subject of any involuntary
petition in bankruptcy or any involuntary proceeding relating to insolvency,
receivership, liquidation or assignment for the benefit of creditors, and such
petition or proceeding shall not be dismissed within 60 days of filing; (iv) the
business of any other party shall be liquidated or otherwise terminated on any
basis; or (v) any other party shall become insolvent or unable to pay its debts
as they become due.
(c) A party may exercise its right to terminate this Agreement pursuant
to this Section 10 by written notice to the other parties. No exercise by a
party of its rights under this Section 10 shall limit its remedies by reason of
any other party's default, the party's rights to exercise any other rights under
this Section 10 or any other rights of that party.
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(d) The provisions of Sections 3(b) (with respect to Commissions
accrued through the effective date of such termination), 5, 9, 10(d), 11 and 12
shall survive any termination of this Agreement.
11. SPECIFIC ENFORCEMENT. The parties hereto each acknowledge that the other
parties hereto will be irreparably damaged in the event that this Agreement is
not specifically enforced. Upon a breach or threatened breach of the terms,
covenants or conditions of this Agreement by any party, the other parties hereto
shall, in addition to all other remedies, be entitled to a temporary or
permanent injunction, without showing any actual damage, or a decree for
specific performance, in accordance with the provisions hereof.
12. MISCELLANEOUS.
12.1 Notices. Any notice required or permitted to be given hereunder
shall be in writing and shall be deemed to be properly given on the date of
postmark when sent by registered or certified mail, return receipt requested,
addressed as follows:
If to LEI:
The Learning Express, Inc.
Devens Business Community
00 Xxxxx Xxxxx Xxxxxx
Xxxx, XX 00000
Attn: Chief Executive Officer
If to LEC:
XxxxxxxxXxxxxxx.xxx, LLC
Devens Business Community
00 Xxxxx Xxxxx Xxxxxx
Xxxx, XX 00000
Attn: Chief Executive Officer
If to LECH
XxxxxxxxXxxxxxx.xxx Holdings LLC
Devens Business Community
00 Xxxxx Xxxxx Xxxxxx
Xxxx, XX 00000
Attn: Chief Executive Officer
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or such other address as any party may give the others notice of pursuant to
this Section.
12.2 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Massachusetts, without
regard to conflicts of laws principles thereof. Any action to enforce, arising
out of, or relating in any way to, any of the provisions of this Agreement shall
be brought and prosecuted in the state courts of the Commonwealth of
Massachusetts or the United States District Court for the District of
Massachusetts and the parties consent to the jurisdiction of said courts and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
12.3 Waivers; Amendments. No waiver of any right hereunder by any party
shall operate as a waiver of any other right, or of the same right with respect
to any subsequent occasion for its exercise, or of any right to damages. No
waiver by any party of any breach of this Agreement shall be held to constitute
a waiver of any other breach or a continuation of the same breach. All remedies
provided by this Agreement are in addition to all other remedies provided by
law, in equity or otherwise. This Agreement may not be amended except in a
writing signed by the parties hereto.
12.4 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the respective legal representatives, successors
and assigns of the parties hereto.
12.5 Severability. If any provision of this Agreement shall be declared
void or unenforceable by any judicial or administrative authority, the validity
of any other provisions and of the entire Agreement shall not be affected
thereby.
12.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.7 Prior Understandings. This Agreement represents the complete
agreement of the parties with respect to the transactions contemplated hereby
and supersedes all prior agreements and understandings.
12.8 Headings. Headings in this Agreement are included for reference
only and shall have no effect upon the construction or interpretation of any
part of this Agreement.
12.9 Sealed Instrument. This Agreement shall have the effect of an
instrument executed under seal.
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IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
THE LEARNING EXPRESS, INC. XXXXXXXXXXXXXXX.XXX, LLC
By: /s/ Xxxxxx XxXxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
----------------------- -----------------------
Name: Name:
Title: Title:
XXXXXXXXXXXXXXX.XXX HOLDINGS LLC
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------
Name:
Title:
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Exhibit A
AMENDMENT TO
FRANCHISE AGREEMENT/LOCAL FRANCHISE LICENSE AGREEMENT
AMENDMENT (this "Amendment"), dated as of ____ _____, _____, by and
between THE LEARNING EXPRESS, INC. a Massachusetts corporation ("Franchisor"),
and ________________, a _______________ _____________ (the "Franchisee").
BACKGROUND
A. Franchisor and Franchisee are parties to that certain Franchise
Agreement/Local Franchise License Agreement dated as of ____ _____,
_____ by and between Franchisor and Franchisee (the "Franchise
Agreement") pursuant to the terms and conditions of which Franchisor
has granted a franchise to Franchisee to operate a retail specialty toy
store (the "Retail Store") using Franchisor's "System" and "Marks" in
the "Protected Territory," all as defined in the Franchise Agreement.
B. Franchisor has entered into a License Agreement, dated as of November
5, 1999 (the "LEC Agreement") with XxxxxxxxXxxxxxx.xxx, LLC, a Delaware
limited liability company ("LEC"), pursuant to the terms and conditions
of which Franchisor has licensed certain components of the System and
the Marks to enable LEC to develop, operate and promote an
Internet-based on-line specialty toy store under the name
XxxxxxxxXxxxxxx.xxx (the "On-Line Store").
C. Franchisor has entered into Management Services Agreement, dated as of
November 5, 1999 (the "Management Agreement") by and among Franchisor,
LEC and XxxxxxxxXxxxxxx.xxx Holdings LLC ("LECH"), the principal owner
of LEC, pursuant to the terms and conditions of which, among other
matters, Franchisor has agreed to (1) support LEC's use of the System
in the On-Line Store through assistance with marketing, promotion and
exchange of information regarding sales, customers, vendors, and (2)
contract with each of Franchisor's franchisees on the terms and
conditions set forth in this Amendment.
D. Franchisor and Franchisee believe that the On-Line Store will enhance
Franchisor's and Franchisee's respective businesses by, among other
things, promoting the "Learning Express" image and good will to
consumers who use the Internet and enhancing customer traffic to the
Retail Store and other retail stores operated by other franchisees of
Franchisor.
E. Accordingly, Franchisor and Franchisee are entering into this Amendment
to facilitate the development, operation and promotion of the On-Line
Store by LEC
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and to set forth: (i) certain services that Franchisee has agreed to
provide to Franchisee's and LEC's customers with respect to the On-Line
Store and (ii) certain specified payments and other benefits that
Franchisee will receive in consideration thereof.
Now therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. AMENDMENT OF FRANCHISE AGREEMENT; CAPITALIZED TERMS. The terms and
provisions of this Amendment amend the Franchise Agreement. In the event of any
conflict between the terms of the Franchise Agreement and the terms of this
Amendment, the terms of this Amendment shall govern. Capitalized terms not
otherwise defined herein shall have the same meaning(s) as set forth in the
Franchise Agreement.
2. AMENDMENT TO LEARNING EXPRESS CONFIDENTIAL OPERATIONS MANUAL.
(a) Franchisee consents and agrees to all of the amendments to the
LEARNING EXPRESS CONFIDENTIAL OPERATIONS Manual (the "Manual") set forth on
Exhibit A hereto (the "Manual Amendment").
3. TERM. Franchisee's and Franchisor's obligations under this Amendment,
shall commence on , 2000 and continue until the earlier to occur of: (i)
termination of the Franchise Agreement in accordance with its terms (without
giving effect to this Amendment), (ii) the occurrence of a material breach by
Franchisee of the terms and conditions of this Amendment following written
notice to Franchisee by Franchisor detailing such alleged breach and
Franchisee's failure to remedy any such actual breach within ten (10) days, or
such other period as may be required by applicable state law, following such
notice, or (iii) upon Franchisor's election, exercised in its sole discretion by
written notice to Franchisee, to terminate this Amendment incident to a breach
by LEC of the LEC Agreement or the Management Agreement. The foregoing period is
referred to herein as the "Term".
Upon any termination in accordance with subsection (iii) of the
foregoing paragraph, all obligations of the Franchisor and the Franchisee under
this Amendment shall terminate but the Franchise Agreement and all obligations
of the parties thereunder shall continue in full force and effect in accordance
with their terms unaffected hereby.
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4. EQUITY AND COMMISSION
(a) Equity of LECH.
(i) In consideration of Franchisee's agreement to execute
and consummate the terms and conditions of this
Amendment, Franchisor shall cause LECH to issue to
Franchisee 14,250 Common Shares of LECH for each
Retail Store operated by Franchisee (such shares, the
"Shares").
(ii) Prior to issuance of the Shares, LECH may require
Franchisee to execute an investment letter or letters
to the effect that the Shares are being acquired by
Franchisee for Franchisee's own account for
investment purposes, that Franchisee has no present
intention of offering, distributing or otherwise
disposing of the Shares, and that Franchisee shall
agree not to dispose of the Shares unless a
registration statement or appropriate qualification
is then in effect under applicable state "Blue Sky"
laws with respect to the Shares or in the opinion of
counsel for LECH the Shares are exempt from the
registration or qualification requirements of such
laws.
(iii) Prior to issuance of the Shares, Franchisee shall
execute and enter into the then current Operating
Agreement for LECH and be bound thereby as a member
of LECH. Such Operating Agreement shall provide,
among other matters, that, until such time as LECH,
or a successor entity, has completed an "Initial
Public Offering" (defined below), all of the Shares
shall be forfeited to LECH immediately upon the
termination of either or both of the Franchise
Agreement or this Amendment, provided, however, that
the Shares shall not be subject to forfeiture in the
case where either or both of the Franchise Agreement
and this Amendment are terminated in connection with
the sale or transfer of Franchisee's Retail Store to
a New Franchisee.
(iv) Franchisee agrees that Franchisee will not, for a
period of at least 180 days following the effective
date of any "Initial Public Offering" (defined below)
by LECH (or its successor-in-interest) or by LEC (or
its successor-in-interest), directly or indirectly,
sell, offer to sell or otherwise dispose of the
Shares other than any securities which are included
in such Initial Public Offering, provided, however,
that LECH shall be under no obligation to include the
Shares or any portion thereof in any Initial Public
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Offering. If the managing underwriter of any such
Initial Public Offering determines that a shorter
time period is appropriate, the aforementioned 180
day period may be shortened consistent with the
requirements of such managing underwriter. An
"Initial Public Offering" shall mean LECH's, or a
successor entity's, initial distribution of
securities in a firm commitment underwritten public
offering to the general public pursuant to a
registration statement filed with the Securities and
Exchange Commission.
(b) On-Line Commission.
(i) In consideration of Franchisee's performance of
Franchisee's obligations hereunder, Franchisor shall
pay to Franchisee a commission (the "On-Line
Commission") equal to a percentage (the
"Percentage"), of the On-Line Store's "Net Sales in
Territory" accrued during each calendar month (or
portion thereof) during the Term. "Percentage" shall
mean (a) five percent (5%) through the second
anniversary of the "On-Line Store Date," defined
below, and (b) for the period thereafter, the
percentage established from time to time by the Board
of Managers of LEC based on experience of sales and
cash flow of the On-Line Store, provided, however,
that, (1) without limitation of the foregoing, LEC
presently intends to maintain the Percentage during
such period at the 5% level and (2) notwithstanding
anything herein to the contrary such percentage
determined by the Board of Managers shall never be
less than 2.5%. "Net Sales in Territory" shall mean:
(A) LEC's gross revenues accrued from the sale
through the On-Line Store of On-Line Store products
("Products") ordered by customers ("Customers") whose
"xxxx-to" address for the applicable order is within
the "Protected Territory" as defined in the Franchise
Agreement minus (B) all costs and charges incurred in
connection with returned products and shipping and
handling charges in connection therewith. "On-Line
Store Date" shall mean the date on which the On-Line
Store first commences operation on the Internet for
the sale of Products to the general public.
(ii) The On-Line Commission will be payable to the
Franchisee within 35 days after the end of the
calendar month in which LEC accrues the applicable
sale(s).
(iii) In addition, Franchisor need not pay the On-Line
Commission to Franchisee to the extent that LEC,
under and pursuant to that
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certain Management Services Agreement by and among
Franchisor, LEC and XxxxxxxxXxxxxxx.xxx Holdings LLC
(the "MSA"), has not paid to Franchisor the component
of the "On-Line Commission," as defined in the MSA,
corresponding to the On-Line Commission otherwise
payable by Franchisor to Franchisee hereunder.
(iv) Franchisor may suspend payment of the On-Line
Commission to Franchisee if Franchisor determines
that Franchisee continues to be materially
noncompliant with the Manual, as amended from time to
time, following written notice by Franchisor to
Franchisee of such noncompliance and a subsequent
thirty (30) day opportunity to cure such
non-compliance.
(c) Except for payment of the On-Line Commission and the other
consideration provided for in this Agreement, Franchisee shall have no rights
under the Franchise Agreement or otherwise against Franchisor or any other party
with respect to the operations and sales of LEC and the On-Line Store regardless
of the billing address, shipping address or other location of the Customer or
other person to whom any Product is delivered or otherwise on account of any
sale of any Product.
5. FURTHER COOPERATION. Each of the parties hereto covenants and agrees
that it shall furnish to the other party hereto such reasonably necessary
information and reasonable assistance, including without limitation execution of
documents, certificates and instruments, as such other party may reasonably
require to effectuate the provisions of this Amendment.
6. CONFIRMATION OF FRANCHISE AGREEMENT. The parties hereto acknowledge,
agree and confirm that subject to Sections 2(a) and 4(c) hereof, all terms and
conditions of the Franchise Agreement not inconsistent with the terms of this
Amendment shall continue and remain in full force and effect unaffected by this
Amendment.
7. EFFECTIVENESS OF THIS AGREEMENT. This Agreement shall not be effective
until a copy executed by Franchisee and delivered to Franchisor has been
countersigned by Franchisor and delivered to Franchisee.
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8. MISCELLANEOUS.
8.1 Notices.
Any notice required or permitted to be given to Franchisor hereunder shall be
addressed as follows:
The Learning Express, Inc.
Devens Business Community
00 Xxxxx Xxxxx Xxxxxx
Xxxx, XX 00000
Attn: Chief Executive Officer
Any notice required or permitted to be given to Franchisee hereunder shall be
addressed as follows:
or such other address as any party may give the others notice of pursuant to
this Section.
8.2 Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.3 Headings. Headings in this Amendment are included for reference
only and shall have no effect upon the construction or interpretation of any
part of this Agreement.
8.4 Sealed Instrument. This Amendment shall have the effect of an
instrument executed under seal.
[continues on next page]
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IN WITNESS WHEREOF, this Amendment has been executed as of the date
first above written.
THE LEARNING EXPRESS, INC. FRANCHISEE
PRINT NAME OF LEGAL ENTITY (IF ANY):
By: _______________________ ________________________________________
Name:
Title:
BY: _______________________
PRINT NAME OF SIGNER: ____________________
PRINT TITLE OF SIGNER: _____________________
(if more than one signer, continue
signatures below)
BY: _______________________
PRINT NAME OF SIGNER: ____________________
PRINT TITLE OF SIGNER: _____________________
BY: _______________________
PRINT NAME OF SIGNER: ____________________
PRINT TITLE OF SIGNER: _____________________
BY: _______________________
PRINT NAME OF SIGNER: ____________________
PRINT TITLE OF SIGNER: _____________________
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EXHIBIT A
SUPPLEMENT TO LEARNING EXPRESS, INC. OPERATIONS MANUAL
This supplement is intended to outline the key operational requirements of each
Learning Express franchisee that will facilitate cooperation thereby enhancing
the development of the On-Line Store as well as the franchised stores. It does
not address in detail all operational procedures that will facilitate a seamless
environment for the Learning Express customer when shopping either through a
franchised location, the On-Line Store or both. Those detailed procedures are
under development and will be incorporated, along with the following, as part of
the Learning Express, Inc. Policies and Procedures section of the Operations
Manual.
1. IN-STORE KIOSK
A cooperative program between Learning Express franchisee and
XxxxxxxxXxxxxxx.xxx E-commerce Company ("On-Line Store") that will
enhance customer service and broaden product offerings by enabling
access to the On-Line Store via a Kiosk unit.
OPERATIONAL REQUIREMENTS: Learning Express franchisee will provide the
appropriate retail space inside franchised location for placement of
the Kiosk. Franchisee will provide the appropriate utility connections
as well as subscription service to an Internet Service Provider ("ISP")
for access to the World Wide Web. Customer will have access only to the
XxxxxxxxXxxxxxx.xxx URL.
COST TO FRANCHISEE: Ongoing communications (i.e., telephone line and
ISP subscription costs). On-line store will provide equipment and
fixture to franchisee at no cost.
2. MARKETING AND BRAND DEVELOPMENT
Learning Express, Inc. believes that the development of the On-Line
Store will enhance the business of its Franchisees by creating additional
awareness of the Learning Express name through various cooperative marketing and
advertising programs.
OPERATIONAL REQUIREMENTS: Learning Express franchisee will allow the
marketing and promotion of the On-Line Store as well as display the
XxxxxxxxXxxxxxx.xxx URL on marketing materials including; catalogs, print ads,
marketing and advertising materials, bags and in-store display materials.
COST TO FRANCHISEE: Minimal, if any.
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OPERATIONAL REQUIREMENTS: Learning Express franchisee will allow up to
four direct mailings to customer mailing list that will promote in a joint
fashion, the On-Line Store and that particular local store.
COST TO FRANCHISEE: None
OPERATIONAL REQUIREMENTS: Learning Express franchisee will accept
On-Line Store gift certificates and coupons utilizing the same process as now
used for the franchised store system. On-Line Store gift certificates and
coupons will be validated via telephonic or electronic means.
COST TO FRANCHISEE: None
3. PRODUCT RETURNS
In order to provide seamless customer service and distinguish the
Learning Express On-Line Store from other like e-commerce companies, a
cooperative return process between the On-Line Store and the franchised store is
necessary.
OPERATIONAL REQUIREMENTS: Learning Express franchised store will accept
product returns from Learning Express On-Line Store customers following the same
inter-store procedure as outlined in the current Operations Manual.
- Returned products that are on the Learning Express
"Buying Program" will be retained into inventory by
store for sale at retail. Store will receive
reimbursement from On-Line Store for cost of item.
- Returned products that are not on "Buying Program"
may be returned to the On-Line Store fulfillment
center. Store will receive full reimbursement of
credit given to customer.
- Customer will receive instructions for those items
carried by the On-Line Store (i.e., direct ship by
mfg., affiliate sales, etc.) that are not returnable
to a franchised store location.
COST TO FRANCHISEE: Minimal to none
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