LVL
Philips Mobile Computing Group CyberStore
PRELIMINARY LETTER OF Intent
This Preliminary Letter of Intent between LVL Communications,
Inc. ("LVL") and Philips Mobile Computing Group ("PMCG") summarizes
their MUTUAL interest in forming a joint venture and/or creating a
licensing agreement to develop and operate a retail website under the
PMCG name dedicated to selling PMCG and compatible products to
consumers over the Internet. This Letter of Intent is strictly
preliminary and is intended primarily to establish a basis for future
definitive discussions. This Preliminary Letter of Intent is
non-binding on either party.
BUSINESS PURPOSE: To develop and operate an Internet website
("CyberStore") dedicated to exclusively selling PMCG and compatible
products to retail customers for profit.
ENTERPRISE STRUCTURE: A U.S. corporation or limited liability
company (the "CyberStore Enterprise") funded through equity and debt
supplied by LVL or its investors. LVL will be the operating partner
responsible for CyberStore development, operation and expansion with
sole responsibility for financing Website development and operating
losses (initial budgeted capital: $2 million). PMCG will make
available the full PMCG branded product line to the CyberStore
Enterprise and will be responsible for product inventory and order
fulfillment. After repayment of initial start-up costs, PMCG will
receive payments based upon Enterprise revenue or profits on terms to
be negotiated.
CONTRIBUTION/ROLE BY PARTY:
LVL: Development capital ($1 million budgeted)
Operating expenses ($1 million budgeted)
Facilities and personnel
Marketing and management services
Web-oriented advertising and promotion
Sales order entry and customer service
Customer billing and collection
Account and financial reporting
PMCG: Pull PMCG-branded product line
Product inventory
Order fulfillment
Customer technical support
Warranty and repair services
Non-Web advertising and promotion
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ENTERPRISE TERMS:
EXCLUSIVITY: Although other retail websites may sell PMCG products as
part of a broader product offering, PMCG agrees to naming the
CyberStore Enterprise as the exclusive website for the full line of
PMCG-branded products under the PMCG name.
PRICING: The CyberStore Enterprise shall be permitted to PRICE PMCG
products at the best retail price offered to consumers by other PMCG
dealers ("street price") or the best retail price for PMCG products
offered by another website, whichever is lower.
PURCHASING: The CyberStore Enterprise shall be able to purchase any
PMCG branded product at the best price available to any PMCG customer
with similar terms and conditions.
SERVICES: The CyberStore Enterprise shall be responsible for
marketing, merchandising, customer contact, billing and collection,
and other sales activities. PMCG shall be responsible for order
fulfillment, technical support ,warranty and repair, and similar
functions. To the extent that PMCG IS unable to perform necessary
functions, the CyberStore Enterprise shall provide FOR THE performance
of these functions and deduct their cost from Enterprise payments to
PMCG.
ADVERTISING: PMCG agrees to prominently feature the CyberStore
Enterprise name and web address in PMCG-brand advertising. THE
CYBERSTORE ENTERPRISE will create and place at its own expense
Web-oriented advertising compatible with PMCG advertising programs.
Both parties agree to cooperate on joint advertising programs and
promotions.
REPURCHASE: After three years, PMCC may purchase LVL's ownership in
the CyberStore Enterprise on the anniversary of the date of the full
Agreement for cash at a price determined by third-party appraisal.
Upon acquisition of LVL's ownership interest, PMCG will have sole
responsibility for operation of the Enterprise.
SCHEDULE: Upon negotiation and execution of a definitive agreement,
LVL will provide initial funding to the Enterprise and begin
development of the CyberStore website with the intention of commencing
retail sales within 6 months.
AUTHORIZATION TO PROCEED WITH A FEASIBILITY STUDY: By signing this Letter OF
Intent, PMCG authorizes LVL Communications to begin a Feasibility Study AT LVL'S
EXPENSE to analyze PMCG's current infrastructure and business processes AS A
BASIS FOR FORMING a CyberStore Enterprise dedicated to PMCG products. The intent
of this study is to create a business case for managing and maintaining PMCG's
online commerce in an outsource model. This study does not obligate PMCG to move
forward on the formation of a CyberStore Enterprise, but is intended to provide
a framework for future discussions.
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PARTNERSHIP WITH ORACLE
Oracle has entered into a tentative agreement with LVL to provide services and
products required to implement the technical back-end development of these
CyberStores. Oracle has agreed to partner with LVL in developing the initial
Feasibility Study required as the first part of building an on-line retail
presence.
This Preliminary Letter of Intent is only an expression of mutual intent in
negotiating a Definitive Agreement regarding the formation of the CyberStore
Enterprise along the lines described above. Neither party is obligated to move
forward in this proposed relationship; all terms and conditions are subject to
modification AND may change substantially in the Definitive Agreement (if any).
LVL Communications: Philips Mobile Computing Group
/S/ Xxxxxxx Xxx 4/28/98 /S/ Xxxxxx Xxxxx 4/28/98
Xxxxxxx Xxx Xxxxxx Xxxxx
Chairman & CEO Director of Marketing
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