Exhibit 10.19
Confidential treatment has been requested with respect to certain information
contained in this document. Confidential portions have been omitted from the
public filing and have been filed separately with the Securities and Exchanges
commission.
PRODUCTS AND SERVICES AGREEMENT
THIS PRODUCTS AND SERVICES AGREEMENT (this "Agreement") is dated as
of March 3, 1999, by and between Sylvan Learning Systems, Inc., a Maryland
corporation ("Sylvan") and ZapMe! Corporation, a California corporation
("ZapMe").
RECITALS
WHEREAS, Sylvan has developed or will develop those educational and
testing products and services enumerated on EXHIBIT A attached hereto (the
"Authorized Products and Services") for use on or with personal computers
("PCs");
WHEREAS, ZapMe is in the business of, among other things, providing
no cost PC-based computer systems consisting of a server networked with 5 to
15 personal computers and a laser printer to elementary, middle and high
schools at no cost (a "ZapMe" System"); the ZapMe Systems are connected to
the Internet via satellite or otherwise utilizing ZapMe's operating systems
and software; and
WHEREAS, Sylvan and ZapMe have agreed to enter into this Agreement
whereby ZapMe is entrusting Sylvan to maximize the value of certain business
opportunities available to ZapMe, by granting Sylvan the exclusive right to
provide the Authorized Products and Services through ZapMe Systems.
NOW THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein and other good and valuable
consideration, the parties, intending to be legally bound, hereby agree as
follows:
SECTION 1. GRANT OF EXCLUSIVE RIGHT; RIGHTS RESERVED.
1.1 ZapMe hereby grants to Sylvan, and Sylvan hereby
accepts from ZapMe, the exclusive right to deliver the Authorized Products
and Services on ZapMe Systems in Eligible Schools, as defined below, to
Sylvan customers.
1.2 In consideration of ZapMe granting such rights
to Sylvan, Sylvan agrees to use its best efforts to maximize the value to
ZapMe of the opportunities to which ZapMe is hereby entrusting Sylvan by
delivering all of the Authorized Products and Services to Eligible Schools.
1.3 This Agreement does not include or address goods
and services to be delivered outside of the United States, which rights are
specifically reserved by ZapMe.
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Sylvan/ZapMe! Agreement
SECTION 2. SYLVAN'S RESPONSIBILITIES. At all times during the
term hereof, Sylvan shall:
2.1 Promote and support all of the Authorized
Products and Services to students, teachers, administrators and other
potential end users in those schools having an installed and fully
functioning ZapMe System ("Eligible Schools");
2.2 Develop other fee-based products and services
("Additional Sylvan Products and Services") to be provided by Sylvan directly
or by a third party through Sylvan in addition to the Authorized Products and
Services for introduction into the Eligible Schools. ZapMe shall have the
right to approve, in its sole discretion, all proposed terms and conditions
regarding Additional Sylvan Products and Services before they may be
delivered on or through ZapMe Systems in Eligible Schools ("Eligible
Systems"), including specifically the terms and conditions under which ZapMe
will be compensated in connection therewith;
2.3 Interact with teachers, students, administrators
and other end users in the Eligible Schools in order to facilitate and
encourage the use of the Eligible Systems for the Authorized Products and
Services;
2.4 Promptly pay to ZapMe all Profit Share Fees (as
hereinafter defined) in accordance with Section 5 hereof; and
2.5 Use reasonable efforts to cooperate and
facilitate the use of Eligible Systems by third parties designated by ZapMe,
in such a way as not to unduly interfere with Sylvan's rights to offer the
Authorized Products and Services or Additional Sylvan Products and Services.
SECTION 3. ZAPME'S RESPONSIBILITIES. At all times during the
term hereof, ZapMe shall:
3.1 Actively market the ZapMe Systems to school
districts and individual schools throughout the United States so as to
increase the number of schools that may become Eligible Schools;
3.2 Use commercially reasonable efforts to support,
maintain and repair the ZapMe Systems at Eligible Schools, including the PCs,
all software and other components, so that workstation and network downtime
is minimized;
3.3 Not accept any advertising on Eligible Systems
for products or services that are directly competitive with the Authorized
Products and Services; and
3.4 Promptly remit to Sylvan any fees received by
ZapMe which represent fees for Authorized Products and Services and
Additional Sylvan Authorized Products and Services.
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Sylvan/ZapMe! Agreement
SECTION 4. COOPERATION AND INFORMATION SHARING.
4.1 ZapMe shall, subject to any confidentiality
restrictions it may be under, keep Sylvan apprised of and consult with Sylvan
on the types of educational products and services ZapMe intends to offer on
or through the ZapMe!-TM- netspace (the "ZapMe Netspace"). If such products
or services are similar to the Authorized Products and Services or other
products and services Sylvan offers, ZapMe will provide Sylvan with notice
thereof prior to committing to offering such products or services on the
ZapMe Netspace.
4.2 Sylvan will keep ZapMe apprised of its efforts
to deliver the Authorized Products and Services in as many Eligible Schools
as is practical.
SECTION 5. PROFIT SHARE FEES.
5.1 PERCENTAGE. For each calendar quarter
during the term of this Agreement, Sylvan shall pay to ZapMe a cash fee equal
to the Applicable Percent (as defined below) of the Net Operating Profit (as
defined below) generated during such quarter by the Authorized Products and
Services (as expressed on EXHIBIT A hereto) at the Eligible Schools. For
purposes of the foregoing, Net Operating Profit shall be calculated by Sylvan
in accordance with EXHIBIT B attached hereto, and all fees paid to ZapMe
during the term of this Agreement pursuant to this Section 5 (excluding any
credit against Profit Share Fees otherwise owing by reason of Section 5.3
hereof) are hereinafter referred to as "Profit Share Fees." ZapMe
acknowledges that Sylvan provides products and services to schools,
administrators, teachers and students independent of ZapMe Systems and ZapMe
agrees that only those Authorized Products and Services actually provided
making use of Eligible Systems are subject to payment of Profit Share Fees.
The Applicable Percent shall initially be 35%, and for each $5 million in
cumulative Profit Share Fees paid to ZapMe, so long as this Agreement is in
effect, the Applicable Percent shall be reduced by 2.5% until it becomes 20%,
after which it shall not be further reduced.
5.2 PAYMENT OF PROFIT SHARE FEES. After the
end of each calendar quarter during the term of this Agreement, Sylvan shall
calculate the estimated Profit Share Fees payable on account of such quarter
and shall remit the estimated Profit Share Fees to ZapMe not later than the
15th of the month following the end of the quarter, in all cases subject to
the verification procedures described in Section 6.2 of this Agreement. Such
Profit Share Fees shall be calculated net of any previous net operating
losses reported for prior quarters in that particular calendar year.
5.3 MINIMUM PROFIT SHARE FEES.
(a) During 1999 only, Sylvan shall pay a
minimum quarterly Profit Share Fee of $50 for each school that was an
Eligible School on the last day of the applicable quarter (the "1999 Minimum
Per School Quarterly Fee"). For 1999, Sylvan shall pay to ZapMe not less
than $250,000 in cumulative Profit Share Fees. If the calculated amount of
1999 Profit Share Fees (including aggregate 1999 Minimum Per School Quarterly
Fees) is less than $250,000 Sylvan shall receive a credit against the fees to
be paid by Sylvan to ZapMe for
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Sylvan/ZapMe! Agreement
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[*]Confidential treatment has been requested with respect to certain information
contained in this document. Confidential portions have been omitted from the
public filing and have been filed separately with the Securities and Exchanges
commission.
2000, which credit shall equal the excess of $250,000 over the amount of fees
otherwise owing for 1999.
(b) For each year during the term of this
Agreement beginning with the year 2000, Sylvan shall pay to ZapMe an annual
Minimum Profit Share Fee, calculated in accordance with the following
formula: MPSF = ES x FF, where "MPSF" represents the Minimum Profit Share
Fee; "ES" represents the number of Eligible Schools in which a ZapMe System
has been installed and is operational for at least one full year as of the
last day of the year in question; and "FF" represents the relevant Fee Factor
(as hereinafter defined).
(c) Sylvan shall calculate and pay the
MPSF no later than January 15th of the following year, subject to
verification as provided for in Section 6 below. For purposes of the
calculation of MPSF, the FF for each school in question shall be as follows:
Number of Full Years as Eligible School Fee Factor
--------------------------------------- ----------
1 $200
2 $300
3 $400
4 or more $500
SECTION 6. REPORTING; AUDIT RIGHTS.
6.1 ZAPME SCHEDULES. Within 10 days after the
end of each calendar quarter during the term of this Agreement, ZapMe shall
provide Sylvan a schedule showing each Eligible School as of the end of the
preceding quarter (the "Eligible School Schedule"), which shall separately
identify each Eligible School, when such school became an Eligible School and
the number of Eligible Schools added and deleted during such quarter.
Promptly after the end of each year during the term of this Agreement, ZapMe
shall verify its calculations through an independent auditor or other means
of verification acceptable to Sylvan (the "Verified Annual Schedule"), and
ZapMe shall provide Sylvan the Verified Annual Schedule within 30 days after
the end of each year.
6.2 SYLVAN QUARTERLY REPORT. Within 30 days
after receipt of each Eligible School Schedule, Sylvan shall provide ZapMe
with an accounting showing revenues, operating expenses and Net Operating
Profit from the Authorized Products and Services during the quarter covered
by that Eligible School Schedule (the "Sylvan Quarterly Report"). For the
four quarters of 1999, the Sylvan Quarterly Report also shall include a
calculation of the 1999 Minimum Fee, based upon the number of Eligible
Schools contained in the Eligible School Schedule for the applicable quarter.
Each Sylvan Quarterly Report shall be accompanied by either payment of the
amount by which the verified Profit Share Fee exceeded the Profit Share Fee
made previously for that quarter, or a credit memorandum for the amount by
which the estimated Profit Share Fee exceeded the Profit Share Fee made
previously for the Quarter.
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Sylvan/ZapMe! Agreement
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[*]Confidential treatment has been requested with respect to certain information
contained in this document. Confidential portions have been omitted from the
public filing and have been filed separately with the Securities and Exchanges
commission.
6.3 SYLVAN ANNUAL REPORT. Annually, Sylvan shall
cause its independent auditors to report on the accuracy of each Sylvan
Quarterly Report prepared by Sylvan during the preceding year (the "Sylvan
Annual Report") and to calculate the MPSF for each such year (beginning with
the year 2000), based upon the number of Eligible Schools shown on the
Verified Annual Schedule for that year. Sylvan shall provide the Sylvan
Annual Report to ZapMe by March 31 of the following year. If that Sylvan
Annual Report shows that Sylvan owes a MPSF for that year or that Sylvan has
underpaid the Profit Share Fees for that year, Sylvan shall pay the amount
due when it sends the Sylvan Annual Report to ZapMe. If the Sylvan Annual
Report shows that Sylvan has overpaid the Profit Share fees for the year, the
amount of the overpayment shall be credited against the Profit Share Fees for
the following year.
6.4 SYLVAN'S AUDIT RIGHTS. If Sylvan disagrees
with any Eligible Schools Schedule, Sylvan shall notify ZapMe of such
disagreement within 30 days of receiving such Eligible Schools Schedule.
Upon receipt of such notice, ZapMe shall promptly make available to Sylvan
and its auditors, during reasonable business hours, all books and records,
including financial records, pertaining to the Eligible Schools for purposes
of verifying the Eligible Schools Schedule. Sylvan's failure to provide
notice of disagreement within such 30 days shall constitute acceptance of the
Verified Annual Schedule. In the event the Sylvan audit determines that the
Eligible Schools Schedule has been overstated by more than 5%, then ZapMe
shall pay the reasonable cost of such audit.
6.5 ZAPME'S AUDIT RIGHTS. If ZapMe disagrees
with any Sylvan Quarterly Report or Sylvan Annual Report, ZapMe shall notify
Sylvan of such disagreement within 30 days of receiving such Sylvan Quarterly
Report and within one year of receiving such Sylvan Annual Report. Upon
receipt of such notice, Sylvan shall promptly make available to ZapMe and its
auditors, during reasonable business hours, all books and records, including
financial records, pertaining to Sylvan's revenues, operating expenses and
Net Operating Profit from the Authorized Products and Services for purposes
of verifying the Sylvan Quarterly Report or the Sylvan Annual Report, as the
case may be. ZapMe's failure to provide notice of disagreement within such
time frames shall constitute acceptance of the applicable report (subject in
the case of each Quarterly Report to final determination in the Annual
Report). In the event the ZapMe audit determines that the Profit Share Fees
have been understated by more than the greater of $25,000.00 or 5% of the
Profit Share Fees, then Sylvan shall pay the reasonable cost of such audit.
6.6 DISPUTES. If a dispute arises under
Section 6.4 or 6.5 which the parties are unable to resolve within 30 days,
the parties shall cause their respective auditors to seek to resolve the
dispute. If the auditors are unable to resolve the dispute within the next
30 days, the matter shall be submitted to binding arbitration in accordance
with Section 11 hereof.
SECTION 7. SPONSORSHIP; ADVERTISING.
7.1 CHARTER SPONSORSHIP. In 1999, Sylvan will
participate as a charter advertising sponsor on the ZapMe Network in the
amount of $500,000, payable as such
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Sylvan/ZapMe! Agreement
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[*]Confidential treatment has been requested with respect to certain information
contained in this document. Confidential portions have been omitted from the
public filing and have been filed separately with the Securities and Exchanges
commission.
advertising expenses are incurred. As a charter sponsor, Sylvan shall be
entitled to require ZapMe to place Sylvan-created advertisements on the ZapMe
Network in accordance with ZapMe's charter sponsorship terms. Subject to
Sylvan's good faith determination that its customer acquisition cost goals
have been met for a particular year, Sylvan shall remain a sponsor of the
ZapMe Network for the following year, at a spending level of 20% above the
preceding annual level. In the event ZapMe is not able to deliver the minimum
amount of advertising substantially in accordance with reasonable
Sylvan-specified delivery frequencies to meet the sponsorship level provided
in this Section 7.1, then Sylvan shall receive an advertising credit the
following year in an amount equal to the value of advertising not delivered
which would have met the minimum sponsorship level.
7.2 ADVERTISING RATES. In 1999 and 2000,
Sylvan shall be entitled to preferred advertising rates that reflect a 50%
and 25% discount, respectively, to ZapMe's published rates for those years.
During the term of this Agreement, Sylvan shall be charged advertising rates
no greater than the lowest rates charged by ZapMe to any advertiser during
that year.
7.3 ANNUAL ADVERTISING CREDIT. ZapMe and
Sylvan agree that it is in their mutual best interests that the Authorized
Products and Services be promoted by advertisements on the ZapMe Network.
Sylvan shall be credited each calendar year of this agreement beginning in
1999 with an advertising credit equal (a) in 1999 to $500,000 and (b)
thereafter to the actual amount of spending by Sylvan on advertising on the
ZapMe Network the previous calendar year (the "Advertising Credit"). This
Advertising Credit will be repaid to ZapMe on a dollar for dollar basis until
repaid in full out of the Net Operating Profits from the sale of Authorized
Products and Services. Notwithstanding the foregoing, Sylvan will not be
required to repay any Advertising Credits to the extent that they in total
exceed cumulative Net Operating Profits, prior to termination of this
Agreement.
SECTION 8. TERM AND TERMINATION.
8.1 TERM. The initial term (the "Initial Term")
of this Agreement shall expire on December 31, 2003. Sylvan may renew this
Agreement for an additional five year period by providing written notice of
its intent to renew no later than November 15, 2003, but only if: (i) the
Profit Share Fees for the first three calendar quarters of 2003 would result
in an annualized Fee Factor (the "Annualized Fee Factor") of at least $650
per school (the "Renewal Right Amount"), such calculation to be based on the
number of Eligible Schools in which a ZapMe System has been installed and is
operational for at least one year, on September 30, 2003; or (ii) the
Annualized Fee Factor is less than the Renewal Right Amount and Sylvan remits
to ZapMe such additional payment as is necessary to achieve the Renewal Right
Amount.
8.2 TERMINATION. This Agreement may be
terminated as follows:
(a) by mutual written consent of Sylvan
and ZapMe; or
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Sylvan/ZapMe! Agreement
--------------------
[*]Confidential treatment has been requested with respect to certain
information contained in this document. Confidential portions have been
omitted from the public filing and have been filed separately with the
Securities and Exchanges commission.
(b) by Sylvan, if ZapMe breaches any
provision of Section 3 of this Agreement, which breach has not been cured
within 30 days after written notice from Sylvan to ZapMe; or
(c) by ZapMe, if Sylvan breaches any
provision of Section 1, 2, 5, 6 or 7 of this Agreement, which breach has not
been cured within 30 days after written notice from ZapMe to Sylvan; or
(d) by ZapMe, on one year's written
notice, if Sylvan offers or delivers PC-based Authorized Products or Services
through third parties whose business model is based on installing free or
subsidized PC systems in schools; or
(e) by Sylvan for any reason, upon not
less than one year's prior written notice, accompanied by a termination fee
equal to the greater of (i) $1 million; or (ii) the MPSF for the 12 months
preceding the month in which Sylvan provides such notice of termination; or
(f) by Sylvan, by written notice at any
time after December 31, 1999, if ZapMe has not achieved (i) 500 Eligible
Schools by December 31, 1999, (ii) 1,500 Eligible Schools by December 31,
2000; and (iii) 2,500 Eligible Schools by December 31, 2001 and each year
thereafter.
8.3 If Sylvan is precluded by any governmental
authority (including judicial authorities) from delivering any one or more of
the Authorized Products and Services to any Eligible School, (a) Sylvan shall
immediately so inform ZapMe thereof and (b) at any time thereafter, ZapMe
may, by written notice to Sylvan, determine that such school is no longer an
Eligible School.
8.4 REMEDIES UPON TERMINATION. In the event of
the termination of this Agreement, all legal rights and equitable remedies,
if any, of the terminating party shall survive and remain enforceable.
SECTION 9. PERFORMANCE WARRANT. In consideration of the
agreements hereunder, ZapMe shall deliver to Sylvan a warrant in substantially
the form attached hereto as EXHIBIT D.
SECTION 10. CONFIDENTIALITY. Each party hereto will hold in
confidence and not reveal to any third parties any knowledge or information
of a confidential nature with respect to the business, products, know-how and
methods of operation of the other party hereto, and will not disclose,
publish or make use of the same, provided, however, that the foregoing shall
not be applicable to any disclosure or use of confidential information or
knowledge that can be demonstrated to have (i) been publicly known prior to
the date of this Agreement, (ii) become known by publication or otherwise not
due to the unauthorized act or omission on the part of the recipient, or
(iii) been supplied to the recipient by a third party without violation of
the rights of any of the parties to this Agreement or any other party's
rights. Upon termination or expiration of this Agreement, each party shall
immediately return to the other confidential information
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Sylvan/ZapMe! Agreement
--------------------
[*]Confidential treatment has been requested with respect to certain information
contained in this document. Confidential portions have been omitted from the
public filing and have been filed separately with the Securities and Exchanges
commission.
(regardless of the medium) in its possession and belonging to such other
party. The parties agree that the remedy at law for any breach of this
Section 10 may be inadequate and that the aggrieved party shall be entitled
to injunctive and other equitable relief in addition to any other remedy
available to it in law or equity. This Section 10 shall survive termination
or expiration of this Agreement and shall remain enforceable by injunctive or
other equitable relief.
SECTION 11. INDEMNIFICATION. Sylvan shall be responsible for
the Authorized Products and Services, and shall indemnify and hold ZapMe
harmless from any claim asserted by, or liability to, any third party based
solely upon one or more of the Authorized Products and Services or the
negligence of Sylvan. ZapMe shall be responsible for the Computer Labs, the
ZapMe Systems, and all computers and related equipment, and shall indemnify
and hold Sylvan harmless from any claim asserted by, or liability to, any
third party based solely upon one or more of the Computer Labs, the ZapMe
Systems, the related computers and other equipment or the negligence of ZapMe.
SECTION 12. DISPUTE RESOLUTION; CONSENT TO JURISDICTION.
Sylvan and ZapMe agree that any controversy or claim arising out of or
relating to this Agreement or the alleged breach thereof shall be settled
exclusively by arbitration in Tulsa, Oklahoma in accordance with the National
Rules of the American Arbitration Association. The decision of the arbitrator
or arbitrators shall be binding on all parties hereto, and judgment upon the
arbitration award may be entered by any court having jurisdiction. In
reaching its decision, the arbitrator shall have no authority to change or
modify any provision of this Agreement. Any party hereto may seek specific
performance, injunctive relief or other equitable relief before a court of
competent jurisdiction for purposes of compelling the other party hereto to
perform its obligations hereunder, or compelling the other party to arbitrate
any controversy or claim in the manner provided for above. The failure of a
court to grant the equitable relief sought by a party hereto shall not bar
such party from seeking to arbitrate the same claim, and such failure shall
not be taken into account by arbitrators in any arbitration. For purposes of
the foregoing, ZapMe and Sylvan each hereby irrevocably consent to the
jurisdiction of the federal and state courts of the State of Maryland and
California, respectively, and to arbitration located in Tulsa, Oklahoma. For
purposes of Section 10 of this Agreement, ZapMe and Sylvan irrevocably
consent to the jurisdiction of the federal and state courts of the State of
Maryland and California, respectively.
SECTION 13. MISCELLANEOUS.
13.1 NO AGENCY, JOINT VENTURE, ETC. Sylvan and
ZapMe acknowledge and agree that each is not an agent of the other for any
purpose whatsoever, and that each shall have no authority to legally bind the
other. Nothing contained in this Agreement shall be deemed to create a joint
venture or partnership between the parties.
13.2 EXPENSES. Each party to this Agreement
shall pay all of its expenses relating hereto, including fees and
disbursements of its counsel, accountants and financial advisors.
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Sylvan/ZapMe! Agreement
13.3 SURVIVAL. The covenants and agreement
made by the parties in Sections 5, 10, 11 and 12 of this Agreement shall
survive the termination or expiration of this Agreement.
13.4 NOTICES. Except as otherwise provided
herein, all notices, requests, demands and other communications under or in
connection with this Agreement shall be in writing, and:
(a) if to Sylvan, shall be addressed to:
Sylvan Learning Systems, Inc.
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Co-Chief
Executive Officer
Fax: 000-000-0000
with a copy to:
Sylvan Learning Systems, Inc.
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq., General
Counsel
Fax: 000-000-0000
(b) if to ZapMe, shall be addressed to:
ZapMe Corporation
0000 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxx, Chief Executive
Officer
Fax: 000-000-0000
with a copy to:
ZapMe Corporation
0000 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxx, General Counsel
Fax: 000-000-0000
All such notices, requests, demands or communications
shall be sent by overnight delivery, or certified mail (return receipt
requested), and shall be deemed delivered when sent. Any party may change the
address at which it is to receive notice by like written notice to the other.
13.5 ENTIRE AGREEMENT. This Agreement
(including the exhibits hereto and the lists, schedules and documents
delivered hereunder, which are a part hereof) is intended by the parties to
and does constitute the entire agreement of the parties with respect to the
matters contemplated by this Agreement. This Agreement supersedes any and all
prior
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Sylvan/ZapMe! Agreement
understandings, written or oral, between the parties. This Agreement may be
amended, modified, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the amendment,
modification, waiver, discharge or termination is sought. This Agreement may
not be amended except by an instrument in writing signed by each of the
parties hereto.
13.6 HEADINGS. The paragraph headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
13.7 COUNTERPARTS. This Agreement may be
executed simultaneously 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.
13.8 ASSIGNMENT. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns, but nothing herein, express or implied, is
intended to or shall confer any rights, remedies or benefits upon any person
other than the parties hereto. This Agreement may be assigned by either party
with the other party's consent, not unreasonably to be withheld, in the event
of a merger, acquisition, or sale of substantially all of the assets of the
assigning party (provided that the succeeding entity agrees to honor all of
the commitments and obligations of the assigning party under this Agreement,
and without the other party's consent in the event of a merger in connection
with the reincorporation of the assigning party.
13.9 TECHNICAL SPECIFICATIONS. Each ZapMe
System is based on the technical specifications set forth in EXHIBIT C.
13.10 GOVERNING LAW. This Agreement shall be
construed in accordance with and governed by the laws of the State of New
York, without giving effect to the principles of conflicts of law.
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Sylvan/ZapMe! Agreement
IN WITNESS WHEREOF, Sylvan and ZapMe have executed this Agreement as
of the day and year first above written.
SYLVAN LEARNING SYSTEMS, INC.
By: /s/ Xxxxxxx Xxxxxx
---------------------------
Name: Xxxxxxx Xxxxxx
-------------------------
Title: President & Co-CEO
-------------------------
ZAPME CORPORATION
By: /s/ Xxxxx Xxxxxxxxx
---------------------------
Name: Xxxxx Xxxxxxxxx
-------------------------
Title: CEO
------------------------
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Sylvan/ZapMe! Agreement
EXHIBIT A
to
Products and Services Agreement
AUTHORIZED PRODUCTS AND SERVICES
"Authorized Products and Services" include only the following items:
1. Student tutoring or information training services, delivered either
live or by computer.
2. Test preparation programs for academic tests, including but not
limited to the SAT, ACT and the PSAT ("Test Prep Programs").
3. The delivery of computer based tests, for a fee, for (i) academic or
institutional admission (e.g. SAT, ACT), (ii) academic recognition, or
scholarship (e.g. PSAT), (iii) professional or vocational designation or
certification (e.g. Microsoft Certified Systems Engineer), or (iv) academic
placement or credit (e.g. standardized AP testing).
Notwithstanding the foregoing, Authorized Products and Services shall in no
way:
(i) require that ZapMe block access to any sites available on the
Internet that are not operated by ZapMe;
(ii) preclude ZapMe from entering into agreements with on-line
retailers of educational material or content, other than on-line
retailers who specialize in 1, 2 or 3 above; or
(iii) preclude ZapMe from incorporating into the ZapMe Netscape
educational content (other than Test Prep Programs) for which
ZapMe is not compensated.
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Sylvan/ZapMe! Agreement
EXHIBIT B
to
Products and Services Agreement
For purposes of Section 5.1 of the Products and Services Agreement between
Sylvan Learning Systems, Inc. and ZapMe Corporation dated January 15, 1999,
Net Operating Profit shall be deemed to be the result of subtracting from the
gross income derived from the delivery of Authorized Products and Services or
Additional Opportunity Products and Services at an Eligible School utilizing
Eligible Systems the sum of all expenses directly attributable thereto.
For purposes of the foregoing the term "gross income" shall mean the amount
of fees billable for services delivered and gross sales price billed for
products delivered exclusive of any sales taxes or shipping costs billed to
the recipient.
For purposes of the foregoing, expenses shall be directly attributable to
gross income derived from the marketing, delivery and support of Authorized
Products and Services or Additional Opportunity Products and Services to an
Eligible School utilizing Eligible Systems if they are for goods and services
actually delivered or provided to the Eligible School and would not be
incurred but for the activity of providing such Authorized Products and
Services or Additional Opportunity Products and Services. In no event shall
allocated expenses from support or development activities occurring at
locations other than Eligible Schools or depreciation or amortization charges
be utilized in determining Net Operating Profit, without ZapMe's prior
written approval, not unreasonably to be withheld.
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Sylvan/ZapMe! Agreement
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[*]Confidential treatment has been requested with respect to certain information
contained in this document. Confidential portions have been omitted from the
public filing and have been filed separately with the Securities and Exchanges
commission.
EXHIBIT C
SKYSURFER PRO NETWORK SCHEME
[Graphic]
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[*]Confidential treatment has been requested with respect to certain information
contained in this document. Confidential portions have been omitted from the
public filing and have been filed separately with the Securities and Exchanges
commission.
