MBE Express(TM) Joint Venture Agreement
This Agreement is made this 24th day of September 1997, by and
between USA Technologies, Inc., a Pennsylvania corporation ("USA"), and Mail
Boxes Etc., a California corporation ("MBE").
Background
MBE is the world's largest franchisor of postal, business, and
communications retail service centers. USA has developed an unattended, credit
card activated business center known as the Business Express(TM). As more fully
set forth herein, the parties have created a joint venture in order to market
and sell the business centers under the name MBE Express(TM).
Agreement
NOW THEREFORE, intending to be legally bound hereby, the parties
hereto agree as follows:
1. Joint Venture. USA and MBE hereby form a joint venture of which
each of the them shall be a fifty percent (50%) partner unless otherwise
specified herein. The name of the joint venture shall be the "MBE Express(TM)
Joint Venture".
2. Advisory Committee. The joint venture shall be managed by an
advisory committee, the members of which shall consist one-half of
representatives of MBE and one-half of representatives of USA. The actual
number of members serving on the advisory committee shall be mutually agreed
upon by the partners from time to time. The advisory committee shall among
other things establish and maintain the business plan for the partnership as
well as approve the marketing budget for the partnership. The advisory
committee
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shall meet no less than every two months in order to review the progress of
the joint venture and to formulate business strategy.
3.Purpose.
A. During the term of the joint venture, the joint venture
shall have the exclusive right to market and sell the MBE Express(TM) to the
hospitality industry, travel industry, convention centers, colleges,
universities, supermarkets, banks, military, convenience stores, and mass
merchandisers located in the United States. The joint venture shall also have
the nonexclusive right to market and sell the MBE Express(TM) in those countries
in which MBE has Master Franchise Agreements.
B. Definition. For all purposes hereof, the term "MBE
Express(TM)" or "Business Express(TM)"shall mean an unattended, credit card
activated business center consisting of at least two separate technologies
(i.e., computer, copier, laptop workstation, or facsimile machine). For
purposes hereof, USA's Public PC(TM) product or MBE's in-center computer
workstation (a computer and a printer) shall not be considered as two separate
technologies but only one technology.
4. Private Label Product.
A. During the term of the joint venture, in the event a
customer would not desire to purchase the MBE Express(TM) in the industries
referred to above, USA would have the option to directly sell to that customer
a private label business center utilizing any name other than the MBE
Express(TM), including the name Business Express(TM) or any other name it deems
appropriate.
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B. Such private label product would not utilize the data
base technology to be developed by USA referred to in paragraph 10, and shall
not utilize the trademarks and trade dress used by the MBE Express(TM). In
connection with any direct private label sales made by USA an amount equal to
two percent (2%) of the gross revenues from each terminal would be paid to the
joint venture and applied towards the marketing and sales expenses of the
joint venture and any excess shall be split equally between the partners.
C. If any proposed sale of the MBE Express(TM) by the joint
venture creates a franchise encroachment issue within the MBE system, USA may
sell a non-MBE Express(TM) branded product (i.e., Business Express(TM)) in those
locations which are affected under the same terms and conditions as set forth
in Sections 4.A and 4.B above.
5. USA Terminals. During the term of the joint venture, USA shall be
permitted to sell its control system terminals to any person or entity
whatsoever. [two sentences intentionally omitted] USA shall be permitted to
continue to market and sell its Business Express(TM) business centers to
industries not specifically identified in Section 3 above.
6. MBE Exclusive. During the term of the joint venture, MBE
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shall not use, sell, endorse, approve, or purchase any unattended, credit card
activated technology or terminals other than those offered by USA for use in
connection with any of the equipment included in the MBE Express(TM). During the
term of the joint venture, MBE shall not purchase, endorse, approve, use,
sell, or market any unattended business center other than the MBE Express(TM).
USA acknowledges that the MBE franchises are independently owned and operated
and that any obligations of such franchisees shall be set forth in appropriate
processing, sales, or placement agreements to be entered into between USA and
such franchisees.
7. Business Center Components. The manufacturers of the third party
components (i.e., computers, furniture, facsimile machines, printers and copy
machines) included in the MBE Express(TM) shall be agreed upon by the partners.
Any such components shall be purchased directly by USA or MBE, and as shall be
mutually agreed upon by the partners, MBE shall assist USA with financing
arrangements required in connection therewith, including MBE being a guarantor
of such obligations. USA shall have the control system terminals manufactured
on behalf of the joint venture. All such components shall be supplied to the
joint venture at cost.
8. Sales Revenues. The actual selling price of the MBE Express(TM)
shall be established by the partners. Any gross profit (as defined below)
earned by the joint venture from sales on a corporate/national account level
(where the buying decision is made at a customer's headquarters rather than at
the local or store level) would be split equally between USA and MBE. Any
gross
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profit earned by the joint venture from sales to MBE franchisees in connection
with placement handoffs (i.e., sales leads - where host location has already
committed to placing a MBE Express(TM)) provided by either USA or MBE would be
split equally between USA and MBE. For any sales made to the host location at
the local or store level, the gross profit earned by the joint venture would
be split so that the partner responsible for contractually obligating the
customer for that particular sale would receive 75% of the gross profit and
the other partner 25% of the gross profit. For purposes of determining which
partner is responsible for contractually obligating the customer, the term
"partner" shall include such partner's affiliate or franchisee; provided,
however, that only a partner (i.e., USA or MBE) shall be entitled to receive
any payments of gross proceeds hereunder. For all purposes of this Section 8,
the term "gross profits" shall mean the sales price received for the MBE
Express(TM) less the total cost of goods sold (third party costs included) to
deliver, configure, warehouse, assemble, and install the business center
("Order Fulfillment"). All Order Fulfillment tasks may be performed by the
joint venture either directly or outsourced as shall be agreed upon by the
partners.
9. Other Revenues. Notwithstanding anything else set forth herein, it
is the partners intention that any and all revenues, rebates, or income
whatsoever received by the joint venture or either partner and which are
generated or result from the use of, or from any of the marketing or sale
activities in connection with,
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MBE Express(TM) shall be split equally between the partners. Such use or
activities shall include but not be limited to any cooperative marketing,
advertising, licensing, and electronic commerce conducted on the MBE
Express(TM).
10. Intellectual Property.
A. Each of the partners hereby grants to the joint venture
at no cost an appropriate license to use their respective trademarks, logos,
and intellectual property as described herein. During the term of the joint
venture, the trademark MBE Express(TM) is hereby exclusively licensed to the
joint venture by MBE.
B. USA shall, at its cost, develop a customer data
collection network (the "Network") to be hosted by MBE's ISP. The Network
shall be used by all MBE Express(TM) business centers. The Network is hereby
licensed to the joint venture by USA at no cost. Upon the termination of this
Agreement, any and all customer data gathered, or to be gathered after such
termination, pursuant to the Network shall be and remain the sole property of
MBE. Following any such termination, USA shall have the right to use the
Network technology in order to develop its own customer data collection
network to be used in any of its products.
C. During the term of the joint venture, USA would not
utilize the Network in any private label sales or placements of the business
centers or in any other product which is similar to the MBE Express(TM) or
Business Express(TM). USA would, however, be able to utilize the Network
technology solely in connection with its Public PC(TM) product (i.e., computer
and printer) and USA shall use its best
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efforts to utilize MBE's ISP to host the Network technology and to include an
e-MBE icon at no additional cost. MBE shall be able to use the Network for any
of its in-center computer workstations and any other computer station so long
as such computer station utilizes USA's TransAct(TM) card swipe technology. Upon
termination of the joint venture, USA shall be permitted to utilize the
Network technology to develop its own customer data collection network for use
in connection with any and all of its products.
11. Budget. The partners would agree from time to time (but not less
frequently than annually) upon a budget which would cover anticipated expenses
for sales and marketing of the MBE Express(TM). Any such expenses in the budget
shall only be for third party out-of-pocket expenses incurred by the partners
(unless otherwise agreed to) and would include items such as for trade shows,
trade advertising, direct mail, telemarketing, national account coverage,
merchandising, market research and lead generation. These expenses would be
split equally between the partners. Any items not covered in the approved
budget would have to be agreed upon in advance by the partners. Neither
partner shall be reimbursed for their own related (internal) expenses.
12. Administrative Matters. The books and records of the joint
venture would be maintained by USA. USA shall collect and make appropriate
disbursements of the revenues of the joint venture. Any pre-approved,
authorized or agreed upon expenses of the joint venture which are in an amount
of $5,000 or less may be paid by one partner and the other partner shall
reimburse that partner for its
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share of the expense. If any such expense is in excess of $5,000, then such
expense shall be paid by both partners directly at the same time; provided,
however, that upon mutual agreement of the partners, one partner may pay such
expense and be reimbursed by the other partner for its share of such expense.
All expenses would have to have been reflected in the approved budget or
separately approved by each partner in advance. If in the future, the joint
venture would require a dedicated staff, the partners agree that the costs
thereof (i.e., salaries and benefits) would be equally split between them. The
joint venture shall be audited on an annual basis as part of USA's regular
audit and the joint venture shall pay its fair share of such audit.
13. MBE Express(TM) Processing.
A. In connection with all sales of the MBE Express(TM), USA
shall act as the merchant for all credit card sales. USA and the owner of each
such business center shall enter into an appropriate licensing and processing
agreement which shall reflect the terms and conditions of subparagraph B
below. In this regard, USA shall use its best efforts to utilize the lowest
cost processor.
B. If the sale of a business center is made to a person
other than a MBE franchisee, USA shall retain 5% of the gross revenues, MBE
shall retain 5% thereof, and the owner of the business center shall retain 90%
thereof. If, however, the cost of USA's processor shall be in excess of 5%,
then the appropriate percentage retained by USA shall be appropriately
increased and the percentage retained by MBE shall be appropriately decreased
so that
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the owner of the business center shall at all times retain a minimum of 90% of
the gross revenues; provided, however, that if the cost of USA's processor
shall exceed 6%, any such excess shall be borne equally by USA and MBE. For
example, if the cost of processing is 6%, USA would retain 6% of the proceeds
and MBE would retain 4% thereof. If the processing costs are 7%, USA would
retain 6 1/2% and MBE would retain 3 1/2%. USA reserves the right to forward
to the business center owner its share of the gross proceeds on a monthly
basis (rather than on the first and fifteenth of each month).
C. In connection with any sales of the MBE Express(TM) made to
a MBE franchisee, USA shall retain 5% and the MBE franchisee shall retain 95%
of the gross revenues. If, however, the cost of USA's processor shall be in
excess of 5%, then the percentage retained by USA shall be appropriately
increased and the percentage retained by the MBE franchisee shall be
appropriately decreased; provided, however, that if the cost of USA's
processor shall exceed 6%, the excess shall be borne equally by USA and the
MBE franchisee. For example, if the cost of processing is 6%, USA would retain
6% of the proceeds and the MBE franchisee would retain 94% thereof. If the
processing costs are 7%, USA would retain retain 6 1/2% and the MBE franchisee
would retain 93 1/2%. USA shall forward to MBE the MBE franchisee's portion of
the gross proceeds on the first and fifteenth of each month.
D. USA and MBE reserve the right to restructure the above
arrangement in the event that the charges for credit card
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processing increases above anticipated levels in the future.
14. Monthly Service Fees.
A. For all sales of the MBE Express(TM), including sales to
MBE's franchisees, USA shall be entitled to receive a monthly service fee of
$25 per control system terminal from the owner of the business center and USA
will retain the monthly payment from the amount received. USA shall rebate to
MBE on a monthly basis the sum of $5.00 from each and every such monthly
payment.
B. In consideration of the monthly service fee, USA shall be
responsible for all control system terminal related issues, including handling
questions from the owner of the business center about the operation of the
terminals, sending usage information to the owner of the MBE Express(TM) by
e-mail (with a copy thereof to MBE), changing pricing for location customers
remotely, and changing advertising on the purchase receipts remotely.
15. Help Desk. Any questions or issues involving the equipment
contained in the MBE Express(TM) business centers or from users of the equipment
(other than those specifically referred to in Section 14.B above), shall be
handled by a help desk to be established by the joint venture either directly
or through outsourcing.
16. Development Projects. The partners shall mutually attempt to
agree from time to time upon development projects and how such projects would
be funded. Such development projects would include customer driven requests
for custom hardware, software, merchandising, etc.
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17. Term of Joint Venture.
A. The initial term of the joint venture shall be for five
years from the date hereof and shall automatically be continued from year to
year thereafter unless terminated by notice from either partner to the other
partner at least 90 days prior to the end of the initial five year term or any
one year extension thereof. Any such termination could be for any reason
whatsoever and whether or not any "cause" exists.
B. If the joint venture has not met the following cumulative
performance goals, then USA may by sixty days prior written notice to MBE be
released from the exclusive restrictions set forth in Sections 3 and 4 hereof
as they relate to the Business Express(TM):
Number of MBE Express(TM)
Contract Year Locations Open
----------------------- -----------------------
Beginning of Year Three 2,000 business centers
Beginning of Year Four 3,000 business centers
Beginning of Year Five 4,000 business centers
Upon the release of USA pursuant to any such notice, MBE shall also be
released from the exclusivity provisions set forth in Section 6 hereof.
Notwithstanding the above, any sales of the MBE Express(TM) shall remain subject
to all of the terms and conditions of this Agreement.
C. Notwithstanding subparagraph A or B, the joint venture
may be terminated by either partner at any time if the other partner has
breached any material term or condition hereof; provided, however, that the
partner terminating the joint venture
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shall have provided the other partner with written notice of such alleged
breach and at least sixty days in order to cure any such alleged breach prior
to terminating this Agreement, and this Agreement shall not be terminated if
such alleged violation has been cured within such sixty day period.
D. Upon any termination of this Agreement, the partners
shall be free to engage in any business whatsoever; provided that the partners
shall not utilize the intellectual property of the other. Upon any such
termination, USA shall continue to perform its responsibilities and make
payment to MBE as set forth in Sections 13 and 14 hereof for all MBE Express(TM)
operations sold or placed by the joint venture. Upon any termination, MBE
shall retain the right to use the trade name MBE Express(TM). Additionally, MBE
shall retain the perpetual right to utilize the Network (as hosted by MBE's
ISP) as well as any customer data collected prior to any such termination, or
to be collected after termination, pursuant to the Network, and USA reserves
the right to use the Network technology in order to develop its own
proprietary network for use in any and all of its products but shall have no
right to the customer data collected pursuant to the Network.
18. Nonassignability. Without the prior written consent of the other
partner, neither partner shall, directly or indirectly, sell, pledge,
hypothecate, encumber, assign, convey, transfer, grant an option in connection
with, or in any other manner dispose of all or any portion of its interest in
the joint venture, whether voluntary or involuntary, or by operation of law,
or attempt to do
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any of the foregoing. Any act in violation of this Section shall be null and
void as against the joint venture and the partners. No other person or entity
shall be admitted as a partner of the joint venture unless USA and MBE shall
have both agreed thereto.
19. Good Faith. The partners shall cooperate with each other in good
faith to attempt to resolve any business issues which may arise in the future
from time to time. In this regard, the partners shall take any appropriate
actions and execute and deliver any appropriate documents which may be
necessary or appropriate to carry out the transactions contemplated by this
Agreement.
20. Notices. Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed delivered if delivered in
person or sent by certified mail, postage prepaid, return receipt requested,
as follows, unless such address is changed by written notice hereunder:
If to USA:
USA Technologies, Inc.
000 Xxxxx Xxxxxx
Xxxxx, Xxxxxxxxxxxx 00000
Attn. Xx. Xxxxxx X. Xxxxxx, Xx.,
Chief Executive Officer
If to MBE:
Mail Boxes Etc.
0000 Xxxxxxxxxxx Xx. Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
Attn. Xx. Xxxxxx Xxxxxxxxxx,
Senior Vice President Development
21. Applicable Law. The substantive laws of the Commonwealth of
Pennsylvania (without regard to its conflicts of laws rules) shall govern the
construction of this Agreement and the rights and
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remedies of the partners hereto. The headings of the Sections of this
Agreement are for convenience only; they form no part of this Agreement and
shall not affect its interpretation. If any provision of this Agreement is
held to be invalid, the same shall not affect the remaining provisions of this
Agreement which shall continue in full force and effect.
22. Arbitration. All disputes, controversies, or misunderstandings
whatsoever arising out of or in connection with this Agreement, shall be
settled and resolved by binding arbitration pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. The arbitration
shall be convened in the City of Philadelphia, Pennsylvania, if MBE is the
moving party, or in San Diego, California, if USA is the moving party. The
arbitration shall be conducted by a single arbitrator, or if the dispute
involves more than $50,000 by three arbitrators, to be selected by the
partners pursuant to such rules. The costs and expenses of the arbitration, as
well as the arbitrator's compensation shall be paid by the partners as shall
be determined by the arbitrator(s). The arbitrator(s) shall not have any power
to alter, modify or change any of the terms of this Agreement or to grant any
remedy which is either inconsistent with or prohibited by the terms of this
Agreement, or not available in a court of law. The arbitrator(s) shall not
have the authority to commit errors of law or errors of legal reasoning. In
addition, the arbitrator(s) shall have no power or authority to award
punitive, consequential or incidental damages. The arbitrator(s) shall, within
thirty days
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after the matter has finally been submitted to him or her, render a written
decision making specific findings of fact and setting forth the reasons for
the decision which shall be consistent with the terms of this Agreement. The
partners intend that this Section shall survive the termination of or
expiration of this Agreement. The decision and award of the arbitrator(s)
shall be final and binding upon the partners and judgment may be entered on
the award in any court of competent jurisdiction.
23. Binding Effect. This Agreement shall inure to the benefit of,
and shall be binding upon, the respective permitted successors and assigns of
the parties hereto; provided, however, that neither USA nor MBE shall assign
this Agreement in whole or in part without the prior written consent of the
other. This Agreement constitutes the entire agreement between the partners
hereto, and may only be amended or modified by a writing signed on behalf of
the partners hereto.
IN WITNESS WHEREOF, the partners hereto have executed and delivered
this Agreement on the day and year first above written.
USA TECHNOLOGIES, INC. MAIL BOXES ETC.
By: /s/ Xxxxxx X. Xxxxxx, Xx. By: /s/ Xxxxxx Xxxxxxxxxx
------------------------- ---------------------
Xxxxxx X. Xxxxxx, Xx., Xxxxxx Xxxxxxxxxx,
Chief Executive Senior Vice President
Officer Development
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