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Exhibit 10.44
June 21st, 2000
Xx. Xxxx Xxxxxx
President
Lecomp Company, Inc.
00000 Xxxxx Xxxxxx Xxxx - Xxxxx 000
Xxx Xxxxxxx, XX 00000
Re: Distance Learning
Dear Xxxx:
Princeton Review Management, L.L.C. ("Franchisor") and Lecomp Company,
Inc. ("Lecomp") have agreed to certain terms under which Franchisor and/or its
affiliates (collectively, "TPR") will have the right to market and sell
"Distance Learning" in the Lecomp franchise territories. The purpose of this
letter is to memorialize those terms.
For purposes of this letter agreement, "Distance Learning" means: (i)
any "Interactive Product," as that term is defined in Section 3 of the May 31,
1995 Addendum to the franchise agreements between Lecomp and Franchisor (the
"Franchise Agreements"); and (ii) any web-based "Test Preparation Product" (as
that term is defined in Section 2.3 of the May 31, 1995 Formation Agreement
relating to The Princeton Review Publishing Company, L.L.C.) whose suggested
retail price exceeds the "Maximum Allowable Price" (as defined in Section 2.5 of
the Formation Agreement). If TPR's total revenues from the Lecomp franchise
territories in any fiscal quarter from products included in clause (ii) plus
Test Preparation Products whose suggested retail price is less than the Maximum
Allowable Price ("Low-Priced Products") exceed 50% of TPR's combined revenues
from the Lecomp franchise territories for all Distance Learning products and
Low-Priced Products (the "50% Threshold"), Lecomp will have the right to suspend
its marketing commitment under Section 7.d. below for all Distance Learning
products until TPR's revenues from products in clause (ii) plus Low-Priced
Products fall below the 50% Threshold in any quarter. During any period in which
Lecomp elects to suspend its marketing obligations as provided in this
paragraph, the Distance Learning Fee under Section 3 below will be reduced to
ten percent (10%) of Distance Learning Revenue. Otherwise, the foregoing two
sentences will not affect the operation of this letter agreement.
While this letter agreement is in effect, the terms of this letter
supersede the provisions of Section 3 of the May 31, 1995 Addendum.
1. Duration. The terms of this letter agreement will expire on December
31, 2002. If the terms of this letter agreement expire under this paragraph, the
rights and obligations of TPR and Lecomp under Section 3 of the May 31, 1995
Addendum will go back into effect on January 1, 2003 and will not be affected by
this letter agreement.
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2. Distance Learning Revenue. "Distance Learning Revenue" means the
total monies paid for Distance Learning services by Distance Learning students
in the Lecomp franchise territories, minus (i) credit card processing fees
incurred in connection with such payments from Distance Learning students, and
(ii) the aggregate fees paid by TPR to Lecomp under Section 5.b below. The zip
code of the student's shipping address at the time of the student's original
purchase of Distance Learning will be used to determine whether the student is
within or outside of the Lecomp franchise territories. If TPR's records do not
show a shipping address, the zip code of the student's billing address at the
time of original purchase of Distance Learning will be used.
3. Distance Learning Fee. TPR will market and sell in the Lecomp
franchise territories all Distance Learning that TPR generally markets and sells
in the territories of the Operations' company-owned sites. In consideration of
the right to market and sell Distance Learning in the Lecomp franchise
territories, TPR will pay to Lecomp fifteen percent (15%) of Distance Learning
Revenue (the "Distance Learning Fee"). For any Distance Learning course that
permits the student to sign up for or participate in more than three (3) hours
of online synchronous instruction, the Distance Learning Fee per student will
not be less than fifteen percent (15%) of the average of the prices then charged
by TPR franchisees in San Diego, California, Austin, Texas, and New York, New
York for the equivalent live instruction course (if such course exists).
4. Course Tools Fee.
a. TPR will provide each "Course Student" (as defined below)
with registered access to the student tools at the web site(s) that TPR uses to
provide online services to students. "Course Student" means a student who
enrolled with Lecomp after the date of this letter agreement for a live,
in-person SAT, ACT, GRE, GMAT, USMLE, MCAT, or LSAT course. "Course Student"
does not include a student enrolled in any institutional or non-profit course or
any mini-course (e.g., PSAT Weekend) appropriately designated in the TPR
management information system. Lecomp agrees that it will offer access to online
course tools only in conjunction with the courses provided to Course Students.
TPR agrees to offer Lecomp Students the same online services offered to Course
Students enrolled at the Operations' company-owned sites.
b. In consideration of the access granted by TPR, Lecomp will
pay TPR $10.75 for each Course Student (the "Course Tools Fee"). The Course
Tools Fee will increase to $11.50 for each Course Student who enrolls after the
date on which TPR makes available to Lecomp the asynchronous portion of its
Distance Learning services for all of the following: SAT, ACT, LSAT, GMAT, and
GRE.
c. TPR agrees that all online course tools that are generally
available to Course Students on the date of this letter will remain available.
TPR further agrees that, within six months after the date of this letter, the
following online services will be available to Course
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Students: (i) the ability to view diagnostic results from Yonkers; and (ii) the
ability to score Yonkers-supported diagnostics. If either tool is not available
to Course Students by the end of the six-month period, the Course Tools Fee will
decrease to $7.50 until such time as both of the tools referred to in (i) and
(ii) above are available to Course Students.
5. Review Sessions.
a. If requested by TPR, Xxxxxx agrees to conduct Review
Sessions (as defined below) at least twice per calendar month, at no fewer sites
than the number of locations at which Lecomp then conducts courses for graduate
school admissions tests. TPR will provide 90 days advance notice, specifying the
requested date, time, session length, and subject matter (e.g., GMAT Math) of
the Review Session. Lecomp will make reasonable efforts to provide the Review
Session on the terms requested, subject to the regular business practices of
facilities used but not controlled by Lecomp. Lecomp will have no obligation to
conduct a Review Session at any location that is more than 25 miles from the
site(s) at which Lecomp regularly schedules course sessions for the subject
covered by the Review Session. TPR may cancel any scheduled Review Session at
any time, but TPR will be liable for the Management Review Session Fee (as
defined below) if the cancellation occurs fewer than 14 days before the
scheduled date of the Review Session.
b. TPR will pay Lecomp $250 per location per session for each
Review Session conducted by Lecomp (the "Management Review Session Fee"). In
addition, TPR will provide all student materials for Review Sessions that are
free of charge to the student under Section 5.c below. Lecomp will provide all
other student materials for Review Sessions. TPR will also provide teacher
materials and Review Session training to Lecomp teachers, at a level adequate to
prepare a person who is qualified to teach the underlying course to teach the
Review Session in the same subject.
c. TPR will provide a means for Distance Learning students to
sign up for Review Sessions online, and will provide Lecomp with a system to
view such registration list. Enrollment for Review Sessions will close two
business days prior to the Review Session date. All Distance Learning students
whose billing address is within 25 miles of a Lecomp course location will have
the right to attend two Review Sessions free of charge. Distance Learning
students may attend any number of additional Review Sessions if the student pays
Lecomp no less than the Student Review Session Fee (defined below) for each
Review Session in excess of two. Lecomp will be responsible for tracking the
attendance of Distance Learning students at Review Courses, using an online
system provided by TPR. Lecomp may market additional The Princeton Review(R)
services to students whose names TPR provides to Lecomp under Section 7.e below.
d. For purposes of this Paragraph:
i. "Review Session" means a session of live
instruction lasting not longer than four hours and capable of accommodating up
to 25 students.
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ii. "Student Review Session Fee" means the amount
determined by multiplying the Average Per-session Course Fee by one and
two-tenths (1.2).
iii. "Average Per-session Course Fee" means the
amount determined by averaging the Per-session Course Fees calculated for The
Princeton Review(R) offices in San Diego, California, Austin, Texas, and New
York, New York.
iv. "Per-session Course Fee" means the amount
determined by allocating a Course Fee in accordance with Franchisor's Statement
of Inter-Franchise Transfer Policy.
v. "Course Fee" means the total course fee charged by
a Princeton Review office for a full, live classroom course preparing for the
same test as the course in which a Distance Learning student is enrolled.
6. Effect on Calculation of Royalty-Service Fee and
Advertising-Promotion Fee. For purposes of calculating royalty-service fees and
advertising-promotion fees due from Lecomp to Franchisor under the Franchise
Agreements: (a) the Distance Learning Fee and Management Review Session Fees
will not be included in Lecomp's gross receipts, but (b) Student Review Session
Fees will be included in Lecomp's gross receipts.
7. Other Benefits and Commitments.
a. TPR will provide registered access to online course make-up
sessions for each student enrolled by Lecomp after the date of this agreement in
a live SAT, ACT, GRE, GMAT, USMLE or LSAT course.
b. TPR will provide Lecomp with registered access to TPR's
virtual classroom environment (the "Horizon System") for the purpose of training
Lecomp course instructors.
x. Xxxxxx will permit Distance Learning students within the
Lecomp franchise territories to participate in all proctored, simulated test
sessions offered by Lecomp. TPR will provide a means for Distance Learning
students to sign up online for such simulated test sessions, and will provide
Lecomp with a registration list no later than 5 business days before the
scheduled test session.
d. TPR and Lecomp will each, in any marketing that refers to
The Princeton Review(R) courses, include references in equal prominence to live,
in-person instruction and Distance Learning services. (The foregoing obligation
applies only to materials that are reprinted, re-recorded, or re-filmed or are
first designed or produced after the date of this letter agreement.) References
to Distance Learning in Lecomp's materials must be no less prominent (in size,
color, position, graphics, audibility, visibility, etc.) than any reference to
tutoring
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services in the same materials. If the marketing materials make no
reference to tutoring services, the reference to Distance Learning must be
prominent to a reasonable consumer.
e. TPR will provide to Lecomp, within 10 days after
registration, the name, address, telephone number, email address, test date, and
other registration information received by TPR from Distance Learning students
whose shipping address is within the Lecomp franchise territories. Lecomp will
provide materials and a contact plan to TPR before contacting any such student
for any purpose other than the service for which the student registered.
f. Except for the marketing commitment in Section 7.d above,
the testing commitment in Section 7.c, and the commitment to provide live
instruction under Section 5.a, TPR will be responsible for all customer service
to Distance Learning students.
g. The benefits described in a.-f. above will be provided at
no additional charge to TPR, Lecomp or their students.
8. Payments. All amounts payable by TPR and Lecomp under this letter
agreement will be calculated as of the end of each calendar quarter and are due
within thirty (30) days after the end of the calendar quarter.
9. No Waiver. This letter agreement is entered into without prejudice
to any position that Franchisor or Lecomp may take in the future with respect to
Section 3 of the May 31, 1995 Addendum, if that provision goes back into effect
as provided above.
10. Cancellation. TPR or Lecomp may terminate this letter agreement by
written notice if the other party fails to cure a default under this letter
agreement within 30 days after receipt of notice of default. However, TPR and
Lecomp will remain liable for, and will continue to perform, all of their
obligations under this letter agreement with respect to students who enrolled in
a live course or Distance Learning before the effective date of termination.
11. Other Distance Learning Arrangements. TPR will notify Lecomp if TPR
enters into an agreement on the marketing and sale of Distance Learning with
Test Services, Inc. and/or T.S.T.S., Inc. while this letter agreement is in
effect. Lecomp will have the right, within 10 days after receipt of TPR's
notice, to notify TPR that Lecomp wishes to substitute the terms of TPR's
arrangement with Test Services, Inc./T.S.T.S., Inc. for the terms of this letter
agreement. Lecomp may not select particular terms of the arrangement with Test
Services, Inc./T.S.T.S., Inc.; Lecomp must accept all of the alternative terms
or none. If Lecomp gives timely notice that it wishes to switch to the
alternative terms for the remaining duration of this letter agreement, TPR and
Lecomp will prepare any documentation they mutually agree is appropriate to
accomplish the switch. With respect to Distance Learning, this provision is in
lieu of any and all other rights Lecomp may have under its agreements with TPR
to obtain the benefit of terms negotiated by TPR with others.
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If the terms set forth above are acceptable to Lecomp, please indicate
your agreement by signing this letter in the space provided below. Two originals
of this letter are enclosed; please sign each original and return one of them to
me. The remaining original is for your records.
Very truly yours,
/s/ Xxxx Xxxxxxx
Xxxx Xxxxxxx
Chief Operating Officer
ACCEPTED AND AGREED TO:
Lecomp Company, Inc.
By: /s/ Xxxx Xxxxxx
Title: CEO
