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Exhibit 10.43
May 30, 2000
Mr. Xxx Xxxxx
President
Princeton Review of New Jersey, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Re: Distance Learning
Dear Xxx:
Princeton Review Operations, L.L.C. ("Operations") is entering into an
Option Agreement with Princeton Review of New Jersey, Inc. and Princeton Review
of Boston, Inc. (together, "Boston/NJ"), under which Operations will have the
option to purchase the assets of Boston/NJ on certain agreed terms. As a
prerequisite to execution of the Option Agreement, Princeton Review Management,
L.L.C. ("Franchisor") and Boston/NJ 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 Boston/NJ 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 Boston/NJ 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 Boston/NJ 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 Boston/NJ franchise territories for all Distance Learning products and
Low-Priced Products (the "50% Threshold"), Boston/NJ 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 Boston/NJ 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. The
effectiveness of this letter agreement does not depend on whether Operations
exercises the Purchase Option as provided in the Option Agreement.
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1. Duration. This letter agreement takes effect upon its execution and
execution of the Option Agreement. The terms of this letter agreement will
expire on December 31, 2002 if TPR has not acquired the Boston/NJ franchises by
that date. If the terms of this letter agreement expire under this paragraph,
the rights and obligations of TPR and Boston/NJ 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.
2. Distance Learning Revenue. "Distance Learning Revenue" means the
total monies paid for Distance Learning services by Distance Learning students
in the Boston/NJ 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 Boston/NJ 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 Boston/NJ 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 Boston/NJ
franchise territories all Distance Learning that TPR generally markets and sells
in the territories of Operations' company-owned sites. In consideration of the
right to market and sell Distance Learning in the Boston/NJ franchise
territories, TPR will pay to Boston/NJ 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 Boston/NJ 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. Boston/NJ agrees that it will offer access to
online course tools only in conjunction with the courses provided to Course
Students. TPR agrees to offer Boston/NJ Students the same online services
offered to course students enrolled at Operations' company-owned sites.
b. In consideration of the access granted by TPR, Boston/NJ
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
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Boston/NJ 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 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, Boston/NJ 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 Boston/NJ 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. Boston/NJ 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 Boston/NJ. Boston/NJ
will have no obligation to conduct a Review Session at any location that is more
than 25 miles from the site(s) at which Boston/NJ 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 Boston/NJ $250 per location per session for
each Review Session conducted by Boston/NJ (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. Boston/NJ will
provide all other-student materials for Review Sessions. TPR will also provide
teacher materials and Review Session training to Boston/NJ 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 Boston/NJ 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 Boston/NJ 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
Boston/NJ no less than the Student Review Session Fee (defined below) for each
Review Session in excess of two. Boston/NJ will be responsible for tracking the
attendance of Distance Learning students at Review Courses, using an online
system provided by TPR. Boston/NJ may market additional The Princeton Review(R)
services to students whose names TPR provides to Boston/NJ under
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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.
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. Boston/NJ to Franchisor under the Franchise
Agreements: (a) the Distance Learning Fee and Management Review Session Fees
will not be included in Boston/NJ's gross receipts, but (b) Student Review
Session Fees will be included in Boston/NJ'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 Boston/NJ after the date of this letter
agreement in a live SAT, ACT, GRE, GMAT, USMLE or LSAT course.
b. TPR will provide Boston/NJ with registered access to TPR's
virtual classroom environment (the "Horizon System") for the purpose of training
Boston/NJ course instructors.
c. Boston/NJ will permit Distance Learning students within the
Boston/NJ franchise territories to participate in all proctored, simulated test
sessions offered by Boston/NJ. TPR will provide a means for Distance Learning
students to sign up online for such simulated test sessions, and will provide
Boston/NJ with a registration list no later than 5 business days before the
scheduled test session.
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d. TPR and Boston/NJ 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 Boston/NJ's materials must be no
less prominent (in size, color, position, graphics, audibility, visibility,
etc.) than any reference to tutoring 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 Boston/NJ, 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 Boston/NJ franchise territories. Boston/NJ
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, Boston/NJ or their students.
8. Payments. All amounts payable by TPR and Boston/NJ 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 Boston/NJ 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 Boston/NJ 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
Boston/NJ 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 Boston/NJ 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. Boston/NJ will have the right, within 10 days after receipt of TPR's
notice, to notify TPR that Boston/NJ 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. Boston/NJ may not select particular terms of the arrangement with
Test Services, Inc./T.S.T.S., Inc.; Boston/NJ must accept all of the alternative
terms or none. If Boston/NJ gives timely notice
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that it wishes to switch to the alternative terms for the remaining duration of
this letter agreement, TPR and Boston/NJ 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 Boston/NJ may
have under its agreements with TPR to obtain the benefit of terms negotiated by
TPR with others.
If the terms set forth above are acceptable to Boston/NJ, 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
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Xxxx Xxxxxxx
Chief Operating Officer
ACCEPTED AND AGREED TO:
PRINCETON REVIEW OF BOSTON, INC.
By: /s/ Xxxxxx Xxxxx
Title: Vice President
PRINCETON REVIEW OF NEW JERSEY, INC.
By: /s/ Xxxxxx Xxxxx
Title: President
