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EXHIBIT 99.5
AMENDMENT TO
FRANCHISE AGREEMENT/LOCAL FRANCHISE LICENSE AGREEMENT
AMENDMENT (this "Amendment"), dated as of ____ _____, _____, by and
between THE LEARNING EXPRESS, INC. a Massachusetts corporation ("Franchisor"),
and ________________, a _______________ _____________ (the "Franchisee").
BACKGROUND
A. Franchisor and Franchisee are parties to that certain Franchise
Agreement/Local Franchise License Agreement dated as of ____ _____,
_____ by and between Franchisor and Franchisee (the "Franchise
Agreement") pursuant to the terms and conditions of which Franchisor
has granted a franchise to Franchisee to operate a retail specialty toy
store (the "Retail Store") using Franchisor's "System" and "Marks" in
the "Protected Territory," all as defined in the Franchise Agreement.
B. Franchisor has entered into a License Agreement, dated as of November
5, 1999 (the "LEC Agreement") with XxxxxxxxXxxxxxx.xxx, LLC, a Delaware
limited liability company ("LEC"), pursuant to the terms and conditions
of which Franchisor has licensed certain components of the System and
the Marks to enable LEC to develop, operate and promote an
Internet-based on-line specialty toy store under the name
XxxxxxxxXxxxxxx.xxx (the "On-Line Store").
C. Franchisor has entered into Management Services Agreement, dated as of
November 5, 1999 (the "Management Agreement") by and among Franchisor,
LEC and XxxxxxxxXxxxxxx.xxx Holdings LLC ("LECH"), the principal owner
of LEC, pursuant to the terms and conditions of which, among other
matters, Franchisor has agreed to (1) support LEC's use of the System
in the On-Line Store through assistance with marketing, promotion and
exchange of information regarding sales, customers, vendors, and (2)
contract with each of Franchisor's franchisees on the terms and
conditions set forth in this Amendment.
D. Franchisor and Franchisee believe that the On-Line Store will enhance
Franchisor's and Franchisee's respective businesses by, among other
things, promoting the "Learning Express" image and good will to
consumers who use the Internet and enhancing customer traffic to the
Retail Store and other retail stores operated by other franchisees of
Franchisor.
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E. Accordingly, Franchisor and Franchisee are entering into this Amendment
to facilitate the development, operation and promotion of the On-Line
Store by LEC and to set forth: (i) certain services that Franchisee has
agreed to provide to Franchisee's and LEC's customers with respect to
the On-Line Store and (ii) certain specified payments and other
benefits that Franchisee will receive in consideration thereof.
Now therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. AMENDMENT OF FRANCHISE AGREEMENT; CAPITALIZED TERMS. The terms and provisions
of this Amendment amend the Franchise Agreement. In the event of any conflict
between the terms of the Franchise Agreement and the terms of this Amendment,
the terms of this Amendment shall govern. Capitalized terms not otherwise
defined herein shall have the same meaning(s) as set forth in the Franchise
Agreement.
2. AMENDMENT TO LEARNING EXPRESS CONFIDENTIAL OPERATIONS MANUAL.
(a) Franchisee consents and agrees to all of the amendments to the
LEARNING EXPRESS CONFIDENTIAL OPERATIONS Manual (the "Manual") set forth on
Exhibit A hereto (the "Manual Amendment").
3. TERM. Franchisee's and Franchisor's obligations under this Amendment, shall
commence on , 2000 and continue until the earlier to occur of:
(i) termination of the Franchise Agreement in accordance with its terms
(without giving effect to this Amendment), (ii) the occurrence of a material
breach by Franchisee of the terms and conditions of this Amendment following
written notice to Franchisee by Franchisor detailing such alleged breach and
Franchisee's failure to remedy any such actual breach within ten (10) days,
or such other period as may be required by applicable state law, following such
notice, or (iii) upon Franchisor's election, exercised in its sole discretion
by written notice to Franchisee, to terminate this Amendment incident to a
breach by LEC of the LEC Agreement or the Management Agreement. The foregoing
period is referred to herein as the "Term".
Upon any termination in accordance with subsection (iii) of the
foregoing paragraph, all obligations of the Franchisor and the Franchisee under
this Amendment shall terminate but the Franchise Agreement and all obligations
of the parties thereunder shall continue in full force and effect in accordance
with their terms unaffected hereby.
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4. EQUITY AND COMMISSION
(a) Equity of LECH.
(i) In consideration of Franchisee's agreement to execute
and consummate the terms and conditions of this
Amendment, Franchisor shall cause LECH to issue to
Franchisee 14,250 Common Shares of LECH for each
Retail Store operated by Franchisee (such shares, the
"Shares").
(ii) Prior to issuance of the Shares, LECH may require
Franchisee to execute an investment letter or letters
to the effect that the Shares are being acquired by
Franchisee for Franchisee's own account for
investment purposes, that Franchisee has no present
intention of offering, distributing or otherwise
disposing of the Shares, and that Franchisee shall
agree not to dispose of the Shares unless a
registration statement or appropriate qualification
is then in effect under applicable state "Blue Sky"
laws with respect to the Shares or in the opinion of
counsel for LECH the Shares are exempt from the
registration or qualification requirements of such
laws.
(iii) Prior to issuance of the Shares, Franchisee shall
execute and enter into the then current Operating
Agreement for LECH and be bound thereby as a member
of LECH. Such Operating Agreement shall provide,
among other matters, that, until such time as LECH,
or a successor entity, has completed an "Initial
Public Offering" (defined below), all of the Shares
shall be forfeited to LECH immediately upon the
termination of either or both of the Franchise
Agreement or this Amendment, provided, however, that
the Shares shall not be subject to forfeiture in the
case where either or both of the Franchise Agreement
and this Amendment are terminated in connection with
the sale or transfer of Franchisee's Retail Store to
a New Franchisee.
(iv) Franchisee agrees that Franchisee will not, for a
period of at least 180 days following the effective
date of any "Initial Public Offering" (defined below)
by LECH (or its successor-in-interest) or by LEC (or
its successor-in-interest), directly or indirectly,
sell, offer to sell or otherwise dispose of the
Shares other than any securities which are included
in such Initial Public Offering, provided, however,
that LECH shall be under no obligation to include the
Shares or any portion thereof in any Initial Public
Offering. If the managing underwriter of any such
Initial Public Offering determines that a shorter
time period is appropriate, the aforementioned 180
day period may be shortened consistent with the
requirements of such managing underwriter. An
"Initial Public
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Offering" shall mean LECH's, or a successor entity's,
initial distribution of securities in a firm
commitment underwritten public offering to the
general public pursuant to a registration statement
filed with the Securities and Exchange Commission.
(b) On-Line Commission.
(i) In consideration of Franchisee's performance of
Franchisee's obligations hereunder, Franchisor shall
pay to Franchisee a commission (the "On-Line
Commission") equal to a percentage (the
"Percentage"), of the On-Line Store's "Net Sales in
Territory" accrued during each calendar month (or
portion thereof) during the Term. "Percentage" shall
mean (a) five percent (5%) through the second
anniversary of the "On-Line Store Date," defined
below, and (b) for the period thereafter, the
percentage established from time to time by the Board
of Managers of LEC based on experience of sales and
cash flow of the On-Line Store, provided, however,
that, (1) without limitation of the foregoing, LEC
presently intends to maintain the Percentage during
such period at the 5% level and (2) notwithstanding
anything herein to the contrary such percentage
determined by the Board of Managers shall never be
less than 2.5%. "Net Sales in Territory" shall mean:
(A) LEC's gross revenues accrued from the sale
through the On-Line Store of On-Line Store products
("Products") ordered by customers ("Customers") whose
"xxxx-to" address for the applicable order is within
the "Protected Territory" as defined in the Franchise
Agreement minus (B) all costs and charges incurred in
connection with returned products and shipping and
handling charges in connection therewith. "On-Line
Store Date" shall mean the date on which the On-Line
Store first commences operation on the Internet for
the sale of Products to the general public.
(ii) The On-Line Commission will be payable to the
Franchisee within 35 days after the end of the
calendar month in which LEC accrues the applicable
sale(s).
(iii) In addition, Franchisor need not pay the On-Line
Commission to Franchisee to the extent that LEC,
under and pursuant to that certain Management
Services Agreement by and among Franchisor, LEC and
XxxxxxxxXxxxxxx.xxx Holdings LLC (the "MSA"), has not
paid to Franchisor the component of the "On-Line
Commission," as defined in the MSA, corresponding to
the
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On-Line Commission otherwise payable by Franchisor to
Franchisee hereunder.
(iv) Franchisor may suspend payment of the On-Line
Commission to Franchisee if Franchisor determines
that Franchisee continues to be materially
noncompliant with the Manual, as amended from time to
time, following written notice by Franchisor to
Franchisee of such noncompliance and a subsequent
thirty (30) day opportunity to cure such
non-compliance.
(c) Except for payment of the On-Line Commission and the other
consideration provided for in this Agreement, Franchisee shall have no rights
under the Franchise Agreement or otherwise against Franchisor or any other party
with respect to the operations and sales of LEC and the On-Line Store regardless
of the billing address, shipping address or other location of the Customer or
other person to whom any Product is delivered or otherwise on account of any
sale of any Product.
5. FURTHER COOPERATION. Each of the parties hereto covenants and agrees that it
shall furnish to the other party hereto such reasonably necessary information
and reasonable assistance, including without limitation execution of documents,
certificates and instruments, as such other party may reasonably require to
effectuate the provisions of this Amendment.
6. CONFIRMATION OF FRANCHISE AGREEMENT. The parties hereto acknowledge, agree
and confirm that subject to Sections 2(a) and 4(c) hereof, all terms and
conditions of the Franchise Agreement not inconsistent with the terms of this
Amendment shall continue and remain in full force and effect unaffected by this
Amendment.
7. EFFECTIVENESS OF THIS AGREEMENT. This Agreement shall not be effective until
a copy executed by Franchisee and delivered to Franchisor has been countersigned
by Franchisor and delivered to Franchisee.
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8. MISCELLANEOUS.
8.1 Notices.
Any notice required or permitted to be given to Franchisor hereunder shall be
addressed as follows:
The Learning Express, Inc.
Devens Business Community
00 Xxxxx Xxxxx Xxxxxx
Xxxx, XX 00000
Attn: Chief Executive Officer
Any notice required or permitted to be given to Franchisee hereunder shall be
addressed as follows:
or such other address as any party may give the others notice of pursuant to
this Section.
8.2 Counterparts. This Amendment may be executed 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.
8.3 Headings. Headings in this Amendment are included for reference
only and shall have no effect upon the construction or interpretation of any
part of this Agreement.
8.4 Sealed Instrument. This Amendment shall have the effect of an
instrument executed under seal.
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IN WITNESS WHEREOF, this Amendment has been executed as of the date
first above written.
THE LEARNING EXPRESS, INC. [FRANCHISEE]
By: _______________________ By: _______________________
Name: Name:
Title: Title:
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EXHIBIT A
SUPPLEMENT TO LEARNING EXPRESS, INC. OPERATIONS MANUAL
This supplement is intended to outline the key operational requirements of each
Learning Express franchisee that will facilitate cooperation thereby enhancing
the development of the On-Line Store as well as the franchised stores. It does
not address in detail all operational procedures that will facilitate a seamless
environment for the Learning Express customer when shopping either through a
franchised location, the On-Line Store or both. Those detailed procedures are
under development and will be incorporated, along with the following, as part of
the Learning Express, Inc. Policies and Procedures section of the Operations
Manual.
1. IN-STORE KIOSK
A cooperative program between Learning Express franchisee and
XxxxxxxxXxxxxxx.xxx E-commerce Company ("On-Line Store") that will
enhance customer service and broaden product offerings by enabling
access to the On-Line Store via a Kiosk unit.
OPERATIONAL REQUIREMENTS: Learning Express franchisee will provide the
appropriate retail space inside franchised location for placement of
the Kiosk. Franchisee will provide the appropriate utility connections
as well as subscription service to an Internet Service Provider ("ISP")
for access to the World Wide Web. Customer will have access only to the
XxxxxxxxXxxxxxx.xxx URL.
COST TO FRANCHISEE: Ongoing communications (i.e., telephone line and
ISP subscription costs). On-line store will provide equipment and
fixture to franchisee at no cost.
2. MARKETING AND BRAND DEVELOPMENT
Learning Express, Inc. believes that the development of the On-Line
Store will enhance the business of its Franchisees by creating additional
awareness of the Learning Express name through various cooperative marketing and
advertising programs.
OPERATIONAL REQUIREMENTS: Learning Express franchisee will allow the
marketing and promotion of the On-Line Store as well as display the
XxxxxxxxXxxxxxx.xxx URL on marketing materials including; catalogs, print ads,
marketing and advertising materials, bags and in-store display materials.
COST TO FRANCHISEE: Minimal, if any.
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OPERATIONAL REQUIREMENTS: Learning Express franchisee will allow up to
four direct mailings to customer mailing list that will promote in a joint
fashion, the On-Line Store and that particular local store.
COST TO FRANCHISEE: None
OPERATIONAL REQUIREMENTS: Learning Express franchisee will accept
On-Line Store gift certificates and coupons utilizing the same process as now
used for the franchised store system. On-Line Store gift certificates and
coupons will be validated via telephonic or electronic means.
COST TO FRANCHISEE: None
3. PRODUCT RETURNS
In order to provide seamless customer service and distinguish the
Learning Express On-Line Store from other like e-commerce companies, a
cooperative return process between the On-Line Store and the franchised store is
necessary.
OPERATIONAL REQUIREMENTS: Learning Express franchised store will accept
product returns from Learning Express On-Line Store customers following the same
inter-store procedure as outlined in the current Operations Manual.
- Returned products that are on the Learning Express "Buying
Program" will be retained into inventory by store for sale at
retail. Store will receive reimbursement from On-Line Store
for cost of item.
- Returned products that are not on "Buying Program" may be
returned to the On-Line Store fulfillment center. Store will
receive full reimbursement of credit given to customer.
- Customer will receive instructions for those items carried by
the On-Line Store (i.e., direct ship by mfg., affiliate sales,
etc.) that are not returnable to a franchised store location.
COST TO FRANCHISEE: Minimal to none
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