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Exhibit 10.52
PRINCETON REVIEW MANAGEMENT, L.L.C.
0000 XXXXXXXX
XXX XXXX, XXX XXXX 00000
October 18, 2000
Mr. Rob Case
President
T.S.T.S., Inc.
Dobie Mall 0000 Xxxxxxxxx - Xxxxx 000
Xxxxxx, XX 00000
Re: Distance Learning
Dear Rob:
Princeton Review Management, L.L.C. ("Franchisor") and T.S.T.S., Inc.
("SxSW") 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 SxSW 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 SxSW 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 SxSW 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 SxSW franchise territories for all Distance Learning products and
Low-Priced Products (the "50% Threshold"), SxSW will have the right to suspend
its marketing commitment under Section 7.e. 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
SxSW elects to suspend its marketing obligations as provided in this paragraph,
the Distance Learning Fee under Section 2.b 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
"Addendum Terms").
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1. Duration. The terms of this letter agreement will expire on December
31, 2002. If this letter agreement expires under this paragraph, the rights and
obligations of TPR and SxSW under the Addendum Terms will go back into effect on
January 1, 2003 and will not be affected by this letter agreement. If this
letter agreement is cancelled for default under Section 10 below, then except as
otherwise provided in Section 10, the Addendum Terms will go back into effect on
the effective date of cancellation of this letter agreement.
2. Distance Learning Revenue and Distance Learning Fee.
a. "Distance Learning Revenue" means the total monies paid for
Distance Learning services by Distance Learning customers in the SxSW franchise
territories, minus (i) credit card processing fees incurred in connection with
such payments from Distance Learning customers, and (ii) the aggregate fees paid
by TPR to SxSW under Section 5.b below. The zip code of the customer's shipping
address at the time of the customer's original purchase of Distance Learning
will be used to determine whether the customer is within or outside of the SxSW
franchise territories. If TPR's records do not show a shipping address, the zip
code of the customer's billing address at the time of original purchase of
Distance Learning will be used.
b. In consideration of the right to market and sell Distance
Learning in the SxSW franchise territories, TPR will pay to SxSW fifteen percent
(15%) of Distance Learning Revenue (the "Distance Learning Fee"). For any
Distance Learning course that permits the customer 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).
3. TPR Rights.
a. TPR will market and sell in the SxSW franchise territories
all Distance Learning that TPR generally markets and sells in the territories of
the company-owned sites run by Princeton Review Operations, LLC ("COS
Territories"). TPR will not market and sell in the SxSW franchise territories
Distance Learning products and services that are not generally offered in COS
Territories without SxSW's consent.
b. Notwithstanding Section 3.a, TPR will not engage in direct
marketing (such as personal visits, direct mail, or telemarketing) of Distance
Learning to institutions in the SxSW franchise territories without the consent
of SxSW. This restriction does not prohibit TPR from dealing with any
institution in the SxSW franchise territories that contacts TPR as a result of
any marketing or communications other than direct marketing in the SxSW
franchise territories (such as word-of-mouth, TPR's web sites, conferences and
trade shows, or national media advertising). TPR will make reasonable efforts to
notify SxSW of any discussions with institutions arising from such contacts, but
there will be no breach or penalty if TPR does not notify SxSW. If an
institution in the SxSW franchise territories purchases Distance Learning
services from TPR, TPR will provide an automated post-purchase notification to
SxSW. The automated notification system will be in place by October 15, 2000.
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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 SxSW 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. SxSW agrees that it will offer access to online course tools
only in conjunction with the courses provided to Course Students. TPR agrees to
offer SxSW Students the same on-line services offered to course students
enrolled at Operations' company-owned sites.
b. In consideration of the access granted by TPR, SxSW 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 SxSW 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, SxSW 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 SxSW 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. SxSW 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 SxSW. SxSW will have no obligation to
conduct a Review Session ouSxSWde of the franchise territory or at any location
that is more than 25 miles from the site(s) at which SxSW 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 SxSW $250 per location per session for each
Review Session conducted by SxSW (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
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below. SxSW will provide all student materials for additional Review Sessions.
TPR will also provide teacher materials and Review Session training to SxSW
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 SxSW 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 SxSW 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 SxSW no less
than the Student Review Session Fee (defined below) for each Review Session in
excess of two. SxSW will be responsible for tracking the attendance of Distance
Learning students at Review Courses, using an online system provided by TPR.
SxSW may market additional The Princeton Review(R) services to students whose
names TPR provides to SxSW under Section 7.f 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 SxSW to Franchisor under the Franchise
Agreements: (a) the Distance Learning Fee and Management Review Session Fees
will not be included in SxSW's gross receipts, but (b) Student Review Session
Fees will be included in SxSW's gross receipts.
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7. Other Benefits and Commitments.
a. TPR will provide registered access to online course make-up
sessions for each student enrolled by SxSW after September 15, 2000 in a live
SAT, ACT, GRE, GMAT, USMLE or LSAT course.
b. TPR will provide SxSW with registered access to TPR's
virtual classroom environment (the "Horizon System") for the purpose of training
SxSW course instructors.
c. SxSW will permit Distance Learning students within the SxSW
franchise territories to participate in all proctored, simulated test sessions
offered by SxSW. TPR will provide a means for Distance Learning students to sign
up online for such simulated test sessions, and will provide SxSW with a
registration list no later than 5 business days before the scheduled test
session. SxSW will provide materials to Distance Learning students for simulated
test sessions, except that SxSW will have no obligation to provide individual
test booklets if individual test booklets are not available for purchase either
directly from the publisher or from TPR or its affiliates at a price of $6 or
less per booklet (adjusted annually for changes in the Consumer Price Index -
All Urban Consumers).
d. SxSW will have the right to engage in direct marketing of
Distance Learning to institutions in SxSW's franchise territories on behalf of
TPR, provided that: (i) this right applies only to asynchronous instruction;
(ii) SxSW will market only at TPR's published prices; and (iii) SxSW must assist
TPR in any efforts to collect amounts owed by Distance Learning customers
obtained by SxSW. Any purchases of Distance Learning from TPR resulting from
SxSW's marketing will be included in Distance Learning Revenue under Section 2.a
and subject to the Distance Learning Fee in Section 2.b.
e. TPR and SxSW will each, in any marketing that refers to The
Princeton Review(R) courses, include prominent references 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 SxSW'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.
f. TPR will provide to SxSW, 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 SxSW franchise territories. SxSW 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.
g. Except for the marketing commitment in Section 7.e 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.
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h. The benefits described in a.-g. above will be provided at
no additional charge to TPR, SxSW or their students.
8. Payments. All amounts payable by TPR and SxSW 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 SxSW 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 SxSW 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
SxSW will remain liable for, and will continue to perform, all of their
obligations under this letter agreement with respect to customers who enrolled
in a live course or Distance Learning before the effective date of termination.
11. Other Distance Learning Arrangements. TPR will notify SxSW if,
while this letter agreement is in effect, TPR modifies its Distance Learning
agreement with Princeton Review of New Jersey, Inc. SxSW will have the right,
within 10 days after receipt of TPR's notice, to notify TPR that SxSW wishes to
substitute the terms of TPR's modified arrangement with Princeton Review of New
Jersey, Inc. for the terms of this letter agreement. SxSW may not select
particular terms of the arrangement with Princeton Review of New Jersey, Inc.;
SxSW must accept all of the alternative terms or none. If SxSW gives timely
notice that it wishes to switch to the alternative terms for the remaining
duration of this letter agreement, TPR and SxSW 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 SxSW
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 SxSW, 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:
T.S.T.S., Inc.
By: /s/ Xxxxxx Xxxx
_____________________________
Title: Vice President - CEO
___________________________
