Exhibit 2.
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20 August 2002
RE: Studio Mouse
MEMORANDUM OF UNDERSTANDING
1. Studio Mouse, LLC (hereinafter "the Company") is a 95% owned
subsidiary of Trudy Corporation, 5% owned by .
2. Chart Studio Publishing, (Pty.) LTD (hereinafter "Chart Studio") shall
be paid for all design services rendered to the Company at cost.
a. Existing invoices to be paid at the currently invoiced
rates.
b. Future invoices to be preceded by statement of hourly costs.
3. Chart Studio shall be paid for all expenses incurred on behalf of the
Company. As of 30 June 2002, this includes:
a. a loan account value of $40,962.00 plus 5% interest.
b. Design service charges through 30 June 2001 of $25,137.00
c. Design service charges through 31 December 2001 of $3,942
d. Design service charges through 31 March 2002 of $26,763.00
e. Any earned royalties based upon the license agreement
between Chart Studio and the Company.
The above expenses to be paid on or before 30 September 2002.
4. In addition to the expenses invoiced to the Company as of 20 August
2002, Chart Studio shall also submit invoices in the amount of
USD$25,000.00 for repayment.
5. A long term loan shall exist in the accounts of the Company in favor
of Chart Studio as of 20 August 2002, in the amount of USD$444,852.20,
which is equivalent to 50% of the valuation of the Company's Good
Will, less USD$25,000.00 referenced in Clause 4. The valuation of the
Company's Good Will is calculated on 800% of the Company's Earnings
Before Interest, Tax, Depreciation and Amortization.
6. For a period of 24 months from 20 August 2002, Chart Studio shall have
the option, including the right of first refusal, to buy 50% of the
Company for the sum of USD$25,000.00 and 100% forgiveness of the long
term loan to the Company of $444,852.00.
7. If, after 24 months from 20 August 2002 Chart Studio is unwilling or
unable to purchase 50% of the Company as outlined in Clause 6:
A. The Good Will of the Company will be reevaluated. This
reevaluation shall be done:
I. At a rate of 900% of the Company's Earnings Before
Interest, Tax, Depreciation, and Amortization.
II. To include in the Company's General and
Administrative costs a base figure of 24% of Trudy
Corporation's General and Administrative costs,
including only: Rent, Electric and Gas, Telephone,
Misc. Office supplies/equipment, IT support,
Insurance and Real estate tax. This base
percentage shall be increased commensurate with
the Company's contribution to any increase in this
expense.
III. To include in the Company's General and
Administrative costs the equivalent of 50% of the
salary paid to by Trudy Corporation. To be
reevaluated if necessary.
B. 50% of the new valuation of the Good will, less
$25,000.00 shall replace the long term loan amount on
the Studio Mouse books in favor of Chart Studio
8. Such revised Long Term loan described in Clause 7(B) shall be repaid
within 36 months of 20 August 2004.
9. Further, Chart Studio shall not charge the Company for any auditing
expense of staff salaries.
10. An intellectual property/format/content set known as "48 Piece
Puzzles" shall hereafter be a Chart Studio product.
11. Chart Studio, Soundprints/Trudy Corporation and the Company shall all
act in good faith to reasonably help Chart Studio in its endeavor to
submit a favorable application for an equity participation in the
Company by allowing the Company, where appropriate, to:
A. License content from Chart Studio and Soundprints/Trudy
Corporation
B. Directly employ designers and contract for Chart Studio
design services in South Africa.
C. License the Company's content to Chart Studio and
Soundprints/Trudy Corporation.