EXHIBIT 10.10
INTERCOMPANY MANAGEMENT AND FACILITY USE AGREEMENT
THIS INTERCOMPANY MANAGEMENT AND FACILITY USE AGREEMENT (this "AGREEMENT") is
made and entered into effective as of the 1st day of January, 1998 (the
"EFFECTIVE DATE"), by and between SYLVAN LEARNING SYSTEMS, INC. ("SYLVAN"), and
CALIBER LEARNING NETWORK, INC. ("CALIBER"), each a Maryland corporation with its
principal place of business at 0000 Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000
(the "SYLVAN FACILITY").
RECITALS
A. Caliber is a development stage company organized in 1996 to develop, own,
and operate a state-of-the-art distance learning network integrating
professional classroom facilities, satellite transmission, two-way video
conferencing, wide-area network computing and Internet technologies.
B. Sylvan is a principal stockholder and promoter of Caliber and the owner of
the Sylvan Facility. Since Caliber's initial organization, Sylvan has
permitted Caliber to occupy and use the Sylvan Facility. Sylvan has also
provided certain executive management and administrative services to
Caliber.
C. The Sylvan Facility has become inadequate to serve the needs of both
Caliber and Sylvan. Accordingly, Sylvan is currently negotiating with the
owner (the "LANDLORD") of the property generally known as Meadow Mill at
Woodbury in Baltimore, Maryland (the "MEADOW MILL FACILITY"), for the lease
(the "MEADOW MILL LEASE") by Sylvan and use by Caliber of 17,800 square
feet of office space (the "LEASED PREMISES") at the Meadow Mill Facility.
D. The parties wish to clarify and formalize their understanding concerning
Caliber's use and occupancy of the Sylvan Facility and the Meadow Mill
Facility and the management services Sylvan has hitherto provided and, upon
the terms and conditions of this Agreement, will continue to provide to
Caliber.
TERMS AND CONDITIONS
In consideration of the mutual covenants and conditions set forth in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:
1. TERM
The term of this Agreement shall be two (2) years commencing on Effective Date.
Upon the expiration of the initial two-year term, this Agreement may be
renewed by the parties upon such terms conditions as the parties may agree
in writing. The period of effectiveness of this Agreement is hereinafter
referred to as the "TERM."
2. SYVLAN MANAGEMENT SERVICES
During the Term, Sylvan shall provide the following services to Caliber as
requested or required by Caliber in connection with the management and
conduct of Caliber's corporate and business affairs ("MANAGEMENT
SERVICES"):
2.1. Executive management services, including consultation and assistance
in the development and implementation of Caliber's business objectives
and strategies.
2.2. Financial management, tax, and accounting services, including
consultation and assistance in the preparation and maintenance of
internal financial records and controls; tax planning, management and
compliance; invoicing, billing, collection, and payment of accounts;
and payroll processing.
2.3. Legal services.
2.4. Management information services.
2.5. Human resources administration, including recruiting and personnel
management.
2.6. Such other management or administrative services as Caliber may
request or require from time to time and as Sylvan may agree to
provide.
3. USE OF FACILITIES
3.1. Sylvan Facility. Subject to Section 3.2, Caliber shall have the
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continuing right during the Term to occupy up and use the Sylvan
Facility in accordance with the past practice.
3.2. Meadow Mill Facility. Subject to Sylvan's execution of the Lease
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and any required consents of the Landlord, Caliber agrees to vacate
the Sylvan Facility and relocate its operations to the Leased Premises
at the Meadow Mill Facility not later than four (4) weeks following
the commencement date of the Meadow Mill Lease (the "LEASE
COMMENCEMENT DATE"). Caliber thereafter shall have the right for the
remainder of the Term to use and occupy the Leased Premises for the
conduct of its business. Notwithstanding the foregoing, Caliber may
continue to occupy and use the Caliber demonstration classrooms
currently located on the first floor of the Sylvan Facility.
4. FEE AND PAYMENT
In consideration of the Management Services to be provided by Sylvan to Caliber
hereunder and Caliber's use and occupancy of the Sylvan Facility and the
Meadow Mill Facility on and after the Effective Date, Caliber shall pay to
Sylvan in each year of the Term an annual management and use fee of Two
Million Dollars ($2,000,000), which fee shall be payable by Caliber
quarterly in arrears within thirty (30) days of Caliber's receipt of
appropriate invoices from Sylvan.
5. DEFERRED INTERCOMPANY CHARGES
5.1. Reconciliation of Accounts To Effective Date. In consideration of
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Caliber's use of the Sylvan Facility and the management and
administrative services provided by Sylvan to Caliber prior to the
Effective Date, the parties acknowledge, agree, and confirm that
Caliber is indebted to Sylvan as of December 31, 1997, in the amount
of Two Million Eight Hundred Eighty Thousand Five Hundred Dollars
($2,880,500) (the "DEFERRED INTERCOMPANY CHARGES") broken down by
period as follows:
For the period 7/1/96 - 12/31/96 $ 480,000
For the period 1/1/97 -12/31/97 2,400,500
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TOTAL 2,880,500
5.2. Payment of Deferred Charges.
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5.2.1. In General. The Deferred Intercompany Charges shall be
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payable by Caliber to Sylvan in forty-eight (48) equal
consecutive monthly installments of principal together with
accrued interest commencing on the first anniversary of the
Effective Date. The unpaid principal balance of the Deferred
Intercompany Charges shall bear interest commencing on the
Effective Date at one percent (1%) above the prime rate as
published by NationsBank, N.A., in Baltimore, Maryland, on the
last business day of each calendar quarter during which there
were principal amounts outstanding. All payments made on
account of the Deferred Intercompany Charges shall be applied
first to accrued and unpaid interest, and then to the unpaid
principal balance of such Charges. The Deferred Intercompany
Charges may be prepaid by Caliber, in whole or in part, at any
time without penalty. The Deferred Intercompany Charges,
together with accrued and unpaid interest at the rate set
forth above, shall be due and payable in any event on the
third anniversary of the Effective Date.
5.2.2. Acceleration on IPO. Notwithstanding the foregoing, the
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Deferred Intercompany Charges, together with accrued and
unpaid interest at the rate set forth in Section 5.2.1, shall
be due and payable on demand by Sylvan upon the closing, if
any, of an Initial Public Offering by Caliber. As used herein,
the term "INITIAL PUBLIC OFFERING" shall have the same meaning
as the meaning ascribed to such term in Section 4.1 of the
Stockholders' Agreement dated November 22, 1996, by and among
Caliber, Sylvan, MCI Communications Corp., Xxxxxxx X. Xxxxxx,
R. Xxxxxxxxxxx Xxxxx-Xxxxx, and Xxxx X. Xxxx.
6. COVENANTS REGARDING MEADOW MILL LEASE
6.1. Compliance with Lease. On and after the Lease Commencement Date:
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6.1.1. Sylvan's Obligations. Sylvan shall pay any and all rent,
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utility charges, common area maintenance fees, taxes, and
any and all other charges, expenses, and monetary
obligations associated with the Leased Premises payable or
assumed by Sylvan as tenant under the Lease.
6.1.2. Caliber's Obligations. Except as provided in Section
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6.1.1, Caliber assumes and agrees to perform and comply with
all of the agreements, covenants and obligations of Sylvan
as tenant under the Lease; provided, however, that nothing
in this Section 6.1.2 shall be deemed to constitute Landlord
a third party beneficiary of Caliber's covenants hereunder
and Landlord shall have no right to enforce against Caliber
any obligations of the tenant under the Lease.
6.2. Indemnification.
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6.2.1. By Sylvan. Sylvan covenants and agrees to indemnify, defend,
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and hold harmless Caliber from and against any losses,
liabilities, damages, claims, costs and expenses (including
but not limited to reasonable attorneys' fees and court
costs) incurred by or asserted against Caliber which arise
out of or result from any failure by Sylvan to perform,
carry out, comply with, discharge, or abide by its
obligations under this Section 6.
6.2.2. By Caliber. Caliber covenants and agrees to indemnify and
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hold harmless Sylvan from and against any losses,
liabilities, damages, claims, costs and expenses (including
but not limited to reasonable attorneys' fees and court
costs) incurred by or asserted against Sylvan which arise
out of or result from any failure by Caliber to perform,
carry out, comply with, discharge, or abide by its
obligations under this Section 6.
7. APPLICABLE LAW
This Agreement shall be deemed to have been made in the State of Maryland and
shall be construed and enforced in accordance with, and the validity and
performance hereof shall be governed by, the laws of the State of Maryland,
without regard to conflict of laws principles. Judicial proceedings
regarding any matter arising under the terms of this Agreement shall be
brought solely in the federal or local courts of the State of Maryland.
8. WAIVER
No failure on the part of either party to exercise, no delay in exercising, and
no course of dealing with respect to any right, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or privilege preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege.
9. ASSIGNMENT
Neither party may assign this Agreement, or any part thereof, without the prior
written approval of the other party, which approval shall not be
unreasonably withheld.
10. GENERAL
This Agreement constitutes the entire agreement between the parties with respect
to the subject matter hereof and may only be changed or modified in writing
signed by both parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as at the
day and year first above written.
ATTEST: SYLVAN LEARNING SYSTEMS, INC.
________________________________ By________________________________
O. Xxxxxx Xxxxx, Asst. Secretary Xxxxxxx X. Xxxxxx, President
ATTEST: CALIBER LEARNING NETWORK, INC.
________________________________ By________________________________
O. Xxxxxx Xxxxx, Asst. Secretary Xxxxx X. Xxxxxx, President
