Exhibit 10.3
PROFESSIONAL SERVICES AGREEMENT
This Professional Services Agreement (the "Agreement") is effective as of
June 30, 2000 2000 ("Effective Date") by and between Sylvan Learning Systems,
Inc., a Maryland corporation ("Sylvan") and eSylvan, Inc., a Maryland
corporation ("eSylvan").
Recitals
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A. Sylvan is the licensor of a franchise system pursuant to which it licenses
to certain persons (the "Licensees" and each a "Licensee") the right to
offer the Sylvan-proprietary system of programs, systems, teaching and
management techniques, individualized diagnostic tests and academic and
educational courses or programs designed to be personally taught,
supervised or administered to students who come to a Licensee's location(s)
(each a "Center") for in-person instruction, or such rights as are
specifically described in a specific Licensee's license agreement (such
system of licensed Centers, Sylvan's company-owned Centers and the services
Centers offer, the "Sylvan Learning Center System").
B. Sylvan has determined that to respond to the actual and anticipated actions
of its competitors and to take advantage of new means of making educational
services available to the public, Sylvan must and should develop, in
addition to the Sylvan Learning Center System, an Internet version of
Sylvan's proprietary programs, system and teaching and management
techniques (the "Sylvan On-Line System").
C. Sylvan has concluded that the most effective way to develop and roll-out
the Sylvan On-Line System is to establish a separate company, eSylvan.
Sylvan has granted to eSylvan the exclusive right to develop and offer the
Sylvan On-Line System, pursuant to a license agreement, dated as of the
date of this Agreement with eSylvan (the "eSylvan License Agreement").
D. Sylvan desires that Licensees support the development of the Sylvan On-line
System and desires to facilitate the support of the Licensees, and to do
so, intends to offer the Licensees the opportunity to participate in its
program for Center participation in the Sylvan On-Line System (each
participating Licensee, a "Participant") pursuant to a separate
participation agreement (each a "Participation Agreement") with each
Participant.
E. The SLC Franchise Owners Association, Inc. (the "FOA") is a non-profit
trade association, heretofore established, whose members include Licensees
and which was established, among other reasons, to represent Licensees in
discussions with Sylvan of issues pertinent to their relationships with
Sylvan. Sylvan has asked the FOA to support the development and marketing
of the Sylvan On-Line System and, accordingly, has entered into an
agreement with the FOA dated as of the date of this Agreement (the "Program
Agreement"), setting forth certain covenants and agreements relating the
establishment of eSylvan and the participation of the Participants in the
Sylvan On-Line System. Under the Program Agreement, Sylvan has agreed to
create a committee (the "eSylvan Committee") comprised of representatives
of Sylvan and the FOA to assist Sylvan in overseeing its participation in
the Sylvan On-Line System.
F. As part of the Sylvan On-Line System, Sylvan and eSylvan desire to
cooperate in certain marketing arrangements, provide each other with
student referrals and Sylvan desires to provide and eSylvan desires to
obtain tutoring and other professional services.
NOW, THEREFORE, for and in consideration of the covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Term. This Agreement shall remain in effect until the termination or
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expiration of the eSylvan License Agreement.
2. Referral of Students to Sylvan On-Line System
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2.1 For each student that Sylvan refers (which term shall include
referrals by Sylvan or referrals directly from Participants) for participation
in the Sylvan On-line System, Sylvan shall receive 5% (to a maximum of $100) of
all revenues received by eSylvan for the program(s) to which such the student
initially subscribes, including without limitation related testing and
registration fees.
2.2 Referred students are not required to be existing enrolled
students in the Sylvan Learning Center System. So long as (i) a prospective
Sylvan On-Line System student uses a Sylvan Learning Center System Center number
or location when initially enrolling for the Sylvan On-Line System, or (ii)
Sylvan (or a Participant) sends an email referral to eSylvan, the Sylvan On-Line
System prospective student will count as a Sylvan referred student. When
completing an on-line enrollment application, each prospective student will be
asked to indicate the number or location of the Sylvan Learning Center System
Center, if any, that referred the prospective Sylvan On-Line System student.
Sylvan may include Sylvan Learning Center System Center numbers on promotional
materials it displays, in pamphlets it distributes and in any advertising it
does.
2.3 eSylvan is obligated to pay Sylvan only to the extent that eSylvan
actually receives revenues from a referred student (e.g., if a student enrolls
and pays a 25% deposit but then drops out and no more is collected from the
student, Sylvan receives 5% (to a maximum of $100) of the 25% portion of the
course fee collected by eSylvan).
2.4 For each student enrollment that a Participant generates for the
Sylvan On-Line System from its Center, in addition to the referral fees set
forth above, Sylvan shall receive a sales commission from eSylvan equal to five
percent (5%) (up to a maximum of $100) of the revenues received by eSylvan for
the first program(s) to which such student initially subscribes through the
Center. For the purposes of this Section 2.4, a "student enrollment" shall be
defined as the on-line submission by a Participant or Sylvan to eSylvan for
engagement in the Sylvan On-Line System of an enrollment form and payment in the
form of a credit card number or electronic fund transfer check number or other
acceptable payment method.
3. Referral of Students to Sylvan Learning Center System
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3.1 For each student that eSylvan refers to Sylvan (whether to Sylvan
or directly to a Participant) who enrolls in and pays for a Sylvan
diagnostic/prescriptive program, Sylvan will pay eSylvan 5% (to a maximum of
$100) of all revenues received by Sylvan or a Participant for such program,
including without limitation testing and registration fees. For each
student eSylvan refers to Sylvan for programs other than diagnostic/prescriptive
programs, Sylvan shall pay eSylvan 5% (to a maximum of $100) of the revenues
received by Sylvan or a Participant for the first program(s) to which such
student initially subscribes.
3.2 Sylvan is obligated to pay eSylvan only to the extent Sylvan or a
Participant actually receives revenues from a referred student (e.g., if a
student enrolls and pays a 25% deposit but then drops out and no more is
collected from the student, eSylvan receives 5% of the 25% portion of the course
fee collected by Sylvan or a Participant).
4. Professional Services
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4.1 Prior to assigning any diagnostic/prescriptive instructors to a
student of the Sylvan On-Line System, eSylvan shall request Sylvan to provide a
diagnostic/prescriptive instructor for such student for a committed period. In
the event that Sylvan is unable to provide a diagnostic/prescriptive instructor
at the time and in the discipline requested by the student, subject to the
requirement of the Sylvan On-Line System to maintain student-teacher ratios of
3:1, eSylvan may use diagnostic/prescriptive instructors that are not provided
by Sylvan.
4.2 If eSylvan requests Sylvan (which shall include any direct request
to a Participant) to nominate and manage Sylvan-certified
diagnostic/prescriptive instructors, other instructors, Education Directors and
sales personnel in the Sylvan On-Line System. Sylvan is not required to respond
to such request. However, to the extent Sylvan makes personnel available to
eSylvan in connection with the Sylvan On-Line System for committed periods,
eSylvan shall reimburse Sylvan for Base Salary* plus a 30% Management Fee for
each hour of direct instruction or test administration (including any
preparation time specified by eSylvan), or, for education directors, to conduct
parent conferences. In addition, other services (as for example, school
conferences) may be required and authorized by eSylvan and corresponding fees
payable, all as approved from time to time by the eSylvan Committee. Such fees
shall be payable monthly not later than 20 days after the end of the month
during which such services were delivered.
4.3 If Sylvan (or a Participant) refers personnel to Sylvan for
engagement in the Sylvan On-line System on an independent contractor basis,
eSylvan shall pay Sylvan a Referral Fee, as set forth below. Once a Sylvan-
nominated independent contractor has provided 40 hours of service on behalf of
the Sylvan On-line System, eSylvan will pay to Sylvan the Referral Fee
irrespective of the number of additional times such tutor is used with the
initial student or other students. Such fees shall be payable quarterly not
later than 20 days after the end of the quarter during which such fees accrued.
MANAGEMENT FEES REFERRAL FEES
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DIAGNOSTIC/PRESCRIPTIVE INSTRUCTORS BASE SALARY* X 1.3 $100
TEST ADMINISTRATORS BASE SALARY* X 1.3 $100
EDUCATION DIRECTORS BASE SALARY* X 1.3 $100
* Base salary shall mean the base hourly salary paid by Sylvan or a Participant
to the tutor or director, exclusive of taxes and benefits.
5. Co-Marketing
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5.1 Support of Sylvan Learning Centers System. During the term of
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this Agreement, eSylvan shall include on its website a prominent link to the
Sylvan Learning Centers System website and such other promotional initiatives as
may be approved by the SLC National Advertising Fund, Inc. During the term of
this Agreement, Sylvan shall include on its website a prominent link to the
Sylvan On-Line System website and such other promotional incentives as eSylvan
may reasonably request subject to the approval of the SLC National Advertising
Fund, Inc.
5.2 Sylvan shall adhere to eSylvan's reasonable directives concerning
promotion of the Sylvan On-Line System, including displaying posters or other
promotional materials in Sylvan-owned Centers and using commercially reasonable
efforts to cause Participants to display posters or other promotional materials
at Participant-owned Centers. All such promotional materials and their
deployment must be approved by SLC National Advertising Fund, Inc. prior to use
in Centers.
6. Non-Solicitation. eSylvan agrees not to solicit employees or
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independent contractors of Sylvan or Participants to become employees or
independent contractors of eSylvan. eSylvan agrees to confirm that Sylvan or
Participant employees and independent contractors that seek employment with
eSylvan have given notice to Sylvan or a Participant, as the case may be.
7. Indemnification. Sylvan shall defend, indemnify and hold harmless
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eSylvan, of and from any and all claims, actions, causes of actions, suits,
proceedings, costs, expenses, liabilities, damages and other losses (including
without limitation the costs and expenses incurred in defending or settling any
claims), based upon or arising out of or in any way relating to Sylvan's
performance of or failure to perform its obligations under any Participation
Agreement. Except as provided below, Sylvan shall have the right in its sole
discretion to control the defense and settlement of any such action and eSylvan
shall have the right to participate in the defense of any such action using
counsel of its own choosing, at its own expense. In the event either Sylvan or
a court of competent jurisdiction determines that a conflict exists in the
representation of both Sylvan and eSylvan with respect to a third-party claim,
Sylvan shall, at its expense, retain counsel of its choosing for eSylvan, which
counsel shall be reasonably acceptable to eSylvan. Sylvan may not settle any
claim against eSylvan without eSylvan's written consent, unless such settlement
provides a complete release from all liability without the payment of any
consideration by eSylvan and such settlement shall not impose any limitation on
the future conduct of eSylvan.
8. Miscellaneous.
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8.1 Governing Law and Disputes. This Agreement shall be governed by
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and construed in accordance with the laws of the State of Maryland but not
including its provisions concerning conflicts of law.
8.2 Entire Agreement. This Agreement contains the entire agreement
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of the parties with respect to its subject matter. This Agreement may not be
amended or modified except by written instrument executed by the authorized
representative of the parties to this Agreement.
8.3 Severability; Interpretation. Should any provision of this
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Agreement be for any reason held invalid, illegal or unenforceable by a court of
competent jurisdiction, such provision shall be deemed restricted in application
to the extent required to render it valid; and the
remainder of this Agreement shall in no way be affected and shall remain valid
and enforceable for all purposes, both parties hereto declaring that they would
have executed this Agreement without inclusion of such provision. In the event
such total or partial invalidity or unenforceability of any provision of this
Agreement exists only with respect to the laws of a particular jurisdiction,
this paragraph shall operate upon such provision only to the extent that the
laws of such jurisdiction are applicable to such provision. All uses of forms of
the word "including" in this Agreement mean "including without limitation." The
headings and captions contained herein are for the purposes of convenience and
reference only and are not to be construed as a part of this Agreement. All
terms and words used herein shall be construed to include the number and gender
as the context of this Agreement may require. The parties agree that each
section of this Agreement shall be construed independently of any other section
or provision of this Agreement.
8.4 Counterparts. This Agreement may be executed in any number of
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counterparts, each of which when so executed and delivered shall be deemed an
original, but such counterparts together shall constitute one and the same
instrument.
8.5. Third-Party Beneficiaries. No Licensee shall be deemed an
intended third party beneficiary of this Agreement.
[SIGNATURES NEXT PAGE]
Each of the parties hereto has caused this Agreement to be executed by a
duly authorized representative as of the dates set forth below.
eSYLVAN, INC. SYLVAN LEARNING SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxx
_________________________ __________________________
Name: Xxxxx X. Xxxxxx Name: Xxxxxx X. Xxxxx
Title: President Title: Vice President
