-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OwD6/vP6R8nMMahk0re0vtS+s20Pb8zNjwaAv/CrN3LH0yqE4LPG1v4Buqclylka zSyUfgRdTE1x4DIAnuwB3w== 0000928385-97-000812.txt : 19970508 0000928385-97-000812.hdr.sgml : 19970508 ACCESSION NUMBER: 0000928385-97-000812 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19970507 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYLVAN LEARNING SYSTEMS INC CENTRAL INDEX KEY: 0000912766 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 521492296 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-26633 FILM NUMBER: 97597404 BUSINESS ADDRESS: STREET 1: 1000 LANCASTER ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4108438000 MAIL ADDRESS: STREET 1: 1000 LANCASTER ST CITY: BALTIMORE STATE: MD ZIP: 21202 S-3 1 FORM S-3 REGISTRATION STATEMENT As filed with the Securities and Exchange Commission on May 7, 1997 Registration No. 333-_____ ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________________________ FORM S-3 REGISTRATION STATEMENT Under The Securities Act of 1933 __________________________ SYLVAN LEARNING SYSTEMS, INC. (Exact name of registrant as specified in its charter) MARYLAND 52-1492296 (State of Incorporation) (I.R.S. Employer Identification No.) 1000 Lancaster Street Baltimore, Maryland 21202 (410) 843-8000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Douglas L. Becker President, Co-Chief Executive Officer and Secretary Sylvan Learning Systems, Inc. 1000 Lancaster Street Baltimore, Maryland 21231 (410) 843-8000 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies of all communications, including all communications sent to the agent for service, should be sent to: Richard C. Tilghman, Jr., Esquire Jill Cantor Nord, Esq. Piper & Marbury L.L.P. 36 South Charles Street Baltimore, Maryland 21201 (410) 539-2530 Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933,other than securities offered in connection with dividend or interest reinvestment plans, check the following box: [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: [_]
CALCULATION OF REGISTRATION FEE ============================================================================================================= Title of Shares to be Registered Proposed Maximum Aggregate Offering Price Amount of Registration Fee - ------------------------------------------------------------------------------------------------------------- Common Stock, $.01 par value $9,642,923(1) $2,923.00(1) =============================================================================================================
(1) Calculated in accordance with Rule 457(b) and (o) of the Securities Act of 1933, as amended. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ + [Information contained herein is subject to completion or amendment. A + + registration statement relating to these securities has been filed with + + the Securities and Exchange Commission. These securities may not be sold + + nor may offers to buy be accepted prior to the time the registration + + statement becomes effective. This prospectus shall not constitute an offer + + to sell or the solicitation of an offer to buy nor shall there be any sale + + of these securities in any jurisdiction in which such offer, solicitation + + or sale would be unlawful prior to registration or qualification under the + + securities laws of any such jurisdiction.] + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Subject to Completion May 7, 1997 PROSPECTUS 320,097 Shares SYLVAN LEARNING SYSTEMS, INC. Common Stock ___________ The shares of Common Stock of Sylvan Learning Systems, Inc. (the "Company") covered by this Prospectus are outstanding shares which may be offered and sold from time to time by the stockholders named herein. See "Selling Stockholders." The Company will not receive any proceeds from the sale of the shares by the Selling Stockholders. The Common Stock is quoted on the Nasdaq Stock Market (National Market) under the symbol "SLVN." On May 6, 1997 the last sale price for the Common Stock as reported on the Nasdaq Stock Market was $34.25 per share. The Company's Common Stock is quoted on the Nasdaq National Market under the symbol "SLVN." The Selling Stockholders may from time to time sell shares of the Common Stock offered hereby in transactions on the Nasdaq Stock Market, in privately-negotiated transactions or otherwise, in each case at negotiated prices. See "Plan of Distribution." The brokers or dealers through or to whom the shares of Common Stock covered hereby may be sold may be deemed "underwriters" within the meaning of the Securities Act of 1933, in which event all brokerage commissions or discounts and other compensation received by such brokers or dealers may be deemed underwriting compensation. ___________ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ___________ The date of this Prospectus is , 1997. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information filed by the Company with the Commission, including the reports and other information incorporated by reference into this Prospectus, can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at its regional offices located at 7 World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can also be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at rates prescribed by the Commission or from the Commission's Internet web site at http:\\www.sec.gov. The Common Stock of the Company is quoted on the Nasdaq National Market. Reports, proxy statements and other information concerning the Company can be inspected at the offices of the Nasdaq Stock Market, 1735 K Street, Washington, D.C. 20006. This Prospectus does not contain all the information set forth in the Registration Statement of which this Prospectus is a part and exhibits relating thereto which the Company has filed with the Commission. Copies of the information and exhibits are on file at the offices of the Commission and may be obtained, upon payment of the fees prescribed by the Commission, may be examined without charge at the offices of the Commission or through the Commission's Internet web site. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission (File No. 0- 22844) pursuant to the 1934 Act are incorporated herein by reference: 1. The Company's Annual Report on Form 10-K for the year ended December 31, 1996, as amended by its Annual Report on Form 10-K/A. 2. The Company's Current Reports on Forms 8-K and 8-K/A dated January 28, 1997, relating to the Company's acquisition of Wall Street Institute. 3. The Company's Current Report on Form 8-K dated April 17, 1997, relating to the Company's agreement to acquire I-R, Inc. and Independent Child Study Teams, Inc. 4. The description of Common Stock contained in Item 4 of the Company's Registration Statement on Form 8-A, filed with the Commission under the 1934 Act; and 5. All other documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of filing of the Registration Statement of which this Prospectus is a part and prior to the termination of the offering made hereby. The Company will provide without charge to each person to whom a copy of this Prospectus is delivered, upon the request of any such person, a copy of any or all of the documents which have been incorporated herein by reference, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Requests for such documents should be directed to Sylvan Learning Systems, Inc., 1000 Lancaster Street, Baltimore, Maryland 21231, Attention: Chief Financial Officer, telephone: (410) 843-8000. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. -2- THE COMPANY Sylvan Learning Systems, Inc. (the "Company" or "Sylvan") is a leading international provider of educational and testing services. The Company delivers a broad array of supplemental and remedial educational services and computer- based testing through three principal segments. Through its Core Educational Services segment, the Company designs and delivers individualized tutorial services to school-age children and adults through its 620 franchised and Company-owned Sylvan Learning Centers in 49 states, five Canadian provinces, and Hong Kong, South Korea and Guam. Sylvan Prometric, the Company's testing services segment, administers computer-based tests for major corporations, professional associations and governmental agencies through its network of certification centers, which are located throughout the world. In addition, the Company's Contract Educational Services segment now serves 72 schools and over 10,000 by educational services to public and non-public school districts receiving funding under federal and state programs and provides contract educational and training services on-site to employees of large corporations. In 1996, total system-wide revenues were approximately $285.5 million, composed of $165.7 million from core educational services ($139.5 million from franchised Learning Centers and $25.6 million from Company-owned Learning Centers, product sales and franchise sales fees), $87.0 million from testing services and $33.4 million from contract educational services. Core Educational Services. Sylvan is widely recognized as providing high quality educational services with consistent, quantifiable results, and has delivered its core educational service to more than 1,000,000 students primarily in grades three through eight over the past 17 years through both Company-owned and franchised Sylvan Learning Centers. The Company's core educational service segment provides supplemental instruction in reading, mathematics and reading readiness, featuring an extensive series of standardized diagnostic tests, individualized instruction, a student motivational system and continued involvement from both parents and the child's regular school teacher. As of December 31, 1996, there were a total of 620 Learning Centers in 49 states, five Canadian provinces, Hong Kong, South Korea and Guam operated by the Company or its franchisees. As of that date, there were 434 franchisees operating 581 Sylvan Learning Centers. As of December 31, 1996, Sylvan owned and operated 39 Learning Centers: five in Baltimore, six in Dallas, six in Los Angeles, five in the greater Philadelphia area, six in South Florida, six in the greater Washington, D.C. area and five in the greater Minneapolis area. As of December 31, 1996, nine of the Company-owned Learning Centers contained Technology Centers for computer-based testing. The Company may consider selected acquisitions of additional Learning Centers now operated by franchisees. Sylvan Prometric Testing Services. Sylvan has established 221 testing centers which are located in existing Learning Centers, 20 stand-alone testing centers and, with the acquisition of Drake Prometric, L.P. in December 1995, added an additional 990 testing centers, 594 of which are located in North America and the remainder in 95 foreign countries. In addition, Sylvan acquired contract rights from the National Association of Securities Dealers ("NASD") and assumed management of 56 NASD testing centers in April 1996. Pursuant to the NASD contract, the Company is in the process of reducing the number of these testing centers. The Company enters into contracts directly with the testing organization, such as Educational Testing Services ("ETS"), under which Sylvan receives a fee based upon the number of tests given. Principal customers for the Company's testing services in the information technology ("IT") industry are Novell, Inc. and Microsoft Corp. IT customers sponsor worldwide certification programs for various professionals such as network administrators and engineers, service technicians and instructors. Sylvan has been designated as the exclusive commercial provider of computer-based tests administered by ETS (excluding tests not currently offered by the College Board in computer-based format) so long as Sylvan is able to provide sufficient capacity to meet the demand of candidates seeking to take computer-based versions of tests. The Company is also one of two entities licensed by the FAA to deliver computer- based versions of various pilot and mechanic licensing tests for private aviation, and also provides testing services for organizations in many other fields, such as for computer professionals, medical laboratory technicians and military candidates. -3- Effective December 1, 1996, the Company purchased the privately-held Wall Street Institute International, B.V. and its commonly controlled affiliates (collectively, "WSI"), a European based franchisor and operator of learning centers where English is taught through a combination of computer-based and live instruction. Typically, the instructional programs are approximately nine months to one year in duration. With more than 170 franchised centers in operation throughout Europe and Latin America, WSI had revenues of approximately $14.0 million for the fiscal year ended August 31, 1996. Contract Educational Services; PACE; Sylvan-At-Work. Under federal and various state funding programs to provide supplemental and remedial education to academically and economically disadvantaged students, such as the Title I (formerly Chapter I) program administered by the U.S. Department of Education, Sylvan has contracts to provide virtually the same core educational services offered at Sylvan Learning Centers to students in the following public schools: 22 Baltimore schools, 10 District of Columbia schools, seven schools in four districts in Texas and Maryland, 14 schools in Chicago, three schools in Newark, five St. Paul schools, two schools in Broward County, Florida, one school in New Orleans and schools in the Charleston, Oklahoma City and Richmond districts. Under the same funding programs, Sylvan contracts with public school districts to provide its services to parochial or private school students. In March, 1995, the Company acquired the PACE Group ("PACE"), a provider of educational and training services to large corporations throughout the United States. Services offered by PACE include racial and gender workplace diversity training and skills improvement programs such as writing, advanced reading, listening and public speaking. The Company's Sylvan-At-Work program, which has been offered since 1990, is a modified version of Sylvan's core educational service provided to businesses on-site. Programs are currently offered for Motorola, Inc., Texas Instruments Incorporated and Martin Marietta Energy Systems, Inc. The Company's principal executive offices are located at 1000 Lancaster Street, Baltimore, Maryland 21202, (410)843-8000. USE OF PROCEEDS All of the proceeds from the sale of the shares of the Company's Common Stock offered hereby will be received by the Selling Stockholders. The Company will receive none of the proceeds from the sale of the shares of Common Stock. SELLING STOCKHOLDERS The following table sets forth information regarding the beneficial ownership of the Company's Common Stock by the persons listed therein (the "Selling Stockholders") prior to this offering, the maximum number of shares of Common Stock to be sold by the Selling Stockholders hereby, and the beneficial ownership of the Company's Common Stock by the Selling Stockholders after this offering, assuming that all shares of Common Stock offered hereby are sold.
Shares Beneficially Shares Beneficially Owned Prior to Offering Shares To Owned After Offering --------------------------- Be Sold In ------------------------ Name and Address of Beneficial This Owner(1) Number Percent Offering Number Percent - -------------------------------- ------------ ----------- ------------ -------- ---------- Alan B. Carter.......................... 79,105 * 39,553 39,552 * Dr. Luigi T. Peccenini.................. 714,884 2.9 280,544 434,340 1.8 Torre Mapfre Marina, 16-18, 18th Floor 08005 Barcelona, Spain
Alan B. Carter acquired his shares of Common Stock pursuant to an Agreement and Plan of Reorganization effective as of December 31, 1996 (the "Carter Agreement"), by and among the Company, Carter Holdings, Inc. ("Carter") and Alan B. Carter, as sole stockholder of Carter. -4- Pursuant to the Carter Agreement, Carter was merged with and into the Company, and the Company acquired all of the outstanding stock of Carter from Mr. Carter in exchange for 79,105 shares of Common Stock of the Company, half of which are being offered in this Prospectus, as required by the Carter Agreement. As a result of the Company's acquisiton, Mr. Carter became and continues to be an employee of the Company. The Carter Agreement requires the Company to register the remaining shares Mr. Carter acquired pursuant to the Carter Agreement on or before January 29, 1998. Dr. Luigi T. Peccenini (together with Mr. Carter, the "Selling Stockholders") acquired an aggregate of 714,884 shares of Common Stock (the "WSI Shares") pursuant to the Agreement for Purchase and Sale of the Business of WSI, dated December 1, 1996 (the "WSI Agreement"). Pursuant to the WSI Agreement, 280,544 of the WSI Shares are being offered in this Prospectus. In connection with the Company's acquisition of WSI, Dr. Peccenini became and continues to be a consultant to the Company. PLAN OF DISTRIBUTION The Company's Common Stock is quoted on the Nasdaq National Market under the symbol "SLVN." The Selling Stockholders may from time to time sell shares of Common Stock offered hereby in transactions on the Nasdaq Stock Market, in privately-negotiated transactions or otherwise, in each case at negotiated prices. The broker-dealers through or to whom the shares of Common Stock offered hereby may be sold may be deemed "underwriters" within the meaning of the Securities Act of 1933, in which event, all brokerage commissions or discounts and other compensation received by such broker-dealer may be deemed underwriting compensation. The Common Stock offered hereby will be sold by the Selling Stockholders acting as principal for their own account, and the Company will receive no proceeds from this offering. The Selling Stockholders will pay all applicable stock transfer taxes, transfer fees and brokerage commissions or discounts. The Company has agreed to bear the cost of preparing the Registration Statement of which this Prospectus is a part and all filing fees and legal and accounting expenses in connection with registration of the shares of Common Stock offered by the Stockholders hereby under federal and state securities laws. LEGAL MATTERS The legality of the shares offered hereby has been passed upon for the Company by Piper & Marbury L.L.P., Baltimore, Maryland. EXPERTS The consolidated financial statements and schedule of Sylvan Learning Systems, Inc. appearing in the Annual Report of Sylvan Learning Systems, Inc. (Form 10-K) for the year ended December 31, 1996 have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements have been incorporated herein by reference in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. -5- ================================================================================ 320,097 Shares SYLVAN LEARNING SYSTEMS, INC. Common Stock PROSPECTUS , 1997 No person has been authorized by the Company to give any information or to make any representations other than those contained in this Prospectus in connection with the offer contained in this Prospectus, and if given or made, such information or representations may not be relied upon as having been authorized by the Company. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in any jurisdiction in which such offer or solicitation is not authorized, or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this Prospectus nor any sale made hereunder shall create an implication that there has been no change in the affairs of the Company since the date hereof. ------------------------------- TABLE OF CONTENTS Page ---- Available Information..................................................... 2 Incorporation of Certain Documents by Reference................................................... 2 The Company............................................................... 3 Use of Proceeds........................................................... 4 Selling Stockholders...................................................... 4 Plan of Distribution...................................................... 4 Legal Matters............................................................. 5 Experts................................................................... 5 ================================================================================ INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. The following table sets forth the expenses in connection with this Registration Statement. The Company will pay all expenses of the offering. All of such expenses are estimates, other than the filing fees payable to the Securities and Exchange Commission.
Filing Fee-Securities and Exchange Commission.......... $ 2,923 Nasdaq Listing Fees.................................... 6,402 Fees and Expenses of Counsel........................... 5,000 Miscellaneous Expenses................................. 4,675 ------- TOTAL................................................. $19,000 =======
Item 15. Indemnification of Directors and Officers. The Company's Charter provides that, to the fullest extent that limitations on the liability of directors and officers are permitted by the Maryland General Corporation Law, no director or officer of the Company shall have any liability to the Company or its stockholders for monetary damages. The Maryland General Corporation Law provides that a corporation's charter may include a provision which restricts or limits the liability of its directors or officers to the corporation or its stockholders for money damages except: (1) to the extent that it is provided that the person actually received an improper benefit or profit in money, property or services, for the amount of the benefit or profit in money, property or services actually received, or (2) to the extent that a judgment or other final adjudication adverse to the person is entered in a proceeding based on a finding in the proceeding that the person's action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding. The Company's Charter and By-laws provide that the Company shall indemnify and advance expenses to its currently acting and its former directors to the fullest extent permitted by the Maryland General Corporation Law and that the Company shall indemnify and advance expenses to its officers to the same extent as its directors and to such further extent as is consistent with law. The Charter and By-laws provides that the Company will indemnify its directors and officers and may indemnify employees or agents of the Company to the fullest extent permitted by law against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the Company. In addition, the Company's Charter provides that its directors and officers will not be liable to stockholders for money damages, except in limited instances. However, nothing in the Charter or By-laws of the Company protects or indemnifies a director, officer, employee or agent against any liability to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. To the extent that a director has been successful in defense of any proceeding, the Maryland General Corporation Law provides that he shall be indemnified against reasonable expenses incurred in connection therewith. II-1 Item 16. Exhibits. Exhibit No. Description - ----------- ----------- 3.1 Articles of Amendment and Restatement* 3.2 Amended and Restated By-Laws* 4.1 Specimen Stock Certificate* 4.2 Agreement and Plan of Reorganization dated as of December 31, 1996 by and among the Registrant, Carter Holdings, Inc. and the stockholders named therein. 4.3 Agreement for Purchase and Sale of the Business of Wall Street Institute International, B.V. and affiliated companies ("WSI") dated as of December 1, 1996 by and among the Registrant, WSI and the stockholder named therein.** 5.1 Opinion of Piper & Marbury L.L.P. regarding the legality of the securities being registered. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Piper & Marbury L.L.P. (included in Exhibit 5.1) 24.1 Power of Attorney - -------------- * Incorporated by reference to the Registrant's Registration Statement on Form S-1 (No. 33-69558), filed on September 28, 1993. ** Incorporated by reference to the Registrant's Current Report on Form 8-K dated January 28, 1997 and filed on February 4, 1997. Item 17. Undertakings. (a) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suite or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has II-2 been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (d) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act"); (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs in contained in periodic reports filed by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") that are incorporated by reference in the registration statement. (2) That for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement or Amendment to be signed on its behalf by the undersigned, thereunto duly authorized, in Baltimore, Maryland, on this 6th day of May, 1997. SYLVAN LEARNING SYSTEMS, INC. By /s/ R. Christopher Hoehn-Saric --------------------------------------------- R. Christopher Hoehn-Saric, Chairman of the Board and Co-Chief Executive Officer Know all men by these presents, that each person whose signature appears below constitutes and appoints R. Christopher Hoehn-Saric and Douglas L. Becker (with full power to each of them to act alone) as his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead in any and all capacities to sign any or all amendments or post-effective amendments to this Registration Statement, including post-effective amendments filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, to sign any and all applications, registration statements, notices or other document necessary or advisable to comply with the applicable state securities laws, and to file the same, together with all other documents in connection therewith, with the appropriate state securities authorities, granting unto said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- Co-Chief Executive Officer and Chairman of the /s/ R. Christopher Hoehn-Saric Board of Directors (Principal Executive Officer) May 6, 1997 - ------------------------------ R. Christopher Hoehn-Saric Co-Chief Executive Officer President, /s/ Douglas L. Becker Secretary and Director May 6, 1997 - --------------------------- Douglas L. Becker Chief Financial Officer (Principal Financial /s/ B. Lee McGee and Accounting Officer) May 6, 1997 - --------------------------- B. Lee McGee Director - -------------------------- Donald V. Berlanti Director - -------------------------- R. William Pollock
II-4
Signature Title Date --------- ----- ---- Director - -------------------------- J. Phillip Samper /s/ Nancy A. Cole Director May 7, 1997 - -------------------------- Nancy A. Cole /s/ James H. McGuire Director May 7, 1997 - -------------------------- James H. McGuire
II-5 EXHIBIT INDEX
Exhibit No. Description - ----------- ----------- 3.1 Articles of Amendment and Restatement* 3.2 Amended and Restated By-Laws* 4.1 Specimen Stock Certificate* 4.2 Agreement and Plan of Reorganization dated as of December 31, 1996 by and among the Registrant, Carter Holdings, Inc. and the stockholders named therein. 4.3 Agreement for Purchase and Sale of the Business of Wall Street Institute International, B.V. and affiliated companies ("WSI") dated as of December 1, 1996 by and among the Registrant, WSI and the stockholder named therein.** 5.1 Opinion of Piper & Marbury L.L.P. regarding the legality of the securities being registered. 23.1 Consent of Ernst & Young L.L.P. 23.2 Consent of Piper & Marbury L.L.P. (included in Exhibit 5.1) 24.1 Power of Attorney** - -------------------
* Incorporated by reference from the Registrant's Registration Statement on Form S-1 (No. 33-69558), filed on September 28, 1993. ** Incorporated by reference to the Registrant's Current Report on Form 8-K dated January 28, 1997 and filed on February 4, 1997. II-6 EX-4.2 2 AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), effective as of December 31, 1996 but dated this 29th day of January, 1997, by and among SYLVAN LEARNING SYSTEMS, INC., a Maryland corporation (the "Purchaser"), CARTER HOLDINGS, INC., a Virginia corporation (the "Company"), which has elected to be treated as an S Corporation pursuant to Subchapter S of the Internal Revenue Code of 1986, as amended (the "Code") and Alan Carter, the sole stockholder of the Company (the "Stockholder"). W I T N E S S E T H: - - - - - - - - - - The Stockholder owns all the issued and outstanding capital stock of the Company. The Purchaser and the Stockholder wish to enter into an agreement for the acquisition of the Company by the Purchaser through a merger of the Company into the Purchaser in a transaction qualifying as a tax-free reorganization under Section 368(a)(1)(A) of the Code (the "Merger"). The parties agree and acknowledge that for accounting purposes, the Merger is to be treated as a pooling-of-interests. The Purchaser, the Company and the Stockholder wish to enter into a definitive agreement setting forth the terms and conditions of the Merger. Accordingly, in consideration of the foregoing and of the covenants, agreements, representations and warranties hereinafter contained, the Purchaser, the Company and the Stockholder hereby agree as follows: 1. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby represents and warrants to the Company and the Stockholder as follows: 1.1 Organization and Standing. The Purchaser is a corporation duly ------------------------- organized, validly existing and in good standing under the laws of the State of Maryland and has the corporate power to carry on its business as it is now being conducted and to own or hold under lease the properties and assets it now owns or holds under lease. Copies of the Charter and By-Laws of the Purchaser have been delivered to the Company, and such copies are complete and correct and in full force and effect on the date of this Agreement. The Purchaser has at all times in the past operated and used its assets in material compliance with, and currently is not in violation of, and has obtained all material licenses and permits required by, any law, rule or regulation. 1.2 Financial Statements. The Purchaser has delivered to the Company -------------------- copies of the Purchaser's audited consolidated financial statements for the fiscal years ended December 31, 1994 and 1995. These financial statements are true and complete in all material respects, have been prepared in accordance with generally accepted accounting principles -1- ("GAAP") consistently followed throughout the periods covered by such statements (except as may be stated in the explanatory notes to such statements), and present fairly the consolidated financial position and results of operations of the Purchaser at the dates of such statements and for the periods covered thereby. The Purchaser also has delivered to the Company copies of its Annual Report on Form 10-K for the year ended December 31, 1995, its proxy statement dated May 1, 1996, and all other reports or documents required to be filed with the Securities and Exchange Commission pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), after the filing of such Annual Report on Form 10-K and prior to the date of this Agreement. 1.3 No Conflict With Other Documents. Neither the execution and -------------------------------- delivery of this Agreement nor the carrying out of the transactions contemplated hereby will result in any violation, termination or modification of, or be in conflict with, the Purchaser's Charter or By-Laws, or, any terms of any contract, instrument or other agreement to which the Purchaser is a party or by which it or any of its properties is bound or affected, or any law, rule, regulation, license, permit, judgment, decree or order applicable to the Purchaser or by which any of its properties or assets are bound or affected, or result in any breach of or constitute a default (or with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation, or result in the creation of any lien, charge or encumbrance upon any of its properties or assets, except where such event or occurrence would not, singly or in the aggregate, have a material adverse on the Purchaser. 1.4 Brokers and Advisors. The Purchaser has taken no action which -------------------- would give rise to a valid claim against any party hereto for a brokerage commission, finder's fee, counseling or advisory fee, or like payment. 1.5 Authority. The execution, delivery and performance of this --------- Agreement by the Purchaser have been duly authorized by its Board of Directors, and this Agreement is a valid, legally binding and enforceable obligation of the Purchaser. Upon the satisfaction of all conditions contained herein and the filing of the Articles of Merger (as defined in Section 4.2) with the Maryland State Department of Assessments and Taxation and the Virginia Corporation Commission, this Agreement will result in the valid, legally binding and enforceable statutory merger of the Company and the Purchaser. 1.6 Validity of Common Stock. The shares of Purchaser's Common Stock ------------------------ to be issued and delivered by the Purchaser in connection with the Merger have been duly authorized for issuance and will, when issued and delivered as provided in this Agreement, be duly and validly issued, fully paid and non- assessable. -2- 1.7 Tax-Free Reorganization. The Purchaser is not aware of any ----------------------- events or conditions relating to the Purchaser which would preclude the Company or the Stockholder from treating the Merger as a tax-free reorganization under Section 368(a)(1)(A) of the Code. 1.8 Registration Statement on Form S-3. As of the date hereof, the ---------------------------------- Purchaser is aware of no events, actions or conditions which would prevent the Purchaser from being able to comply with the provisions of Section 11.1(a) of this Agreement, and will use its best efforts to continue to be eligible to comply with the provisions of Section 11.1(a). 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SOLE STOCKHOLDER. The Company and the sole Stockholder hereby jointly and severally represent and warrant to the Purchaser as follows: 2.1 Authorized and Issued Shares. The Company's entire authorized ---------------------------- capital stock consists of one thousand ( 1,000 ) shares of Common Stock, ------------ ------- $ No par value per share (the "Company Common Stock"), of which 1,000 shares - -------- are issued and outstanding. No shares of Company Common Stock are held in the Company's treasury and no shares are reserved for issuance. All outstanding shares of Company Common Stock have been duly authorized and are validly issued and are fully paid and non-assessable and are owned by the Stockholder. The Company is not a party to or bound by any options, calls, contracts, preemptive rights or commitments of any character relating to any issued or unissued capital stock, or any other equity security issued or to be issued by the Company. 2.2 Organization. The Company is a corporation duly organized, ------------ validly existing and in good standing under the laws of the Commonwealth of Virginia, and has the corporate power and authority to carry on its business as it is now being conducted and to own or hold under lease the properties or assets it now owns or holds under lease and to perform the actions contemplated hereby. Complete and accurate copies of the current Charter, By-Laws, minute books and stock transfer books of the Company have been provided to the Purchaser, and such copies are complete and correct and in full force and effect. The Company does not own or have any direct or indirect interest in any other corporation, firm, partnership, joint venture enterprise or other business entity. The Company has duly and effectively elected to be treated as an S Corporation under and is presently operating in accordance with the provisions of Subchapter S of the Code. 2.3 Transactions with Affiliates. Except as set forth in Section 2.3 ---------------------------- of the disclosure schedule delivered to the Purchaser pursuant to this Agreement (the "Disclosure Schedule") or in the Company Financial Statements (as hereinafter defined), the Company is not a party to any contract, agreement or other arrangement with any current or former officer, director or stockholder or any affiliate of any such persons. Each transaction required to be listed -3- on the Disclosure Schedule is on terms no less favorable than terms available from unrelated parties. 2.4 Financial Statements. The Company has provided to the Purchaser -------------------- the unaudited financial statements for the fiscal years of the Company ended on December 31, 1995 and the preliminary balance sheet and income statement for the twelve month period ending December 31, 1996, which shall be reviewed as soon as practicable after the execution of this Agreement (collectively, the "Company Financial Statements"). The Company Financial Statements are complete and correct, have been prepared on a consistent basis throughout the periods covered thereby and present fairly and accurately the financial position and results of operations of the Company as of and for the periods indicated. There are no material liabilities or obligations of the Company, whether contingent or absolute, as of the dates of such statements, including liability for taxes of any type, which in accordance with GAAP consistently applied should have been shown or provided for in the Company Financial Statements and are not so shown or provided for. Since December 31, 1996, there has been no material adverse change in the condition (financial or otherwise), assets, liabilities, earnings, net worth, financial position, business, operations, properties or prospects of the Company except as shown on Schedule 2.4 of Disclosure Schedule. The Company's accounts receivable arose, and all accounts receivable that will be outstanding as of the Closing Date shall have arisen, from bona fide ---- ---- transactions in the ordinary course of business and will be collectible by the Company in full, less applicable reserves shown in the Company Financial Statements, in the ordinary course of business within ninety days of the Closing Date, and there are no offsets or claims related to such accounts receivable. 2.5 Taxes. The Company and the Stockholder have properly prepared ----- and filed all federal, state and other tax returns required to be filed in connection with the operations of the Company. True and complete copies of all federal and state income tax returns for the Company and the Stockholder for each of the years ended December 31, 1993 through December 31, 1995 have been delivered or made available to the Purchaser on or prior to the date hereof and copies of other returns will be made available upon request. Except as set forth on Section 2.5 of the Disclosure Schedule, neither the Company nor the Stockholder has any liability for any federal, state, county, local or other taxes whatsoever that arose or otherwise was incurred on or before the date of the balance sheet for 1996 included in the Company Financial Statements. No proposed taxes, additions to tax, interest or penalties have been asserted or are pending against the Company or the Stockholder with respect to periods ending on or before Closing, and no such matters are under discussion with the applicable authorities. There are no agreements, waivers, or other arrangements providing for extensions of time with respect to the assessment or collection of any unpaid tax against the Company or the Stockholder. The Company and the Stockholder have withheld or otherwise collected all taxes or amounts it or he was required to withhold or collect under any applicable federal, state or local law, including, without limitation, any amounts required to be withheld or collected with respect to employee state and federal -4- income tax withholding, social security, unemployment compensation, sales or use taxes or workmen's compensation, and all such amounts have been timely remitted to the proper authorities. 2.6 Agreements. Section 2.6 of the Disclosure Schedule identifies ---------- each of the following agreements, contracts, documents and other items (whether written or oral) as to which the Company is a party or otherwise is bound (and all such contracts, or summaries thereof, have been made available to the Purchaser): (i) all documents relating to indebtedness for money borrowed or collateral therefor, including guarantees; (ii) all agreements or plans relating to employment, compensation of or benefits for officers or employees of the Company; (iii) all contracts for the purchase of materials, supplies, services, merchandise or equipment involving consideration of more than $2,000 or involving purchases in excess of normal operating requirements; (iv) any contract, agreement, or instrument not entered into in the ordinary course of the business of the Company on a basis consistent with past practice; (v) any contract containing restrictions on the Company's operations or its ability to compete in any geographic region or in any line of business; (vi) any lease of real property and all personal property leases calling for annual lease payments in excess of $2,000; and (vii) each and every other contract which is material to the financial condition, earnings, operation or business of the Company. Each of the contracts and agreements so listed (collectively, the "Contracts") is a valid and existing contract or agreement in full force and effect and there exists no default thereunder. None of the Contracts will be violated or breached and no default or right of termination or modification shall arise thereunder as a result of the consummation of the transactions contemplated by this Agreement. 2.7 Property. Section 2.7 of the Disclosure Schedule sets forth a -------- schedule (the "Property Schedule") of (i) all real property owned or leased by the Company (the "Real Property"), (ii) all individual items of tangible personal property and assets (other than inventory) of the Company having a fair market value in excess of $2,000, and (iii) all patents, trademarks, trade names, service marks, trade secrets, copyrights, franchise rights or applications therefor which are held, used, prepared in connection with or otherwise related to the conduct of the business of the Company. Except as set forth in the Property Schedule, the Company has good and marketable title to all of such property and assets owned by it, free of any pledge, mortgage, lien, lease, security agreement, encumbrance, charge or claim of any nature whatsoever. The machinery and equipment of the Company are, in all material respects, in good operating condition and repair, ordinary wear and tear excepted. To the Company's knowledge, the Company is not infringing on any patent, trademark, trade name, service mark, trade secret or copyright of another entity and has received no notice or claim of any such infringement. 2.8 Legal Proceedings, Etc. Except as set forth in Section 2.8 of ----------------------- the Disclosure Schedule, there are no legal, administrative, arbitration, or other proceedings or governmental investigations pending or, to the best of the Company's and the Stockholder's -5- knowledge, threatened against the Company, the Stockholder or the respective properties or assets of the Company and the Stockholder. 2.9 Compliance; Licenses. The Company has at all times in the past -------------------- operated and used its assets in material compliance with, and currently is not in violation of, and has obtained all material licenses and permits required by, any law, rule or regulation. Section 2.9 of the Disclosure Schedule contains a true and complete list of all material licenses, permits, approvals, franchises and other authorizations as are necessary in order to enable the Company to own and conduct its business. 2.10 Bank Accounts, etc. Section 2.10 of the Disclosure Schedule ------------------ sets forth a true and complete list of all bank accounts, safe deposit boxes and lock boxes of the Company including, with respect to each such account and lock box identification of all authorized signatories. 2.11 Insurance. Section 2.11 of the Disclosure Schedule sets forth a --------- summary of all general liability, product liability, fire, casualty, motor vehicle and other insurance currently maintained by or on behalf of the Company. All requirements and provisions thereof are being complied with. True and correct copies of all insurance policies relating to such coverage have been provided by the Company to the Purchaser. No notice of cancellation has been given to or received by the Company with respect to any of its insurance policies, and no such policies are subject to any retroactive rate or audit adjustments or coinsurance arrangements. 2.12 Employee Matters. Except as set forth in Section 2.12 of the ---------------- Disclosure Schedule, the Company does not maintain, sponsor or contribute to any plans in effect for pension, profit-sharing, deferred compensation, severance pay, bonuses, stock options, stock purchases, or any other retirement or deferred benefit, or for any health, accident or other welfare plan, or any other employee or retired employee benefits or incentive plan, program, contract, understanding or arrangement in which any employee, former employee, retired employee, or beneficiary of any of these, of the Company is entitled to participate. The plans, programs, contracts, understandings and arrangements listed on the Disclosure Schedule pursuant to this Section 2.12 are hereinafter referred to as the "Employee Plans." The Company has supplied the Purchaser with complete and accurate copies of each such Employee Plan. Each Employee Plan has been operated according to its terms in compliance with all applicable laws. 2.13 Recent Operations; Employee Matters. Since December 31, 1996, ----------------------------------- (i) the Company has operated its business substantially as it was operated immediately prior to said date and only in the ordinary course, and the Company and the Stockholder have used their best efforts to preserve intact the Company's business relationships, (ii) there have been no bonuses paid to or increases in the compensation of officers or employees, except as set forth in Section -6- 2.13(i) of the Disclosure Schedule, and (iii) except as set forth in Section 2.13(iii) of the Disclosure Schedule, the Company has not declared or paid any dividend or made any other distribution with respect to its capital stock. 2.14 Stockholder Distributions. No dividends or distributions were ------------------------- declared and/or paid to the Stockholder (whether in cash or other assets) after December 31, 1995 through the date hereof (the "1996 Period"). 2.15 Environmental Matters. To the best of Company's knowledge, no --------------------- storage tanks, underground or otherwise, are now located on any properties occupied by the Company, the Company has complied in all material respects with all environmental laws relating to its operations or properties occupied by it and there are no asbestos containing materials located on properties occupied by the Company. The Company has not received any notice, demand, suit or information request pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") or any comparable state law, nor does it have knowledge of any other party's receipt of same relating to any properties occupied by the Company. 2.16 Disclosure. The Company and the Stockholder have disclosed to ---------- the Purchaser all facts material to the assets, business, operations, financial condition and prospects of the Company. All agreements, schedules, exhibits, documents, certificates, reports or statements furnished or to be furnished to the Purchaser by or on behalf of the Company in connection with this Agreement or the transactions contemplated hereby are true, complete and accurate in all material respects, and no such items contain any untrue statement of a material fact or omit a material fact necessary in order to make the statements contained herein and therein not misleading. 2.17 No Conflict With Other Documents. Neither the execution and -------------------------------- delivery of this Agreement, nor the carrying out of any of the transactions contemplated hereby, will result in any violation, termination or modification of, or be in conflict with, the Company's Articles of Incorporation or By-Laws, any terms of any contract, instrument or other agreement to which the Company is a party or by which it or any of its properties is bound or affected, or any law, rule, regulation, license, permit, judgment, decree or order applicable to the Company or by which any of its properties or assets are bound or affected, or result in any breach of or constitute a default (or with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation, or result in the creation of any lien, charge or encumbrance upon any of its properties or assets, except where such event or occurrence would not, singly or in the aggregate, have a material adverse effect on the Company. -7- 2.18 Brokers and Advisors. The Company has taken no action which -------------------- would give rise to a valid claim against any party hereto for a brokerage commission, finder's fee, counseling or advisory fee, or like payment. 2.19 Authority. The execution, delivery and performance of this --------- Agreement by the Company have been duly authorized by the sole Director and the Stockholder, and this Agreement is a valid and legally binding and enforceable obligation of the Company. Upon the satisfaction of all conditions contained herein and the filing of the Articles of Merger with the Maryland State Department of Assessments and Taxation and the Virginia Corporation Commission, this Agreement will result in the valid, legally binding and enforceable statutory merger of the Company and the Purchaser. 3. REPRESENTATIONS AND WARRANTIES OF THE SOLE STOCKHOLDER. The sole Stockholder hereby represents and warrants to the Purchaser as follows: 3.1 Ownership of Company Common Stock. Such Stockholder has good and --------------------------------- marketable title to the number of issued and outstanding shares of Company Common Stock set forth opposite his or her name on Section 3.1 of the Disclosure Schedule, free and clear of any pledges, liens, restrictions, claims or encumbrances of any kind. Such Stockholder is not a party to or bound by any options, calls, contracts, or commitments of any character relating to any issued or unissued stock or any other equity security issued or to be issued by the Company. 3.2 No Conflicts. Neither the execution and delivery of this ------------ Agreement nor the carrying out of the transactions contemplated hereby, will result in any breach of or constitute a default (or with notice or lapse of time or both would become a default), or give to others any rights, under the terms of any contract, instrument or other agreement to which such Stockholder is a party or is otherwise bound, or any judgment, decree or order applicable to such Stockholder. 3.3 Binding Effect. This Agreement is a valid and legally binding -------------- and enforceable obligation of the Stockholder. 3.4 Litigation. There is no litigation, proceeding or governmental ---------- investigation pending as to which Stockholder has been served with process or summons, or to the best of Stockholder's knowledge, threatened or in prospect against or relating to such Stockholder or the shares of Company Common Stock owned by him or her or the transactions contemplated by this Agreement. 3.5 Brokers and Advisors. Such Stockholder has taken no action which -------------------- would give rise to a valid claim against any party hereto for a brokerage commission, finder's fee, counseling or advisory fee, or like payment. -8- 3.6 Investment Intent. It is understood that the shares of Purchaser ----------------- Common Stock to be delivered to the Stockholder pursuant to this Agreement are not being registered, for purposes of the transactions hereunder, under the Securities Act of 1933, as amended (the "Securities Act") or any state securities laws, and the shares are being delivered without registration in reliance upon an exemption from the registration requirements of the Securities Act or any state securities laws. The Stockholder is acquiring the Purchaser Common Stock hereunder only for his own account and not with any intention of making, or with a view to, or for sale in connection with, any distribution thereof within the meaning of the Securities Act unless such shares first are registered under the Securities Act. In connection with the foregoing, each of the Stockholder hereby represents and warrants that: (a) such Stockholder has reviewed, discussed and evaluated the information delivered under Section 1.2 and has had the opportunity to ask questions of, and receive answers from, executive officers of the Purchaser concerning the terms and conditions of this Agreement and to obtain any additional information which such Stockholder considered necessary to verify the accuracy of the information delivered under Section 1.2; (b) such Stockholder understands that he or she must bear the economic risks of the investment in Purchaser Common Stock to be made hereunder for an indefinite period of time because such stock has not been registered under the Securities Act and, therefore, may not be sold until such stock subsequently is registered under the Securities Act or an exemption from registration is available; and (c) such Stockholder has sufficient knowledge and experience in financial and business matters to enable such Stockholder to be capable of evaluating the merits and the risks of the exchange of the Company Common Stock for the Purchaser Common Stock contemplated by this Agreement and such Stockholder's prospective investment in the Purchaser. 3.7 Legends. It is understood and agreed that, to implement the ------- requirements of the Securities Act and state securities laws and evidence the restrictions upon transfer contained in this Agreement, the Purchaser will cause a legend to be conspicuously noted on the certificates representing the Purchaser Common Stock deliverable hereunder, and that the Purchaser will issue stop transfer instructions to its transfer agent, to the effect that such stock has not been registered under the Securities Act and that no transfer may take place except as permitted by Section 11 of this Agreement and after delivery of an opinion of Purchaser's counsel to the effect that registration thereof for the purpose of transfer is not required under the Securities Act or that the stock proposed to be transferred has been effectively registered for that purpose under the Securities Act. -9- 3.8 No Agreements with Respect to Purchaser Common Stock. ---------------------------------------------------- Stockholder has not entered into any agreement or understanding with anyone for the sale, at Stockholder's option or otherwise, of any of the Purchaser Common Stock to be delivered hereunder to Stockholder at the Closing. 4. COVENANTS OF THE PURCHASER. The Purchaser covenants to the Company and the Stockholder that, except as otherwise consented to in writing by the Company after the date of this Agreement: 4.1 Stock Reservation. Between the date hereof and the Closing Date, ----------------- the Purchaser will keep available and reserve a sufficient number of shares of Purchaser Common Stock for issuance and delivery to the Stockholder as contemplated in this Agreement. 4.2 Cause Conditions to be Satisfied. The Purchaser will use its -------------------------------- best efforts to cause all of the conditions described in Sections 8 of this Agreement to be satisfied (to the extent such matters reasonably are within its control). 4.3 Registration Statement on Form S-3. The Purchaser will use its ---------------------------------- best efforts to meet the requirements for eligibility set forth in paragraph A. of the General Instructions to Form S-3, as promulgated by the U.S. Securities and Exchange Commission in fulfilling its obligations under Section 11 hereof. 4.4 Tax-Free Reorganization. The Purchaser recognizes that the ----------------------- Company and the Stockholder desire to treat the Merger as a tax-free reorganization under Section 368(a)(1)(A) of the Code and will use its best efforts to cooperate with the Company and the Stockholder in this regard. 5. COVENANTS OF THE COMPANY AND THE SOLE STOCKHOLDER. The Company and the Stockholder jointly and severally covenant to the Purchaser that, except as otherwise consented to in writing by the Purchaser after the date of this Agreement: 5.1 Conduct of Business. After the date hereof and through the date ------------------- of the Closing, with respect to the Company (a) its business will be conducted only in the ordinary course; (b) it will terminate each of its Employee Plans and will not enter into, adopt or amend any employee benefit plan, agreement or arrangement, enter into or amend any employment contracts, or increase the salaries or compensation of its officers or employees, other than ordinary increases in salaries in accordance with past practices; (c) it shall pay in full all liabilities outstanding on the date hereof except for those balances (i) owed to the holders of the Company's notes and other liabilities as shown in Section 5.1(c) of the Disclosure Schedule, and (ii) accrued employee compensation, leave and benefits and the taxes thereon; and (d) it shall not -10- incur any additional liability for borrowed money, or encumber any of its assets; (e) except as shown in Section 5.1(e) of the Disclosure Schedule, all outstanding loans payable by the Company to the Stockholder or receivable by the Company from the Stockholder or any employee shall be repaid in full by the appropriate party; (f) its current liabilities at all times will exceed its current assets by no more than $240,000; (g) except as shown in Sec 5.1(g) of the Disclosure Schedule, all trade payables and liabilities and obligations payable in installments shall be current; (h) it will use its best efforts to preserve its business organization intact, to keep available the service of its officers and employees and to preserve the goodwill of suppliers, customers and others doing business with it; (i) it will not enter into any agreement for the purchase, sale or other disposition, or purchase, sell or dispose of, any equipment, supplies, inventory, investments or other assets (other than sales of inventory and purchases of materials and supplies in the ordinary course of business and in accordance with past practices); (j) it will not compromise or write off any material account receivable other than by collection of the full recorded amount thereof; (k) no change shall be made in its Charter or By-Laws; (l) no change shall be made in the number of shares or terms of its authorized, issued or outstanding capital stock, nor shall it enter into or grant any options, calls, contracts or commitments of any character relating to any issued or unissued capital stock; and (m) no dividend or other distribution or payment shall be declared or paid in respect of its capital stock, except as permitted by Section 2.14. 5.2 Pre-Tax Income of the Company. The Company's Pre-Tax Income for ----------------------------- the twelve months ending December 31, 1996 will be equal to or greater than $$45,000 "Pre-Tax Income" means the Company's EBIT minus interest, taxes and any distributions or dividends to the Stockholder, and adding back salary, and payroll taxes thereon, paid to Linda Carter and salary, and payroll taxes thereon, paid to Alan Carter in excess of $100,000. 5.3 Consents. The Company and the Stockholder agree to take all -------- necessary corporate or other action and to use their best efforts to obtain all consents and approvals required for consummation of the transactions contemplated by this Agreement. 5.4 Audited Financial Statements. The Stockholder will cause the ---------------------------- Company to deliver to Purchaser the Company's audited financial statements for the year ended December 31, 1996 as soon as practicable after the execution of this Agreement. 5.5 Cause Conditions to Be Satisfied. The Company and the -------------------------------- Stockholder will use their best efforts to cause all of the conditions described in Sections 7 and 8 of this Agreement to be satisfied (to the extent such matters reasonably are within their control). 6. MERGER OF PURCHASER AND THE COMPANY. Subject to the terms and conditions of this Agreement, the Purchaser and the Company agree to effect the following transactions at the Closing: -11- 6.1 Conditions. The Purchaser and the Company will deliver to the ---------- other appropriate evidence of the satisfaction of the conditions to their respective obligations hereunder. 6.2 Merger. At the Closing, the Company will be merged with and into ------ the Purchaser pursuant to the provisions and with the effect provided in the general corporation laws of the States of Maryland and Virginia. The parties shall prepare and execute appropriate merger documents under the corporate laws of Maryland and Virginia, containing the terms provided in this Agreement, including a Certificate and Articles of Merger which shall be filed with the Maryland State Department of Assessments and Taxation and with the Secretary of State of the Virginia Corporation Commission on the date of the Closing. The Purchaser shall be the surviving corporation in the Merger. 6.3 Conversion Amount; Conversion of the Company Shares. As a result --------------------------------------------------- of the Merger and without any action by the holders thereof, all of the shares of Company Common Stock issued and outstanding immediately prior to the Merger and all rights in respect thereof, shall be converted into that number shares of Purchaser Common Stock having a market value of $2,000,000.00 (the "Conversion Amount"). As a result of such conversion, the sole Stockholder will receive, the number of shares of Purchaser Common Stock to be issued pursuant to the Merger, rounded to the nearest whole share. In order to effect such conversion, (i) the sole Stockholder will deliver to the Purchaser at the Closing certificates in due and proper form representing the shares of Company Common Stock owned by such Stockholder, duly endorsed or accompanied by duly executed stock powers, with signatures guaranteed by a commercial bank or a member of the National Association of Securities Dealers, Inc., and (ii) the Purchaser shall deliver to the sole Stockholder a certificate, in due and proper form, representing the number of shares of Purchaser Common Stock to which such Stockholder is entitled. Each share of Purchaser Common Stock issued pursuant to the Merger shall be fully paid and non-assessable. For purposes of the foregoing, the market value of the Purchaser Common Stock shall equal the average of the closing prices reported in the Wall Street Journal for each of the last fifteen (15) trading days of 1996. 6.4. Closing. The closing (the "Closing") of the transactions ------- contemplated by this Agreement shall take place at the offices of Purchaser, 1000 Lancaster Street, Baltimore, Maryland 21202 beginning at 10:00 a.m. on January 29, 1997, or at such other time and place as may be agreed upon in writing by the Purchaser and the Company (the "Closing Date"). 7. CONDITIONS TO THE PURCHASER'S OBLIGATIONS. Unless waived by the Purchaser in writing in its sole discretion, all obligations of the Purchaser under this Agreement are subject to the fulfillment, prior to or at the Closing, of each of the following conditions: -12- 7.1. Opinion of Counsel. The Company and the Stockholder shall ------------------ have delivered to the Purchaser an opinion of counsel dated as of the date of Closing, in form and substance reasonably satisfactory to Purchaser, to the effect that: (a) The Company has been duly incorporated and organized, and is validly existing and, based upon the Company VA GS and the Certificate of the Company and Stockholder is in good standing as a corporation under the laws of the Commonwealth of Virginia; (b) The Company has the corporate authority to own its properties and conduct its business as now conducted, and to execute and perform its obligations under this Agreement and the Certificate and Articles of Merger (the "Transaction Documents"); (c) All necessary corporate action has been taken to authorize the execution, delivery, and performance of the Transaction Documents by the Company; (d) The transaction Documents have been duly executed and delivered by the Company and the Stockholder and constitute the valid and legally binding obligations of the Company and Stockholder, enforceable against the Company and Stockholder in accordance with their terms, subject to the following: (i) applicable bankruptcy, insolvency, reorganization, moratorium, and other laws affecting the rights of creditors generally; and (ii) the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or equity); (e) The execution and delivery of, and the performance of the obligations under, the Transaction Documents (i) will not violate the Company's corporate charter or bylaws, (ii) based solely upon our review of the identified Company Contracts and our knowledge, will not violate or result in the material breach of the provisions of, or constitute a material default under, any of the Company's contracts, and iii) based solely upon the certificates of Company and reports of a search firm, and our knowledge, will not conflict with or result in the breach of any court decree or order of any governmental body applicable to the Company; (f) Based solely upon the certificate of the Company, and to our knowledge, there is no litigation pending before any court or administrative body or threatened against the Company or its properties, except for matters described in the certificate of the Company; (g) Upon the filing of the Articles and Certificate of Merger with the Maryland State Department of Assessments and Taxation and the Secretary of State of the Commonwealth of Virginia, and the completion of all conditions precedent to effectiveness of the merger set forth in the Agreement , a statutory merger of the Purchaser and Company will be consummated; and (h) The authorized capital stock of the Company is as set forth in Section 2.1 of the Agreement; and, based upon the stock ledger of the Stockholder is the sole stockholder of capital stock of the Company and counsel has no knowledge of any claims, rights, pledges or liens in others relating thereto. 7.2. Approvals of Governmental Authorities. All governmental ------------------------------------- approvals necessary or advisable in the reasonable opinion of the Purchaser's counsel to consummate the transactions contemplated by this Agreement shall have been received and shall not contain any provision which, in the reasonable judgment of the Purchaser, is unduly burdensome. 7.3 No Adverse Proceedings or Events. No suit, action or other -------------------------------- proceeding against the Company or the Purchaser, or their respective officers or directors, or either of the -13- Stockholder, shall be threatened or pending before any court or governmental agency in which it will be, or it is, sought to restrain or prohibit any of the transactions contemplated by this Agreement or to obtain damages or other relief in connection with this Agreement or the transactions contemplated hereby. 7.4. Consents and Actions; Contracts. All requisite consents of any ------------------------------- third parties and other actions which the Company has covenanted to use its best efforts to obtain and take under Section 5.2 hereof shall have been obtained and completed. All material contracts and agreements of the Company, including, without limitation, all contracts and agreements listed on Section 2.6 of the Disclosure Schedule, shall be in full force and effect and shall not be affected by the consummation of the transactions contemplated hereby. 7.5 Other Evidence. The Purchaser shall have received from the -------------- Company and the Stockholder such further certificates and documents evidencing due action in accordance with this Agreement, including certified copies of proceedings of the Board of Directors and stockholders of the Company, as the Purchaser reasonably shall request. 7.6 Employment Agreement. The Purchaser and the Stockholder shall -------------------- have entered into an Employment Agreement in substantially the form of Exhibit ------- A attached hereto. 7.7 Current Financial Statements and Projections. The Company shall -------------------------------------------- have provided to Purchaser the unaudited financial statements for calendar year 1996 showing an EBIT of at least $ $45,000 for such year, as well as a projection of revenues and expenses for calendar year 1997, which projection reflects net income of at least $350,000 for such year. For 1996, "EBIT" means the Company's net revenues minus all of its expense items including any extraordinary and non-recurring items and depreciation and amortization, but excluding interest and taxes and adding back salary, and payroll taxes thereon, paid to Linda Carter and salary, and payroll taxes thereon, paid to Alan Carter in excess of $100,000.. For the 1997 projection EBIT shall be calculated in the same manner as "profits subject to bonus" under paragraph 2.02 of the Employment Agreement attached hereto as Exhibit A. 8. CONDITIONS TO THE COMPANY'S AND THE STOCKHOLDER OBLIGATIONS. Unless waived by the Company and the Stockholder, all obligations of the Company and the Stockholder under this Agreement are subject to the fulfillment, prior to or at the Closing, of each of the following conditions: 8.1. Opinion of Counsel to Purchaser. The Purchaser shall have ------------------------------- delivered to the Company and the Stockholder a favorable opinion of the Purchaser's counsel, Piper & Marbury, dated the date of Closing, in form and substance satisfactory to the Company, the Stockholder and their counsel, to the effect that (a) the Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland; (b) the Purchaser -14- has the corporate power to carry on its business as it is now being conducted and to own or hold under lease the properties and assets it now owns or holds under lease and such counsel has no reason to believe that Purchaser is not operating its business in material compliance with all applicable laws and regulations; (c) the Purchaser has the corporate power to enter into the transactions contemplated by this Agreement and perform it obligations hereunder; (d) the execution, delivery and performance of this Agreement and all other documents to be executed by the Purchaser in connection with this Agreement (the "Purchaser Documents") have been duly authorized and approved by all requisite action of the Board of Directors of the Purchaser, and this Agreement and all other Purchaser Documents have been duly executed and delivered by the Purchaser and constitute valid and legally binding obligations of the Purchaser, subject to applicable bankruptcy, insolvency, moratorium and other similar laws of general application and such general principles of equity as a court having jurisdiction may apply; (e) the execution and delivery of this Agreement and the other Purchaser Documents did not, and the consummation of the transactions contemplated hereby or thereby will not, violate or conflict with any provision of the Charter or By-Laws of the Purchaser; (f) the execution and delivery of this Agreement and the other Purchaser Documents did not, and the consummation of the transactions contemplated hereby or thereby will not, violate any provision of any agreement, instrument, order, judgment or decree, of which such counsel has knowledge, to which the Purchaser may be a party or by which it is bound; (g) except as may be specified by such counsel, such counsel does not know of any material suit or proceeding pending or threatened against the Purchaser which seeks to restrain or prohibit the consummation of the transactions contemplated by this Agreement other than those which have been disclosed in filings made prior to the execution of this Agreement by Purchaser pursuant to the Securities Exchange Act of 1934; (h) upon the appropriate filing of the Certificate and Articles of Merger with the Maryland State Department of Assessments and Taxation and the Secretary of State of the State of Virginia the merger will be valid and effective as a statutory merger of the Purchaser and the Company, in accordance with the terms thereof under the laws of the State of Maryland; (i) the shares of Purchaser Common Stock to be issued in connection with the Merger are duly authorized and reserved for issuance and, when issued and delivered in accordance with this Agreement, will be duly and validly issued and outstanding shares of Purchaser Common Stock, fully paid and non assessable under the laws of the State of Maryland; (j) to the knowledge of such counsel, all regulatory and governmental approvals, consents and filings required of the Purchaser for the consummation of the transactions contemplated by this Agreement or any of the other Purchaser Documents have been obtained or made, and to the knowledge of such counsel, all such approvals, consents or filings remain in full effect as of the date of such opinion; and (k) to such further effect regarding the validity and sufficiency of legal proceedings and matters relative to the transactions contemplated by this Agreement as the Company may reasonably request. 8.2. No Adverse Proceedings or Events. No suit, action or other -------------------------------- proceeding against the Company or the Purchaser, or their respective officers or directors, or the Stockholder, shall be threatened or pending before any court or governmental agency in which it -15- will be, or it is, sought to restrain or prohibit or to obtain damages or other relief in connection with this Agreement or the transactions contemplated hereby. 8.3. Consents and Actions. All requisite consents of any third -------------------- parties and other actions which the Purchaser has covenanted to use its best efforts to obtain and take under Section 4.4 of this Agreement shall have been obtained and completed. 8.4. Other Evidence. The Company and the Stockholder shall have -------------- received from the Purchaser such further certificates and documents evidencing due action in accordance with this Agreement, including certified copies of proceedings of the Board of Directors and Stockholder of the Purchaser, as the Company and the Stockholder reasonably shall request. 9. INDEMNIFICATION. 9.1. Indemnification by the Stockholder. The Stockholder hereby ---------------------------------- covenants and agrees to indemnify and hold harmless the Purchaser and its respective successors and assigns, at all times from and after the date of Closing against and in respect of the following: (i) any damage or loss resulting from any misrepresentation, breach of representation or warranty or breach or non-fulfillment of any agreement or covenant on the part of the Company or the Stockholder under this Agreement, or from any inaccuracy or misrepresentation in or omission from any certificate or other instrument or document furnished or to be furnished by the Company or the Stockholder hereunder; (ii) any liabilities or obligations of the Company or the Stockholder for federal, state or local income tax or, to the extent not accrued or reflected in the Financial Statements, any personal property, FICA, withholding, excise, unemployment, sales or franchise taxes arising from operations of the Company prior to the Closing except as shown in Schedule 5.1(c) and 5.1(g) of the Disclosure Schedule. (iii) all claims, actions, suits, proceedings, demands, assessments, judgments, costs, reasonable attorneys' fees and expenses of any nature incident to any of the matters indemnified against pursuant to this Section 9.1, including, without limitation, all such costs and expenses incurred in the defense thereof or in the enforcement of any rights of the Purchaser hereunder. 9.2. Notice and Defense. The Purchaser shall notify the Stockholder ------------------ of any asserted liability, damage, loss or expense claimed to give rise to indemnification hereunder. Thereafter, the Purchaser shall have, at its election, the right to compromise or defend any such matter at the Stockholder's sole cost and expense through counsel chosen by the Purchaser and reasonably acceptable to the Stockholder; provided, however, that any such compromise or -16- defense shall be conducted in a manner which is reasonable and the Stockholder shall in all events have a right to veto any such compromise or defense which might increase the potential liability of, or create a new liability for, the Stockholder (other than under Section 9.1). Each party agrees in all cases to cooperate with the defending party and its or his counsel in the compromise of or defending of any such liabilities or claims. In addition, the non defending party shall at all times be entitled to monitor such defense through the appointment, at its or his own cost and expense, of advisory counsel of its own choosing. 9.3. Indemnification by the Purchaser. From and after the Closing -------------------------------- Date, the Purchaser hereby covenants and agrees to indemnify and hold harmless the Stockholder against and in respect of the following: (i) any liability, loss, damage or expense resulting from any misrepresentation, breach of warranty or non-fulfillment of any agreement or covenant on the part of Purchaser under this Agreement, or from any misrepresentation in or omission from any certificate or other instrument or document furnished or to be furnished by the Purchaser hereunder; and (ii) all claims, actions, suits, proceedings, demands, assessments, judgments, costs, reasonable attorneys' fees and expenses of any nature incident to any of the matters indemnified against pursuant to this Section 9.3, including without limitation, all such costs and expenses incurred in the defense thereof or in the enforcement of any rights of the Stockholder hereunder. The Stockholder shall notify the Purchaser of any asserted liability, damage, loss or expense claimed to give rise to indemnification hereunder and thereafter the Purchaser shall have the right to defend, compromise and settle such matter provided that the Stockholder is fully protected from any cost or expense in connection therewith. 10. SURVIVAL; LIMITATIONS. 10.1 Survival. The representations, warranties and agreements made -------- by the parties in this Agreement and in any other certificates and documents delivered in connection herewith, including the indemnification obligations of the Stockholder and Purchaser set forth in Section 9 hereof, shall survive the Closing under this Agreement regardless of any investigation made by the party making claim hereunder, except that, subject to the provisions of the next sentence, neither the Purchaser, on the one hand, nor the Stockholder, on the other, shall have any liability with respect to any matter if notice of a claim has not been provided on or prior to December 31, 1999. Notwithstanding the foregoing, (i) any indemnification obligations of the Stockholder relating to federal, state or local tax matters or environmental matters of any sort shall continue in full force and effect without limitation until expiration of the statute of -17- limitations applicable to such tax or environmental matters, (ii) the representation and warranty contained in Sections 3.1, 3.3 or 3.6 and any indemnification obligations of the Stockholder in connection therewith shall continue in full force and effect without any limitation, (iii) any claims, actions or suits the Purchaser, on the one hand, or the Company or the Stockholder, on the other hand, may have which arises from any fraud or willful misconduct on the part of the Stockholder or the Company, or any representative of either, on the one hand, and the Purchaser or any representative of it, on the other hand, shall continue in full force and effect without limitation until expiration of the statute of limitations applicable thereto. 10.2 Limitations. No indemnified party shall be entitled to ----------- indemnification hereunder until such time as a single loss or an aggregate of several losses equals Ten Thousand Dollars ($10,000), at which time such indemnified party shall be entitled to indemnification for all losses sustained, incurred, paid or required to be paid by such indemnified party in excess of the $10,000; and in no event shall any party to this Agreement be entitled to indemnification for a single loss or an aggregate of several losses which exceeds $2,000,000.00. 11. REGISTRATION RIGHTS. 11.1 Registration Procedures and Expenses. So long as the ------------------------------------ Stockholder has not initiated the termination of his employment with the Purchaser pursuant to Section 4.01 of the Employment Agreement between the Stockholder and the Purchaser dated as of the date hereof, Purchaser shall: (a) as soon as practicable after the closing date but in no event later than ninety (90) days after the closing date, prepare and file with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 which meets the requirements of Rule 415 promulgated under the Securities Act (a "Shelf Registration Statement") covering the sale by the Stockholder from time to time of one half of the shares of the Purchaser Common Stock received by the Stockholder in the Merger, and as soon as practicable after the first anniversary of the closing date, but in no event later than ninety (90) days after the first anniversary of the closing date, a Shelf Registration Statement covering the sale by the Stockholder from time to time of the remaining shares of Purchaser Common Stock. (b) use its best efforts, subject to receipt of necessary information from the Stockholder, to cause each of the Shelf Registration Statements to become effective; (c) prepare and file with the Commission such amendments and supplements to the Shelf Registration Statements and the prospectus used in connection therewith as may be necessary to keep the Shelf Registration Statements effective until the earlier of the date on which the Purchaser Common Stock registered by such Shelf Registration Statement has been sold, or one year from the date of the initial filing thereof; -18- (d) during the period referred to in (c) above, prepare and promptly file with the Commission, and promptly notify the Stockholder of the filing of, such amendment or supplement to each such Shelf Registration Statement and the prospectus as may be necessary to correct any statements or omissions if, at any time when a prospectus relating to the Purchaser Common Stock is required to be delivered under the Securities Act, any event has occurred the result of which is that any such prospectus then in effect would include or incorporate an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances in which they were made; (e) advise the Stockholder, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of any of such Shelf Registration Statements or the initiation or threatening of any proceeding for that purpose and promptly use its diligent best efforts to prevent the issuance of any stop order and to obtain its withdrawal if such stop order should be issued; (f) furnish to the Stockholder with respect to the Purchaser Common Stock registered under any of the Shelf Registration Statements such number of copies of prospectuses and preliminary prospectuses in conformity with the requirements of the Securities Act and such other documents as the Stockholder may reasonably request (but in no event more than 100), in order to facilitate the public sale or other disposition of all or any of the registered Purchaser Common Stock by the Stockholder; provided, however, that the obligation of -------- ------- Purchaser to deliver copies of prospectuses or preliminary prospectuses to the Stockholder shall be subject to the receipt by Purchaser of reasonable assurances from the Stockholder that the Stockholder will comply with the applicable provisions of the Securities Act and of such other securities or blue sky laws as may be applicable in connection with any use of such prospectuses or preliminary prospectuses; (g) file documents required of Purchaser for normal blue sky clearance in states reasonably specified in writing by the Stockholder, provided, however, that Purchaser shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented; and (h) bear all expenses in connection with the procedures in paragraphs (a) through (g) of this Section 11.1 and the registration of the Purchaser Common Stock pursuant to each of the Shelf Registration Statements, other than fees and expenses, if any, of counsel or other advisers to the Stockholder. 11.2 Engagement of Underwriters. The parties hereto agree that the -------------------------- Purchaser shall have no obligation to (i) conduct, arrange or coordinate any distribution or sales activities on behalf of the Stockholder with respect to the Purchaser Common Stock other than as set forth -19- in Section 11.1 above or (ii) retain any underwriter(s) in connection with the registration and/or distribution of the Purchaser Common Stock pursuant to this Section 11. The Stockholder agrees that any underwriter(s) or counsel engaged in connection with the registration or distribution of the Purchaser Common Stock required to be registered pursuant to this Section 11 will be retained by and at the sole expense of the Stockholder and agrees further that any discounts or commissions payable to such underwriter(s) shall also be an expense solely of the Stockholder. In the event the Stockholder engages one or more underwriters pursuant to this Section 11.2, the Stockholder shall enter into an underwriting agreement with the managing or lead managing underwriter in the form customarily used by such underwriter with such changes thereto as the parties thereto shall agree; and, further, shall provide to such underwriter any documents or other information as is necessary, in the underwriter's reasonable opinion, to facilitate the effectiveness of the Shelf Registration Statement and the completion of the distribution of the Purchaser Common Stock so registered. 11.3 Indemnification with respect to Shelf Registration Statements. ------------------------------------------------------------- Purchaser hereby agrees to indemnify the Stockholder against liability arising out of or based upon any untrue statement or alleged untrue statement of material fact in any of the Shelf Registration Statements filed by Purchaser pursuant hereto, or the omission or alleged omission to state or incorporate by reference in such Shelf Registration Statements any material fact required to be stated therein or necessary in order to make the statements therein not misleading, other than any such statement included or incorporated by reference in, or omitted from, such Shelf Registration Statements by Purchaser in reliance upon and in conformity with written information furnished to Purchaser specifically for use therein by or on behalf of the Stockholder. The Stockholder hereby agrees to indemnify Purchaser against liability arising out of or based upon any untrue statement or alleged untrue statement of a material fact included or incorporated by reference in the Shelf Registration Statements or the omission or alleged omission to state or incorporate by reference therein any material fact required to be stated therein or necessary in order to make the statements therein not misleading, if such statement or omission was made by Purchaser in reliance upon and in conformity with written information furnished to Purchaser for use or incorporation by reference in such Shelf Registration Statements. 12. CONFIDENTIALITY. After the date hereof, the Stockholder will hold in confidence and not reveal to any third parties any knowledge or information of a confidential nature with respect to the business, products, know-how and methods of operation of the Company, and will not disclose, publish or make use of the same, provided, however, that the foregoing shall not be applicable to any disclosure or use of confidential information or knowledge that can be demonstrated to have (i) been publicly known prior to the date of this Agreement, (ii) become well known by publication or otherwise not due to the unauthorized act or omission on the part of the Stockholder, or (iii) been supplied to the Stockholder by a third party without violation of the rights of the Company or the Purchaser or any other party. The parties agree that the remedy at law for any breach by the Stockholder of this Section 12 shall -20- be inadequate and that the aggrieved party shall be entitled to injunctive relief in addition to any other remedy. 13. EXPENSES. Each party to this Agreement shall pay all of its expenses relating hereto, including fees and disbursements of its counsel, accountants and financial advisors, whether or not the transactions hereunder are consummated. If said transactions are consummated, it is expressly understood that the Stockholder will bear, and will not cause the Company to pay, any legal fees or other expenses incurred by Company in connection with the transactions contemplated by this agreement, as well as the cost of furnishing the audited and reviewed Company Financial Statements referred to in Section 2.4; provided, however, that in the event of any litigation between the parties hereto relating to or arising from this Agreement, the prevailing party in such litigation shall be entitled to payment by the non-prevailing party of all reasonable attorney's fees and costs. 14. NOTICES. Except as otherwise provided herein, all notices, requests, demands and other communications under or in connection with this Agreement shall be in writing, and, (a) if to the Purchaser, shall be addressed to: B. Lee McGee, Chief Financial Officer Sylvan Learning Systems, Inc. 1000 Lancaster Street Baltimore, Maryland 21202 with a copy to: Richard C. Tilghman, Jr., Esquire Piper & Marbury 36 South Charles Street Baltimore, Maryland 21201 (b) if to the Company or the Stockholder, shall be addressed to: Alan Carter 1205 Westgrove Blvd. Alexandria, VA 22307 with a copy to: David S. DeJong, Esquire Stein Sperling etal, PC 25 West Middle Lane Rockville, Maryland 20850 -21- All such notices, requests, demands or communications shall be mailed postage prepaid, certified mail, return receipt requested, or by overnight delivery or delivered personally, and shall be sufficient and effective when delivered to or received at the address so specified. Any party may change the address at which it is to receive notice by like written notice to the other. 15. ENTIRE AGREEMENT. This Agreement (including the exhibits hereto and the lists, schedules and documents delivered pursuant hereto, which are a part hereof) is intended by the parties to and does constitute the entire agreement of the parties with respect to the transactions contemplated by this Agreement. This Agreement supersedes any and all prior understandings, written or oral, between the parties, and this Agreement may be amended, modified, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the amendment, modification, waiver, discharge or termination is sought. 16. GENERAL. The paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. This Agreement may be executed simultaneously 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. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns, but nothing herein, express or implied, is intended to or shall confer any rights, remedies or benefits upon any person other than the parties hereto. This Agreement may not be assigned by any party hereto. This Agreement shall be construed in accordance with and governed by the laws of the State of Maryland. IN WITNESS WHEREOF, the Purchaser, the Company and the Stockholder have caused this Agreement to be duly executed and their respective seals to be hereunto affixed as of the date first above written. WITNESS: SYLVAN LEARNING SYSTEMS, INC. __________________________ By:_____________________________ ATTEST: CARTER HOLDINGS, INC. __________________________ By:_____________________________ Linda Bunn, Secretary Alan Carter, President -22- [Corporate Seal] WITNESS: STOCKHOLDER: ___________________________ ___________________________(Seal) Alan Carter -23- EX-5.1 3 OPINION OF PIPER AND MARBURY EXHIBIT 5.1 ----------- [LETTERHEAD OF PIPER & MARBURY L.L.P. APPEARS HEAR] May 7, 1997 Sylvan Learning Systems, Inc. 1000 Lancaster Street Baltimore, Maryland 21202 Re: Registration Statement on Form S-3 ---------------------------------- Dear Sirs: We have acted as counsel to Sylvan Learning Systems, Inc., a Maryland corporation (the "Company"), in connection with the Company's Registration Statement on Form S-3 (the "Registration Statement") filed on the date hereof with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"). The Registration Statement relates to 320,097 shares of the Company's Common Stock, par value $.01 per share (the "Shares"), which were previously issued by the Company and are being registered for resale by the holders thereof. In this capacity, we have examined the Company's Charter and By-Laws, the proceedings of the Board of Directors of the Company relating to the issuance of the Shares and such other documents, instruments and matters of law as we have deemed necessary to the rendering of this opinion. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity with originals of all documents submitted to us as copies. Based upon the foregoing, we are of the opinion and advise you that each of the Shares described in the Registration Statement has been duly authorized and validly issued and is fully paid and nonassessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving our consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the Rules and Regulations of the Commission thereunder. Very truly yours, PIPER & MARBURY L.L.P. EX-23.1 4 CONSENT OF ERNST AND YOUNG EXHIBIT 23.1 ------------ CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS -------------------------------------------------- We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-3 No. 333-_____) and related Prospectus of Sylvan Learning Systems, Inc. for the registration of 320,097 shares of its common stock and to the incorporation by reference therein of our report dated February 27, 1997, with respect to the consolidated financial statements and schedule of Sylvan Learning Systems, Inc. and subsidiaries included in its Annual Report (Form 10-K) for the year ended December 31, 1996, filed with the Securities and Exchange Commission. ERNST & YOUNG LLP Baltimore, MD May 6, 1997 -----END PRIVACY-ENHANCED MESSAGE-----