-----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, M/k9hMp1n/qcQSLLr3r76FYXKsegYA3nYZHaq8w8iAHwkERwaOWNXTzvrKj/ppA4 t/bElpJWLHOHluoRObfC5w== 0000928385-97-002117.txt : 19971230 0000928385-97-002117.hdr.sgml : 19971230 ACCESSION NUMBER: 0000928385-97-002117 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19971229 SROS: NASD 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: SEC FILE NUMBER: 333-43355 FILM NUMBER: 97745228 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 As filed with the Securities and Exchange Commission on December 29, 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, ESQUIRE PIPER & MARBURY 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 PROPOSED MAXIMUM AGGREGATE AMOUNT OF TO BE REGISTERED OFFERING PRICE REGISTRATION FEE ---------------- -------------------------- ---------------- Common Stock, $.01 par value $11,887,500 $3,507.00 ======================================================================================
(1) CALCULATED IN ACCORDANCE WITH RULE 457(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. Subject to Completion DECEMBER 29, 1997 PROSPECTUS 300,000 SHARES SYLVAN LEARNING SYSTEMS, INC. COMMON STOCK ___________ All of the shares of Common Stock of Sylvan Learning Systems, Inc. (the "Company") offered hereby will be sold by the Company upon exercise of options (the "Options") granted by the Company to those of its franchisees who operate Sylvan Testing Centers (the "Testing Franchisees") pursuant to the STC Stock Option Plan (the "Plan"). See "Description of STC Stock Option Plan." The Company will not receive any proceeds from the resale of the Common Stock by the Franchisees other than the aggregate exercise price payable upon exercise of the Options. The Common Stock is quoted on the Nasdaq National Market under the symbol "SLVN." On December 23, 1997 the last sale price for the Common Stock as reported on the Nasdaq Stock Market was $39.25 per share. ___________ 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. ___________ PRICE TO PUBLIC PROCEEDS TO COMPANY(1) - ------------------------------------------------------------------------------- Per Share............ $ $ Total................ $ $ ================================================================================ (1) Before deducting expenses payable by the Company estimated at $23,000. The date of this Prospectus is , 1998. [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.] 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: (i) 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 (with Items 6, 7 and 8 thereof having been superseded by the information contained in the Company's Current Report on Form 8-K dated July 15, 1997), (ii) the Company's Current Report on Form 8-K and 8-K/A dated January 28, 1997, relating to the Company's acquisition of Wall Street Institute; (iii) the Company's Current Report on Form 8-K/A dated March 12, 1997, relating to the termination of the Company's Merger Agreement with National Education Corporation; (iv) the Company's Current Report on Form 8-K and 8-K/A dated April 17, 1997 and May 30, 1997, relating to the Company's acquisition of I-R, Inc. and Independent Child Study Teams, Inc. (collectively, "Educational Inroads"); (v) the Company's Current Report on Form 8-K dated July 15, 1997, restating certain historical financial information to reflect the acquisition of Educational Inroads; (vi) the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997; June 30, 1997; and September 30, 1997; (vii) 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 (viii) 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 21202, 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 private 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 divisions. The Core Educational Services division designs and delivers individualized tutorial services to school-age children and adults at 669 franchised and Company-owned Sylvan Learning Centers. Sylvan Prometric, the Company's testing services division, administers computer-based tests for major organizations, corporations, professional associations and governmental agencies through its worldwide network of Testing Centers. The Contract Educational Services division provides Sylvan's core educational services under federal and state funding programs to more than 12,000 students in 89 public schools and more than 38,000 students in 507 non-public schools (including Educational Inroads) and provides on-site educational and training services to employees of large corporations. Since 1994, the Company has substantially expanded its business through a combination of internal growth and acquisitions and has increased revenue and operating income from $68.7 million and $3.4 million, respectively, in 1994 to $181.9 million and $22.7 million, respectively, in 1996. Sylvan's 1996 systemwide revenues were approximately $310.3 million, consisting of $165.1 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 $58.2 million from contract educational services. Core Educational Services. The Company's Core Educational Services division provides supplemental instruction in reading, mathematics and reading readiness and features 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 September 30, 1997, the Company or its franchisees operated 669 Learning Centers in 49 states, five Canadian provinces, Hong Kong, South Korea and Guam, with 403 franchisees owning and operating 628 Sylvan Learning Centers and Sylvan owning and operating 41 Learning Centers. Sylvan Prometric Testing Services. As of September 30, 1997, Sylvan or its authorized representatives operated 1,908 Testing Centers, 1,207 of which were located in North America and the remainder in 97 foreign countries. The Company enters into contracts directly with various professional licensure, educational and information technology ("IT") businesses, organizations and agencies, under which Sylvan receives a fee based upon the number of tests given for those customers. Principal customers for the Company's testing services are Educational Testing Services ("ETS") and, in the IT industry, Microsoft Corp. and Novell, Inc.. 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 the SAT and PSAT) and operates 47 testing centers in 33 countries to facilitate delivery of international testing for ETS. The Company also provides testing services for organizations responsible for licensing broker-dealers, pilots, aviation mechanics, computer professionals and medical laboratory technicians. Through the Company's December 1996 acquisition of Wall Street Institute International B.V. and its affiliates ("Wall Street"), Sylvan now provides live and computer-based English instruction and testing in Europe and Latin America through a network of more than 180 franchised and Company-owned centers. Contract Educational Services; PACE; Sylvan-at-Work; Caliber Learning Network, Inc. Sylvan provides educational services under federal and various state funding programs to students in 89 public and 507 non-public schools. Sylvan provides educational and training services to large corporations throughout the United States, including racial and gender workplace diversity training and skills improvement programs such as writing, advanced reading, listening and public speaking, through its wholly-owned subsidiary, The PACE Group ("PACE"), and the Company's Sylvan-at-Work program. In November 1996, Caliber Learning Network, Inc. was formed as a joint initiative of Sylvan and MCI Telecommunications Corporation to become a worldwide distribution network of professional education centers equipped with satellite-based video conferencing and computer network capabilities. Sylvan currently owns a 10 percent interest in Caliber Learning Network and has the option to acquire a majority interest in the future. -3- The Company's principal executive offices are located at 1000 Lancaster Street, Baltimore, Maryland 21202, and its telephone number is (410) 843-8000. USE OF PROCEEDS The net proceeds to the Company from the sale of the Commmon Stock being offered hereby are estimated to be approximately $6,322,710, assuming (i) exercise of all of the Options for cash, (ii) a per share exercise price for the December Options (as defined below) of $39.25, the per share closing price for the Common Stock, as reported by The Nasdaq Stock Market, and (iii) other than the Options, no other options are granted under the Plan. See "Description of Sylvan Technology Center Stock Option Plan." The Company will use the net proceeds from this offering for general corporate purposes, which may include the acquisition of complementary businesses. The Company intends to invest substantially all of the net proceeds from this offering in interest-bearing, investment-grade obligations pending application thereof in the manner described above. The Company will not receive proceeds from any resales of the Common Stock acquired by the Franchisees upon exercise of the Options. DESCRIPTION OF STC STOCK OPTION PLAN The Company adopted the Sylvan Technology Center Stock Option Plan (the "Plan") in April 1997. Under the Plan, the Committee, comprised of the Company's Co-Chief Executive Officers, R. Christopher Hoehn-Saric and Douglas L. Becker, is authorized to grant options to purchase shares of Common Stock to any Sylvan Learning Center franchisee who operates one or more Sylvan Technology Centers (collectively, the "Franchisees") as compensation for services rendered or contributions made to the Company. There are an aggregate of 300,000 shares reserved for issuance upon exercise of options granted under the Plan. Options to purchase an aggregate of 174,000 shares of Common Stock were granted to an aggregate of 174 Franchisees on April 15, 1997 (the "April Options"); options to purchase an aggregate of 6,000 shares of Common Stock were granted to 6 Franchisees on July 1, 1997 (the "July Options"); and options to purchase an aggregate of 7,000 shares of Common Stock were granted to 7 Franchisees on October 1, 1997. The Committee intends to grant options to purchase an aggregate of 19,000 shares of Common Stock to 18 Franchisees on December 31, 1997 (the "December Options" and, together with the April Options, July Options and October Options, the "Options"). The exercise prices of the Options are: $29.13 per share for the April Options; $33.53 per share for the July Options; and $39.25 per share for the October Options; and a per share exercise price equal to the per share closing price for the Common Stock on December 31, 1997, as reported by the Nasdaq Stock Market, for the December Options. The April Options, July Options and October Options vest ratably beginning on January 1, 1998 and each of the successive anniversaries thereof, and the December Options will vest ratably beginning on January 1, 1999 and each of the successive anniversaries thereof; provided, however, that the Options will vest on the specified vesting dates only if the Franchisee continues to operate one or more Sylvan Technology Centers pursuant to a written agreement between the Company and the the Franchisee. All Options, whether vested or unvested, terminate on the tenth anniversary of the Grant Date specified in the Option Agreement relating to said options, subject to earlier termination in the event of the termination of a Franchisee's operation of the Sylvan Technology Center(s) described in the Franchisee's Option Agreement or the termination of the Optionholder's Sylvan Technology Center agency relationship with the Company by the Company, for cause, or at the election of the Franchisee. The Stock Option Agreements pursuant to which the Options are or will be granted provide that full payment for each share of Common Stock purchased upon exercise of the Option shall be made no later than the time of exercise or, in the discretion of the Committee, at such later time as the certificate for the share is delivered, in (A) cash or certified check or (B) as long as the shares of Common Stock of the Company remain registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, by delivery of a properly executed exercise notice, together with irrevocable instructions: (i) to a brokerage firm approved by the Company to deliver promptly to the Company the aggregate amount of sale or loan proceeds to pay the exercise price and any withholding tax obligations that may arise in connection with the exercise, and (ii) to the Company to deliver the certificates for such purchased shares directly to such brokerage firm. In the event any income or employment taxes are required to be withheld with respect to an Option, payment of such taxes must be made to the Company. -4- Shares issuable upon exercise of Options will be shares of authorized but unissued Common Stock. The Company will, during the term of the Plan, reserve and keep available a number of shares of Common Stock sufficient to satisfy the requirements of the Plan. Other than the exercise price described in the Stock Option Agreement, there will be no fees, commissions or other charges paid in connection with the exercise of Options. The Plan imposes no restrictions on the resale of Common Stock acquired upon the exercise of Options except that such shares of Common Stock may be resold only in compliance with the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities laws. The Committee may impose resale restrictions on all or a portion of the shares of Common Stock delivered upon exercise of any Option to ensure compliance with these laws. Under the Securities Act, affiliates of the Company generally may resell shares of Common Stock purchased pursuant to the Plan only (i) in accordance with the provisions of Rule 144 of the Securities Act promulgated by the SEC or some other exemption from registration under the Securities Act, or (ii) pursuant to an applicable current and effective registration statement under the Securities Act. Tax Summary. The following is a brief summary of the significant aspects ----------- of current federal income tax treatment of the Options that may be granted under the Plan. The grant of the Options does not result in tax consequences to the Franchisees to whom the Options were granted. Upon the exercise of an Option, the Franchisee will recognize ordinary income equal to the difference between the option price and the Fair Market Value of the Common Stock on the date of exercise. No amount other than the price paid under the Option shall be considered as received by the Company for the Common Stock so issued. When the Franchisee disposes of Common Stock acquired by the exercise of an Option, any amount received in excess of the Fair Market Value of the Common Stock on the date of exercise will be treated as a long- or short-term capital gain, depending upon how long the Franchisee holds the Common Stock prior to selling it. If the amount received is less than the Fair Market Value of the Common Stock on the date of exercise, the loss will be treated as a long- or short-term capital loss, depending upon the holding period of the Common Stock. Except as noted below, the exercise of an Option by the exchange of shares of Common Stock already owned by the Franchisee will not result in any taxable gain or loss on the unrealized appreciation of the shares so used. The Internal Revenue Service has ruled that, since the Options are non-qualified, if the Option exercised (i) a number of shares of the Common Stock received equal to the number of shares surrendered will have the same basis as the shares surrendered, and (ii) the remaining shares received will have a basis equal to their Fair Market Value on the date of exercise (the compensation income recognized upon exercise). For purposes of determining whether shares have been held for the long-term capital gain holding period, the holding period of shares received will generally include the holding period of the shares surrendered only if the shares received have the same basis, in whole or in part, in the Franchisee's hands as the shares surrendered. Section 401(a) of the Code is not applicable to the Plan. PLAN OF DISTRIBUTION The Registration Statement of which this Prospectus forms a part relates to sales by the Company, from time to time, of up to an aggregate of 300,000 shares of Common Stock to the Franchisees upon their exercise of the Options. If all of the Options are exercised, the aggregate purchase price payable by the Franchisees will equal $6,322,710, assuming (i) the December Options have a per share exercise price equal to $39.25, the closing price per share of the Common Stock on December 23, 1997, as reported by The Nasdaq Stock Market, and (ii) other than the Options, no other options are granted under the Plan. The Franchisees are not obligated to exercise any of the Options; however, options not exercised prior to their expiration dates will terminate, and thereafter no shares of Common Stock will be issued by the Company to the Franchisees in respect thereof. The Common Stock the Franchisees acquire upon exercise of the Options should be able to be resold by the Franchisees without further registration under the Securities Act of 1933, as amended (the "Act") in reliance upon Section 4(1) of the Act. However, resales of the Common Stock by Franchisees or their transferees who are or become affiliates of the Company will be subject to the limitations set forth in Rule 144 under the Act. -5- 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. at December 31, 1996 and 1995 and for each of the three years in the period ended December 31, 1996, incorporated by reference in this Prospectus and Registration Statement, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein also incorporated herein by reference which, as to the years 1996 and 1995, is based in part on the reports of Deloitte & Touche LLP, independent auditors, and as to the year 1994, is based in part on the report of Canterelli & Vernoia, CPAs, independent auditors. Such consolidated financial statements have been incorporated herein by reference in reliance upon such reports given upon the authority of such firms as experts in accounting and auditing. -6- ================================================================================ 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................................................................. 5 300,000 SHARES SYLVAN LEARNING SYSTEMS, INC. COMMON STOCK PROSPECTUS , 1998 ================================================================================ 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.. $ 3,507 Nasdaq National Market Listing Fees............ 6,000 Fees and Expenses of Counsel................... 7,000 Miscellaneous Expenses......................... 6,493 ------- TOTAL........................................ $23,000 ======= 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 of the Charter* 3.2 Amended and Restated By-Laws dated September 27, 1996** 4.1 Specimen Stock Certificate* 4.2 1997 Sylvan Technology Center Stock Option Plan 4.3 Form of Stock Option Agreement Under 1997 Sylvan Technology Center Stock Option Plan 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Deloitte & Touche LLP 23.3 Consent of Canterelli & Vernoia, CPAs 23.4 Consent of Piper & Marbury L.L.P. (contained in Exhibit 5.1) 24.1 Powers of Attorney (included on signature page) ______________ * Incorporated by reference from the Registrant's Registration Statement on Form S-1 (No. 33-69558), filed on September 28, 1993. ** Incorporated by reference from the Company's Annual Report on Form 10-K for the Year ended December 31, 1996. 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 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 II-2 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 29th day of December, 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 --------- ----- ---- /s/ R. Christopher Hoehn-Saric Co-Chief Executive Officer and Chairman of the - -------------------------------------- Board of Directors (Principal Executive December 29, 1997 R. Christopher Hoehn-Saric Officer) /s/ Douglas L. Becker Co-Chief Executive Officer President, - -------------------------------------- Secretary and Director December 29, 1997 Douglas L. Becker /s/ B. Lee McGee Chief Financial Officer (Principal Financial - -------------------------------------- and Accounting Officer) December 29, 1997 B. Lee McGee /s/ Donald V. Berlanti Director December 29, 1997 - -------------------------------------- Donald V. Berlanti /s/ R. William Pollock Director December 29, 1997 - -------------------------------------- R. William Pollock Director December __, 1997 - -------------------------------------- J. Phillip Samper /s/ Nancy A. Cole Director December 29, 1997 - -------------------------------------- Nancy A. Cole Director December __, 1997 - -------------------------------------- James H. McGuire Director December __, 1997 - -------------------------------------- Rick Inatome
II-4 EXHIBIT INDEX Sequentially Exhibit No. Description Numbered Pages ----------- ----------- -------------- 3.1 Articles of Amendment and Restatement* 3.2 Amended and Restated By-Laws dated September 27, 1996** 4.1 Specimen Stock Certificate* 4.2 1997 Sylvan Technology Center Stock Option Plan 4.3 Form of Stock Option Agreement Under 1997 Sylvan Technology Center Stock Option Plan 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Deloitte & Touche LLP 23.3 Consent of Canterelli & Vernoia, CPAs 23.4 Consent of Piper & Marbury L.L.P. (contained in Exhibit 5.1) 24.1 Powers of Attorney (included on signature page) ___________________ * Incorporated by reference from the Registrant's Registration Statement on Form S-1 (No. 33-69558), filed on September 28, 1993. ** Incorporated by reference from the Company's Annual Report on Form 10-K for the Year ended December 31, 1996. II-5 EX-4.2 2 1997 SYLVAN TECHNOLOGY CENTER STOCK OPTION PLAN EXHIBIT 4.2 SYLVAN LEARNING SYSTEMS, INC. 1997 SYLVAN TECHNOLOGY CENTER (STC) STOCK OPTION PLAN I. GENERAL PROVISIONS 1.1 Purposes of the Plan. The purposes of the 1997 STC Stock Option Plan -------------------- of Sylvan Learning Systems, Inc. are to provide a means to attract and retain competent STC Operators and to align the interests of such STC Operators with the interests of the Company's stockholders. These purposes are to be achieved by providing to participating STC Operators, and such other persons as the Committee from time to time may determine, long-term incentives for high levels of performance and for unusual efforts to improve the financial performance of the Company. These long-term incentives may be provided through the grant of Options under the Plan. 1.2 Definitions. ----------- (a) "Board" means the Board of Directors of Sylvan Learning Systems, Inc. (b) "Cause" means breach by Agent of any provision of the Participant's Option Agreement, or the agreement between Sylvan and Participant pursuant to which Participant Operates the STC described in the Option Agreement. (c) "Code" means the Internal Revenue Code of 1986, as amended. (d) "Committee" means the committee appointed by the Board to administer the Plan. The Committee shall be composed entirely of such members as are specified in Section 1.4(a) hereof. (e) "Common Stock" means the common stock of Sylvan Learning Systems, Inc., par value $0.01 per share. (f) "Company" means Sylvan Learning Systems, Inc. and any present or future subsidiary corporation (as defined in Section 424 of the Code) or any successor to such corporation. (g) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (h) "Fair Market Value" means the fair market value of a share of Common Stock as determined by the Committee on the basis of such factors as it may deem appropriate, provided that, on the date such determination is made, (i) if quotations for the Common Stock are regularly listed on the NASDAQ National Market, the fair market value shall be the closing sale price of Common Stock as published in the The Wall Street Journal on the date as of which fair market value is to be determined, or if there is no trading of Common Stock on such date, the closing sale price of Common Stock as published in The Wall Street Journal on the next preceding date on which there was trading in such shares; or (ii) if the Common Stock is not then traded on the NASDAQ National Market, the fair market value of the Common Stock shall be determined by reference to the closing sale price of the Common Stock on the principal national securities exchange on which the shares are then traded. 1 (i) "Sylvan" means Sylvan Learning Systems, Inc. (j) "Option" means a right to purchase Common Stock granted under the Plan. (k) "Option Agreement" means the written instrument executed by a Participant evidencing an Option granted to such Participant and including the terms and conditions applicable to such Option. (l) "Participant" means any entity or other person selected to receive an Option pursuant to Section 1.5 hereof, and shall mean and include the optionholder under any Option Agreement. (m) "Plan" means the Sylvan Learning Systems, Inc. 1997 STC Stock Option Plan set forth herein, as amended from time to time. 1.3 Shares of Common Stock Subject to the Plan. ------------------------------------------ (a) Subject to the provisions of Section 3.1 of the Plan, the aggregate number of shares of Common Stock that may be issued pursuant to Options under the Plan shall not exceed 250,000 shares of Common Stock. As to any Option that is forfeited, terminated, canceled, settled in cash in lieu of shares or expires unexercised for any reason and in such a manner that some or all of the shares of Common Stock subject to the Option are not issued, such shares again will be immediately available under the Plan. (b) The Common Stock to be issued under the Plan will be made available, at the discretion of the Board or the Committee, either from authorized but unissued shares of Common Stock or from previously issued shares or Common Stock reacquired by the Company, including shares purchased on the open market, if any. 1.4 Administration of the Plan. -------------------------- (a) The Plan shall be administered by the Committee (the "STC Stock Option Committee") which will consist of two Directors from the Board of Sylvan, or such other number of Directors as may be required or permitted by Rule 16b-3 of the Exchange Act. The Committee may delegate its administrative powers except as to the selection of Participants and the determination of Options for persons subject to Section 16 of the Exchange Act. (b) The Committee has and may exercise such powers and authority of the Board as may be necessary or appropriate for the Committee to carry out its functions as described in the Plan. The Committee has authority in its discretion to determine the persons to whom, and the time or times at which, Options may be granted, the nature of each Option, the number of shares of Common Stock subject to each Option, the form of payment (cash, Common Stock, promissory note or a combination thereof) payable upon the event or events giving rise to payment under an Option and such other terms and conditions applicable to each Option as the Committee shall determine. The Committee at any time may grant new Options to a Participant who previously has received Options whether such prior Options remain outstanding, have been exercised previously, in whole or in part, or are canceled in connection with the issuance of the new Options. The purchase price or initial value of the newly granted Options may be established by the Committee without regard to the existing Options. Further, the Committee may, with the consent of a Participant, amend the terms of any existing Option previously granted to include any provisions or amendments that properly may be incorporated at the time of such amendment. Solely to illustrate the foregoing power, but without limiting its scope, such amendments may accelerate the 2 period of exercise or the vesting period of any Option, or installment thereof, either absolutely or conditionally for whatever reasons the Committee deems appropriate, including without limitation compensatory considerations, events which would result in any change in the listing or cause delisting of the Company's Common Stock, significant changes in the management or control of the Company, or the occurrence of any attempt to effect such a change. (c) Each Option shall be evidenced by an Option Agreement which shall include such terms and conditions consistent with the Plan as the Committee in its discretion may determine. (d) The Committee has authority to interpret the Plan and to make all determinations necessary or advisable for the administration of the Plan. The Committee has authority to prescribe, amend and rescind rules and regulations relating to the Plan. All interpretations, determinations and actions by the Committee will be final conclusive and binding upon all parties. Any action of the Committee with respect to the administration of the Plan shall be taken pursuant to a majority vote or by the unanimous written consent of its members. (e) No member of the Board or the Committee will be liable for any action or determination made in good faith by the Board or the Committee with respect to the Plan or any transaction arising under the Plan. 1.5 Participation. All operators of Sylvan Technology Centers who are also ------------- franchisees operating Sylvan Learning Centers shall be eligible for selection to participate in the Plan. A Participant who has been granted an Option may be granted an additional Option or Options if such Participant otherwise is eligible and the Committee so determines, subject to the provisions of the Plan. II. TERMS AND CONDITIONS OF OPTIONS 2.1 Option Price. The purchase price of Common Stock subject to each ------------ Option will be determined by the Committee. 2.2 Exercise of Options. ------------------- (a) Each Option granted under this Plan shall be exercisable in such installments during the period prior to its expiration date as the Committee shall determine, but in no event shall any Option be exercisable (i) for at least six (6) months after the date of grant except in the case of the death or disability of the Participant granted the Option and (ii) after a period of ten (10) years from the date of grant. Unless otherwise determined by the Committee, in the event a Participant does not purchase in any given installment period all of the shares that he or she is entitled to purchase in such installment period, then that Participant's right to purchase any shares not purchased in such installment period shall continue until the expiration date or sooner termination of the Option. (b) Upon the exercise of an Option, the purchase price shall be paid in full in cash or its equivalent acceptable to the Company. No fractional shares will be issued pursuant to the exercise of an Option nor will any cash payment be made in lieu of fractional shares. Upon the exercise of an Option, not less than 100 shares of Common Stock may be purchased at one time unless the number then available for purchase is less than 100 in which case the full number available must be purchased. If the Common Stock is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, the Optionholder may pay the exercise price, in whole or in part, by delivery of a properly executed exercise notice, together with irrevocable instructions: (i) to a brokerage firm approved by the Company to deliver promptly to the Company the aggregate 3 amount of sale or loan proceeds to pay the exercise price and any withholding tax obligations that may arise in connection with the exercise, and (ii) to the Company to deliver the certificates for such purchased shares directly to such brokerage firm. (c ) No Option that is otherwise exercisable shall be subject to exercise during any period of time that the Participant's STC is not being operated in accordance with the standards and procedures applicable to STC operations, and has been so advised in writing by Sylvan. This includes, but is not limited to, the designation of the Participant's STC for QPIP review and oversight by Sylvan. 2.3 Termination of STC Operations or STC Agency Relationship --------------------------------------------------------- (a) In the event of the termination of a Participant's operation of the STC described in the Option or the termination of the Participant's STC agency relationship with Sylvan for Cause or at the election of the Participant, any unexercised portion of the Participant's Option, whether then exercisable or not, shall expire in its entirety as of the date of termination. In the event of the termination of a Participant's operation of the STC described in the Option or the termination of the Participant's STC agency relationship with Sylvan, due to the Participant's death or disability or due to the transfer of the STC operation to a successor STC agent, the unexercised portion of the Participant's Option shall expire three (3) months after the date of termination, or such different period as is provided in Participant's Option Agreement; provided, however, that such Option shall be exercisable only to the extent that installments thereof are exercisable as of the date of termination, death, disability, or transfer, unless the Committee, in its discretion, elects after the fact to accelerate the vesting of all or any portion of the unvested shares subject to the Option as of such date of termination. The Option shall expire at the end of such three (3) month period (or such different period as is provided in the Option Agreement) to the extent not exercised within that period. (b) Notwithstanding anything to the contrary contained in Section 2.3(a) above, in no event shall the Option be exercisable after the period provided for in Section 2.2(a) hereof. III. OTHER PROVISIONS 3.1 Adjustment Provisions. --------------------- (a) Subject to Section 3.1(b) below, if the number of outstanding shares of Common Stock of the Company is increased, decreased or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to such shares of Common Stock through merger, consolidation, sale of all or substantially all of the property of the Company, reorganization, reclassification, stock dividend, stock split, reverse stock split or other distribution, an appropriate and proportionate adjustment shall be made in (i) the maximum number and kind of shares or other securities provided in Section 1.3, (ii) the number and kind of shares or other securities subject to outstanding Options, and (iii) the price for each share or other security subject to outstanding Options without change in the aggregate purchase price or value as to such Options. (b) In addition to the adjustments required by Section 3.1(a) above, the Committee in its discretion may provide that upon the occurrence of certain events, including a change in control of the Company, as defined by the Committee, any outstanding Option, or portion thereof, not theretofore exercisable, payable or free from restrictions, as the case may be, as of the date of the change of control, immediately shall become exercisable, payable or free from restrictions, as the case may be, and shares of Common Stock subject to such Option which are not fully vested 4 immediately shall become fully vested, notwithstanding any other provisions of the Option Agreement or the Plan. (c) Adjustments under Sections 3.1(a) and 3.1(b) will be made by the Committee, whose determination as to the adjustments to be made and the extent thereof will be final, binding and conclusive. No fractional interests will be issued under the Plan resulting from any such adjustments. 3.2 Continuation of STC Operator Status. Nothing in the Plan or in any ----------------------------------- instrument executed pursuant to the Plan will confer upon any Participant any right to continue as an STC operator or affect the right of the Company to terminate the STC agency relationship of any Participant in accordance with the terms of any agreement governing the STC agency relationship. 3.3 Board Discretion. Nothing in the Plan or in any instrument executed ---------------- pursuant to the Plan will limit, restrict or otherwise affect the authority and right of the Board to exercise its sole and exclusive discretion in considering and making any determination and in taking any action regarding registration of the Company's Common Stock under Section 12 of the Exchange Act. 3.4 Compliance with Government Regulations. No shares of Common Stock will -------------------------------------- be issued pursuant to an Option unless and until all applicable requirements imposed by federal and state securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any stock exchanges upon which the Common Stock may be listed, have been fully met. As a condition precedent to the issuance of shares of Common Stock pursuant to exercise of the Option, or any portion thereof, the Company may require the Participant to take any reasonable action to comply with such requirements. 3.5 Privileges of Stock Ownership. No Participant and no beneficiary or ------------- --------------- other person claiming under or through such Participant will have any right, title or interest in or to any shares of Common Stock allocated or reserved under the Plan or subject to any Option except as to such shares of Common Stock, if any, as have been issued to such Participant. 3.6 Withholding. The Company may make such provisions as it deems ----------- appropriate to withhold any taxes which the Company determines it is required to withhold in connection with the exercise of an Option, or any portion thereof. The Company may require the Participant to satisfy any relevant tax requirements before authorizing any issuance of Common Stock to the Participant. To the extent authorized by the Option Agreement, a Participant may satisfy his or her withholding obligations by delivering to the Company Common Stock having an aggregate Fair Market Value equal to the amount of such withholding obligations. 3.7 Non-transferability of Options. An Option may be exercised solely by ---------------------- ------- the Participant or the Participant's duly appointed guardian or personal representative. No Option and no right under the Plan, contingent or otherwise, is transferable, assignable or subject to any encumbrance, attachment, pledge or charge of any nature except that, under such rules and regulations as the Committee may establish pursuant to the terms of the Plan, a beneficiary may be designated with respect to an Option in the event of the death of the Participant holding the Option. If such beneficiary is the executor or administrator of the estate of the Participant, any rights with respect to such Option may be transferred to the person or persons or entity (including a trust) entitled thereto under the will of the Participant or under the laws of descent and distribution. 3.8 Amendment and Termination of Plan: Amendment of Options. ------------------------------------------------------- 5 (a) The Plan shall terminate ten (10) years following the effective date set forth in Article IV below. Notwithstanding, the Board or the Committee has the power, in its discretion, to suspend or terminate the Plan at any time, and may amend it from time to time in such respects as the Board or the Committee may deem advisable, provided that such amendment, suspension or termination complies with all applicable state and federal requirements and requirements of any stock exchange on which the stock is then listed, including any applicable requirement that the Plan or an amendment to the Plan be approved by the stockholders of the Company. (b) Except as otherwise provided by Section 1.4, the Committee may not, without the consent of a Participant, make modifications in the terms and conditions applicable to an Option. (c) No amendment, suspension or termination of the Plan will, without the consent of the Participant, alter, terminate, impair or adversely affect any right or obligation under any Option previously granted under the Plan. IV. EFFECTIVE DATE AND DURATION OF PLAN The Plan shall become effective April 15, 1997, upon its approval by the Board, and shall continue in effect until no further benefits are available under the Plan unless earlier terminated in accordance with the provisions herein. 6 EX-4.3 3 FORM OF STOCK OPTION AGREEMENT SYLVAN TECH CENTER EXHIBIT 4.3 THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES LAWS AND MAY BE OFFERED, SOLD OR TRANSFERRED ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF SUCH LAWS, OF IF IN THE OPINION OF COUNSEL TO THE COMPANY AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SYLVAN LEARNING SYSTEMS, INC. 1997 SYLVAN TECHNOLOGY CENTER (STC) STOCK OPTION PLAN OPTION AGREEMENT ---------------- FOR THE PURCHASE OF COMMON STOCK OF SYLVAN LEARNING SYSTEMS, INC. Expiring on (as hereinafter defined) - ------------------------------------------------------------------------------- Optionholder: Option Number: Total Number of Shares Covered by this Option Agreement: Shares * Exercise Dates and Amounts: 1/st/ Installment: , 199 Shares * 2/nd/ Installment: , 199 Shares * 3/rd/ Installment: , 200 Shares * TOTAL: Shares (*) Subject to adjustment as provided in Section 6 hereof. - ------------------------------------------------------------------------------- THIS CERTIFIES THAT, for value received, _______ (the "Optionholder") is entitled to purchase, in the aggregate, from Sylvan Learning Systems, Inc., a Maryland corporation (the ACompany@), at any time on or before the Expiration Date, _______ ( ) shares of Common Stock, $.01 par value, of the Company, subject to adjustment as provided in Section 3 hereof, at the Purchase Price (as hereinafter defined) in lawful money of the United States of America, subject to the provisions, limitations and restrictions of Sections 3 and 5 hereof. SECTION 1. Definitions. For all purposes of this Option the following ----------- terms shall have the meanings indicated: A Commission@ shall mean the Securities and Exchange Commission, or any other Federal agency then administering the Securities Act. An Expiration Date@ shall mean ________. 1 "Optionholder" shall mean the registered holder or holders of the Option and any related Option Shares. "Option" shall mean this Option and any Option issued in exchange, transfer or replacement of this option. "Option Shares" shall mean the shares of Common Stock purchased or purchasable by the registered holder of the Option upon exercise hereof pursuant to Section 3 hereof. "Purchase Price" shall mean the Purchase Price per share of Common Stock set forth in Section 2. "Securities Act" shall mean the Securities Act of 1933, or any similar Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Transfer" as used in Section 5 shall include any disposition of any Option or Option Shares, or of any interest in either thereof which would constitute a sale thereof within the meaning of the Securities Act. All terms used in this Option which are not defined in Section 1 have the meanings respectively set forth elsewhere in this Option, or in the Sylvan Learning Systems, Inc., 1997 Sylvan Technology Center (STC) Stock Option Plan. SECTION 2. Purchase Price. The Purchase Price at which Optionholder may -------------- exercise this Option shall be a price per share equal to $____, subject to adjustment as provided in Section 6 hereof. SECTION 3. Exercise of Option, Etc. ----------------------- 3.1. Number of Shares for Which Option is Exercisable; Exercise Dates; --------- ------------------------------------------------------- Registration. The aggregate number of Option Shares for which this Option may ------------ be exercised prior to its expiration shall be _______, subject to adjustment from time to time for any stock splits, stock dividends or reverse stock splits as provided in Section 6 hereof. This Option shall be exercisable as to thirty-three and one-third percent (33 1/3%) of the Option Shares beginning on __________ and as to an additional 33 1/3% of the Option Shares on ________ of each of the next two succeeding years, on the express condition that on such date(s), the Optionholder shall be operating Sylvan Technology Center #___________ pursuant to a written agreement between the Company and the Optionholder authorizing Optionholder to operate such Sylvan Technology Center. 3.2. Procedure for Exercise of Option. To exercise this Option in whole -------------------------------- or in part, the registered holder hereof shall deliver to the Company at its principal executive offices in Baltimore, Maryland (or such other office of the Company in the United States as the Company may designate by notice in writing to the registered holder of this Option) (i) an Option Certificate completed to specify the portion of the Option as to which such holder is electing exercise; provided, however, that no fractional shares of Common Stock shall be issued upon exercise of this Option, so that this Option must be exercised for whole numbers of Common Stock, and, provided further, that the Option may not be exercised for fewer than 100 shares of Common Stock unless the number of shares then available for purchase pursuant to the Option is less than 100, in which case the full number available must be exercised, (ii) cash or a certified or official bank check, payable to the order of the Company, in an amount equal to the then aggregate Purchase Price of the shares of Common Stock being purchased and (iii) if this Option is being exercised in whole or the last fraction of this Option is being exercised, this Option. Upon receipt thereof, such holder shall be deemed to be the holder of record of the Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates 2 representing such Common Stock shall not then be actually delivered to such holder, and the Company shall, as promptly as practicable direct the Transfer Agent for the Common Stock to execute or cause to be executed and deliver to such holder, or as such holder may direct, a certificate or certificates representing the aggregate number of shares of Common Stock specified in said Option Certificate. Each stock certificate so delivered shall be in such denomination as may be requested by the registered holder hereof. If this Option shall have been exercised only in part, the Company shall, at the time of delivery of said stock certificate or certificates, deliver to such holder a certificate evidencing the portion of this Option which remains exercisable. The Company shall pay all expenses, taxes and other charges payable in connection with the preparation, execution and delivery of stock certificates pursuant to this Section, except that, in case such stock certificates shall be registered in a name or names other than the name of the registered holder of this Option, funds sufficient to pay any stock transfer taxes which shall be payable upon the execution and delivery of such stock certificate or certificates shall be paid by the registered holder hereof to the Company at the time of delivering this Option to the Company as mentioned above. If the Common Stock is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, the Optionholder may pay the exercise price, in whole or in part, by delivery of a properly executed exercise notice, together with irrevocable instructions: (i) to a brokerage firm approved by the Company to deliver promptly to the Company the aggregate amount of sale or loan proceeds to pay the exercise price and any withholding tax obligations that may arise in connection with the exercise, and (ii) to the Company to deliver the certificates for such purchased shares directly to such brokerage firm. 3.3. Transfer Restriction Legend. At the time of exercise of this --------------------------- Option, each certificate for Option Shares issued upon exercise of this Option shall bear the following legend (and any additional legend required by any securities exchange upon which such Option Shares may, at the time of such exercise, be listed) on the face thereof: These securities have not been registered under the Securities Act of 1933 or under any state securities laws and may be offered, sold or transferred only if registered pursuant to the provisions of such laws, or if in the opinion of counsel to the Company, an exemption from such registration is available. 3.4. Acknowledgment of Continuing Obligation. The Company will, at the --------------------------------------- time of the exercise of this Option, in whole or in part, upon request of the holder hereof, acknowledge in writing its continuing obligation to such holder in respect of any rights to which such holder shall continue to be entitled after such exercise in accordance with this Option, provided, that the failure of such holder to make any such request shall not affect the continuing obligation of the Company to such holder in respect of such rights. 3.5. Character of Option Shares. All shares of Common Stock issuable -------------------------- upon the exercise of this Option shall, upon payment of the applicable Purchase Price, be duly authorized, validly issued, fully paid and non-assessable; and without limiting the generality of the foregoing, the Company covenants and agrees that it will from time to time take all such action as may be necessary to assure that the par value per share of Common Stock is at all times equal to or less than the then effective Purchase Price. 3.6 Option Not An Incentive Stock Option. This Option is not intended to ------------------------------------ qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the ACode@). 3.7 Withholding Taxes. Upon exercise of this Option or upon the ----------------- disposition by Optionholder or Optionholder=s permitted successors in interest of shares of Common Stock acquired pursuant to the exercise of this Option, the Company shall have the right to require Optionholder or Optionholder=s permitted successors in interest to pay the Company the amount of any taxes which the Company may be required to withhold with respect to such transaction. Such obligation may be satisfied 3 by delivering to the Company shares of Common Stock having an aggregate fair market value equal to the amount of the required withholding. SECTION 4. Ownership of this Option. ------------------------ 4.1. Registered Owner. The Company may deem and treat the person or ---------------- entity in whose name this Option is registered as the holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by anyone other than the Company) for all purposes and shall not be affected by any notice to the contrary. 4.2. Replacement. Upon receipt by the Company of evidence reasonably ----------- satisfactory to it of the loss, theft, destruction or mutilation of this Option, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon surrender and cancellation of this Option, if mutilated, the Company will make and deliver a new Option of like tenor, in lieu of this Option. This Option shall be promptly cancelled by the Company upon the surrender hereof in connection with any replacement. The Company shall pay all expenses, taxes (other than any stock transfer taxes and income taxes) and other charges payable in connection with the preparation, execution and delivery of any replacement Option pursuant to this Section 4. SECTION 5. Restrictions on Exercise and Transfer. ------------------------------------- 5.1. Not Transferable. Notwithstanding any provisions contained in this ---------------- Option to the contrary, this Option shall not be transferable except pursuant to the laws of descent and distribution. Notwithstanding any provisions contained in this Option to the contrary, this Option shall not be exercisable except upon the conditions specified in this Section 5, which conditions are intended to insure compliance with the provisions of the Securities Act in respect of the exercise or transfer of such Option or transfer of such Option Shares. The holder of this Option agrees that it will not (i) exercise this Option prior to delivery to the Company of an opinion of such counsel as described in clause (1) of subsection 5.2, or until registration of the related Option Shares under the Securities Act has become effective, or (ii) transfer such Option Shares prior to delivery to the Company of an opinion of such counsel as described in clause (1) of subsection 5.2, or until registration of such Option Shares under the Securities Act has become effective. 5.2. Notice of Intention to Exercise; Opinion of Counsel. The holder --------------------------------------------------- of this Option agrees that prior to any exercise of this Option or any transfer of the related Option Shares, such holder will give written notice to Company of its intention to effect such exercise and/or transfer, and the Company promptly will seek the opinion of Piper & Marbury, counsel to the Company. as to the necessity or non-necessity for registration under the Securities Act in connection with such exercise and/or transfer. The following provisions shall in apply: (1) If in the opinion of such counsel, the proposed exercise and/or proposed transfer of this Option and/or the proposed transfer of such Option Shares may be effected without registration under the Securities Act of this Option and/or such Option Shares, the holder of this Option shall be entitled to exercise or transfer this Option and/or transfer such Option Shares in accordance with the intended method of disposition specified in the notice delivered by such holder to the Company. (2) If in the opinion of such counsel, the proposed exercise or transfer of this Option and/or the proposed transfer of such Option Shares may not be effected without registration under the Securities Act of this Option and/or such Option Shares, the holder of this Option shall not be entitled to exercise or transfer this Option and/or transfer such Option Shares until such registration is effective. 5.3. Suspension of Right to Exercise. No part of this Option that is ------------------------------- otherwise exercisable shall be subject to exercise during any period of time that the Optionholder=s STC is 4 not being operated in accordance with the standards and procedures applicable to STC operations, and has been so advised in writing by Sylvan. This includes, but is not limited to, the designation of the Optionholder=s STC for QPIP review and oversight by Sylvan. SECTION 6. Adjustment of Purchase Price. ---------------------------- 6.1 Stock Splits, Stock Dividends and Reverse Splits. In case at any ------------------------------------------------ time the Company shall subdivide its outstanding shares of Common Stock into a greater number of shares, or issue shares of Common Stock in a stock dividend, or issue shares of capital stock of the Company declared and payable as stock dividends in lieu of the cash dividends, the Purchase Price in effect immediately prior to such subdivision or dividend shall be proportionately reduced and the number of Option Shares purchasable pursuant to this Option immediately prior to such subdivision or dividend shall be proportionately increased, and conversely, in case at any time the Company shall combine its outstanding shares of Common Stock into a smaller number of shares, the Purchase Price in effect immediately prior to such combination shall be proportionately increased and the number of Option Shares purchasable upon the exercise of this Option immediately prior to such combination shall be proportionately reduced. Except as provided in this subparagraph 6.1, no adjustment in the Purchase Price and no change in the number of Option Shares so purchasable shall be made pursuant to this Section 6 as a result of or by reason of any such subdivision, dividend or combination. 6.2. Effect of Reorganizations and Asset Sales. If any capital ----------------------------------------- reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another Company, or the sale or transfer of all or substantially all of its assets to another Company, or any divisive organization by way of a spin-off. split-up or otherwise, shall be effected in such a way that holders of Common Stock shall become entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such transaction, lawful and adequate provision shall be made whereby each holder of this Option shall thereafter have the right to receive upon the terms and conditions specified herein and in lieu of or in addition to the shares of the Common Stock of the Company immediately theretofore receivable upon exercise of this Option, such shares of stock, securities, assets or other property or cash as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such stock immediately theretofore so receivable had such transaction not taken place; and in any such case appropriate provision shall be made with respect to the rights and interests of such holder to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Purchase Price and the number of shares issuable upon exercise and for the registration of the Option Shares as provided in Section 5) shall thereafter be applicable, as nearly as may be practicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise of this Option. The Company shall not effect any such transaction unless prior to or simultaneously with the consummation thereof each successor Company (if other than the Company) resulting from such transaction or the entities or entity purchasing such assets shall assume by written instrument executed and mailed or delivered to each holder, the obligation to deliver to such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Optionholder may be entitled to receive, and containing its or their express assumption of the due and punctual performance and observance of every provision of this Option to be performed and observed by the Company and of all (or the appropriate part) of the liabilities and obligations of the Company hereunder. 6.3. Accountants' Certificate. Upon each adjustment of the Purchase ------------------------ Price and upon each change in the number of shares of Common Stock issuable upon the exercise of this Option, and in the event of any change in the rights of the holder of this Option by reason of other events herein set forth, then and in each such case, the Company will promptly obtain a certificate of a firm of independent certified public accountants of recognized standing selected by the Company's Board Directors (who may be the regular auditors of the Company), stating the adjusted Purchase Price and the new number of shares so issuable, or specifying the other shares of stock, securities or assets and the amount thereof 5 receivable as a result of such change in rights, and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. The Company will promptly mail a copy of such accountants certificate to the registered holder of this Option. The certificate of such firm of independent public accountants shall be conclusive evidence of the correctness of the computation with respect to any such adjustment of the Purchase Price and any such change in the number of such shares so issuable. SECTION 7. Special Agreements of the Company. The Company covenants and --------------------- ----------- agrees that: 7.1. Will Reserve Shares. The Company will reserve and set apart and ------------------- have at all times, free from pre-emptive rights, a number of shares of authorized but unissued Common Stock deliverable upon the exercise of this Option of or of any other rights or privileges provided for herein sufficient to enable it at any time to fulfill all its obligations thereunder. 7.2. Will Avoid Certain Actions. The Company will not. by amendment of -------------------------- its Charter or through any reorganization, transfer of assets, consolidation, merger, issue or sale of securities or otherwise, avoid or take any action which would have the effect of avoiding the observance of performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in carrying out all of the provisions of this Option and in taking of all such action as may be necessary or appropriate in order to protect the rights of the holders of this Option against dilution or other impairment. 7.3. Will Bind Successors. This Option shall be binding upon any -------------------- corporation succeeding to the Company by merger, consolidation or acquisition of all or substantially all of the Company's assets. 7.4. Will Seek Registration of Option Shares. The Company will use its --------------------------------------- reasonable best efforts to cause the Option Shares issued or issuable to the Optionholder upon the due exercise of the Option to be registered for sale under the appropriate provisions of the Securities and Exchange Act of 1934. SECTION 8. Termination/Expiration. ----------------------- 8.1 In the event of the termination of Optionholder=s operation of the STC described in Section 3.1 of this Option Agreement or the termination of the Optionholder=s STC agency relationship with Sylvan for Cause or at the election of the Optionholder, any unexercised portion of this Option, whether then exercisable or not, shall expire in its entirety as of the date of termination. In the event of the termination of Optionholder=s operation of the STC described in Section 3.1 of this Option Agreement or the termination of the Participant=s STC agency relationship with Sylvan due to the Optionholder=s death or disability, or due to the transfer of the STC operation to a successor STC operator/agent, the unexercised portion of this Option shall expire three (3) months after the date of termination, provided, however, that this Option shall be exercisable only to the extent that installments thereof are exercisable as of the date of termination, death, disability, or transfer. This Option shall expire at the end of such three (3) month period to the extent not exercised within that period. 8.2 Notwithstanding anything to the contrary contained in Section 8.1 above, in no event shall any part of this Option be exercisable after the Expiration Date. SECTION 9. Covenant Not to Compete. The Optionholder covenants, agrees ----------------------- and promises that during the term of any agreement between Optionholder and the Company pursuant to which Optionholder is authorized to operate an STC, and for a period of two years thereafter, Optionholder shall not itself deliver or enter into any agreement with any organization engaged in delivery of computer- based tests which are competitive with the tests deliverable in an STC, at any location that is within twenty-five (25) miles of the Optionholder=s STC or any other STC in the United States. Should any 6 part of the restriction contained in this Section 9 be found to be unenforceable by virtue of its scope in terms of area, business activity prohibited or length of time and should such part be capable of being made enforceable by reduction of any or all thereof, the Optionholder and the Company agree that the same shall be enforced to the fullest extent permissible under the law. The running of any period of time specified above in this Section 9 shall be tolled and suspended for any period of time in which the Optionholder is found by a court of competent jurisdiction to have been in violation of any such restrictive covenant. The Optionholder expressly agrees that the existence of any claim it may have against the Company shall not constitute a defense to the enforcement by the Company of the covenants in this Section 9. The Optionholder acknowledges that the Company's remedy at law for the Optionholder's breach of the covenants contained in this Section 9 would be inadequate and that, accordingly, in such events, the Company shall be entitled to immediate injunctive relief. SECTION 10. Notices. Any notice or other document required or permitted ------- to be given or delivered to the Optionholder shall be delivered at, or sent by certified or registered mail to: Attn: ________________________ or such other address as shall have been furnished to the Company in writing by the Optionholder. Any notice or other document required or permitted to be given or delivered to the Company shall be delivered at, or sent by certified or registered mail to, the principal office of the Company, Attn: General Counsel, at 1000 Lancaster Street, Baltimore, Maryland 21202, or such other address as shall have furnished to the Optionholder by the Company. SECTION 11. No Rights as Stockholder; Limitation of Liability. This ------------------------------------------------- Option shall not entitle any holder hereof to any of the rights of a stockholder of the Company. No provision hereof, in the absence of affirmative action by the holder hereof to purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the holder hereof, shall give rise to any liability of such holder for the Purchase Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. SECTION 12. Investment Representation. Optionholder understands and ------------------------- agrees that the right to acquire shares of Common Stock pursuant to this Option is granted herein to Optionholder for investment purposes and not for purposes of resale or distribution. Any shares issued to Optionholder upon the exercise of the Option shall be subject to such restrictive provisions as the Board or the Committee may from time to time deem necessary or appropriate in order to ensure compliance with all applicable securities and other laws and rules and regulations. SECTION 13. Law Governing. This Option shall be governed by, and ------------- construed and enforced in accordance with, the laws of the State of Maryland without regard to the principles of conflict of laws thereof. SECTION 14. Miscellaneous. This Option and any provision hereof may be ------------- changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. The headings in this Option are for purposes of reference only and shall not affect the meaning or construction of any of the provisions hereof. 7 IN WITNESS WHEREOF, Sylvan Learning Systems Inc., has caused this Option to be signed by its duly authorized officer under its corporate seal, and to be dated on _____________. Corporate Seal SYLVAN LEARNING SYSTEMS, INC. By: O. Steven Jones Vice President and General Counsel WITNESS: OPTIONHOLDER: Date: 8 EX-23.1 4 CONSENT OF ERNST & 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 300,000 shares of its common stock and to the incorporation by reference therein of our report dated July 10, 1997, with respect to the consolidated financial statements and schedule of Sylvan Learning Systems, Inc. and subsidiaries included in its Current Report on Form 8-K dated July 15, 1997, filed with the Securities and Exchange Commission. /s/ ERNST & YOUNG LLP Baltimore, MD December 23, 1997 EX-23.2 5 CONSENT OF DELOITTE & TOUCHE EXHIBIT 23.2 ------------ CONSENT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS ------------------------------------------------------ We consent to the use of our reports on the financial statements of Independent Child Study Teams, Inc. and I--R, Inc., dated March 14, 1997, appearing in the prospectus, which is part of this Registration Statement, and to the reference to us under the heading "Experts" in such Registration Statement. /s/ DELOITTE & TOUCHE LLP Parsippany, New Jersey December 22 , 1997 EX-23.3 6 CONSENT OF CANTERELLI & VERNOIA EXHIBIT 23.3 ------------ CONSENT OF CANTERELLI & VERNOIA, CPAs, INDEPENDENT AUDITORS ----------------------------------------------------------- We consent to the reference to our firm under the caption "Experts" and to the use of our report dated April 25, 1995 and May 10, 1995, with respect to the financial statements of I--R, Inc. and Independent Child Study Teams, Inc., respectively, included in the Registration Statement (Form S-3 No. 333- _________) and related Prospectus of Sylvan Learning Systems, Inc. for the registration of 300,000 shares of its common stock. /s/ CANTERELLI & VERNOIA, CPAs Sommerville, New Jersey December 22, 1997 -----END PRIVACY-ENHANCED MESSAGE-----