<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO _________.
COMMISSION FILE NUMBER 0-22844
SYLVAN LEARNING SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 52-1492296
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION IDENTIFICATION NO.)
1000 LANCASTER STREET, 21202
BALTIMORE MARYLAND (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (410) 843-8000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
Common Stock, Par Value $.01 NASDAQ
Securities registered pursuant to the Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
The aggregate market value of voting Common Stock held by non-affiliates of
the registrant was approximately $453 million as of March 17, 1997.
The registrant had 24,516,623 shares of Common Stock outstanding as of
March 17, 1997.
<PAGE>
Part III of the Registrant's Form 10K is hereby amended to read as
follows:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The executive officers and directors of Sylvan are:
<TABLE>
<CAPTION>
Name Age Position
----- --- ---------
<S> <C> <C>
R. Christopher Hoehn-Saric.................. 34 Co-Chief Executive Officer
and Chairman of the Sylvan Board
Douglas L. Becker........................... 31 Co-Chief Executive Officer, President; Secretary; Director
B. Lee McGee................................ 41 Vice President and Chief Financial Officer; Treasurer
Steve Hoffman............................... 44 President--Sylvan Prometric Division
Peter Cohen................................. 42 President--Learning Services Division
Paula Singer................................ 42 President--Contract Educational Services Division
Donald V. Berlanti (1)(2)................... 59 Director
Nancy A. Cole............................... 54 Director
J. Phillip Samper (2)....................... 62 Director
James H. McGuire(1)......................... 53 Director
R. William Pollock.......................... 68 Director
</TABLE>
___________
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
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<PAGE>
The following table presents information concerning the Sylvan Directors
and Executive Officers.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, DIRECTORSHIPS WITH
NAME AND AGE PUBLIC COMPANIES, AND OTHER INFORMATION
- --------------------------------------------------------------------------------
<S> <C>
R. Christopher Hoehn-Saric Mr. Hoehn-Saric has served as Chief Executive
(34) Officer since April 1993 and was President of
Sylvan from 1988 until 1993. He has been a Director
of Sylvan since 1986. He is a principal in Sterling
and was a co-founder of Health Management
Corporation, a health services company. Before
becoming Sylvan's President, Mr. Hoehn-Saric was
involved in Sterling's acquisition of several
distribution, broadcasting and photography
businesses.
Douglas L. Becker (31) Mr. Becker has been President of Sylvan since April
1993. From February 1991 until April 1993, Mr.
Becker was the Chief Executive Officer of the
Sylvan Learning Center Division of Sylvan. He has
been a Director of Sylvan since 1986. Mr. Becker
was a co-founder of Health Management Corporation
and is a co-founder of Sterling Capital, Ltd.
("Sterling"), the investment partnership that led
the acquisition of KEE Incorporated (the
Predecessor of Sylvan) in December 1986. From
January 1987 to February 1991, Mr. Becker directed
KEE's marketing and sales.
Nancy A. Cole (54) Ms. Cole has been employed by Educational Testing
Service ("ETS") since 1989, serving as President
since 1994 and previously as Executive Vice
President overseeing the program administration
process for ETS. Ms. Cole currently is on the ETS
Board of Trustees. Prior to joining ETS, Ms. Cole
served for four years as Dean of Education and
Professor at the University of Illinois at Urbana-
Champaign. Ms. Cole's background includes
previously serving as a member of the Graduate
Record Examination Board and as a member of the
College Board's SAT committee.
R. William Pollock (68) Mr. Pollock has been a Director of the Company
since December 1995. Mr. Pollock serves as the
Chairman of the Board of Drake Holdings Limited, a
company which owns interest in various businesses
throughout the world and also serves as a director
of Medox Limited.
Donald V. Berlanti (59) Mr. Berlanti has been a Director of Sylvan since
1987. Since 1975, Mr. Berlanti has been involved in
the ownership and management of several businesses,
including radio stations, a chain of convenience
and greeting card stores and real estate
development companies. Mr. Berlanti is the sole
general partner of Quince Associates Limited
Partnership, a stockholder of Sylvan.
J. Phillip Samper (62) Mr. Samper has been a Director of Sylvan since
1993. Mr. Samper currently serves as Chief
Executive Officer and Chairman of the Board of Cray
Research, Inc. Mr. Samper served as President of
Sun Microsystems, Inc. from 1994 to 1995, and as
President and Chief Executive Officer of Kinder-
Care Learning Centers, Inc. during 1990 and as Vice
Chairman of Eastman Kodak Company from 1986 to
1989. Mr. Samper is also a director of Armstrong
World Industries, Inc. and the Interpublic Group of
Companies.
James H. McGuire (53) Mr. McGuire has been a Director of the Company
since December 1995. Mr. McGuire serves as
President of NJK Holding Company, which controls
the interests of Nasser J. Kazeminy (one of the
prior owners of Drake Prometric, L.P., now owned by
the Company) in various businesses throughout the
country. Mr. McGuire also serves as a director of
Green Isle Environmental Services, Inc.
</TABLE>
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<PAGE>
B. Lee McGee. Mr. McGee has been Chief Financial Officer of Sylvan or its
predecessor entities since 1987. Prior to that time, he held various positions
with Kinder-Care Learning Centers, Inc.
Paula Singer. Ms. Singer has been the President of the Contract
Educational Services Division since November 1996. Previously she served as
Vice President of the Division since 1993. Prior to joining Sylvan, Ms. Singer
held positions as General Manager of American Learning, Inc. and Vice President
Learning Corporation.
Steven Hoffman. Mr. Hoffman has been the President of Sylvan Prometric
since September 1996. Prior to joining Sylvan was the Vice President of
Operations for the Computer Task Group, a consulting and outsourcing firm
serving the IT industry. Prior to that he held various positions for
International Business Machines, Corp.
Peter Cohen. Mr. Cohen has been the President of the Learning Services
Division since August, 1996. Prior to joining Sylvan, he was the CEO of The
Pet Practice, an 85 hospital veterinary business. He also served as Vice
President of Sales for National Media Corporation and Senior Vice President of
Corporate Operations for Nutri system Weight Loss Centers.
There are no family relationships among any of the executive officers or
Directors of Sylvan. Executive officers of Sylvan are elected by the Sylvan
Board on an annual basis and serve at the discretion of the Sylvan Board.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Compensation of Executive Officers. The following table shows for the
years ended December 31, 1996, 1995 and 1994, compensation paid by Sylvan,
including salary, bonuses, stock options, and certain other compensation, to its
Co-Chief Executive Officers and each of its four other most highly compensated
executive officers at December 31, 1996 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term All
Compensation Other
Annual Compensation Awards Compensation
----------------------------------------------------- ------------ --------------
Name and Year Salary Bonus Other Annual
Principal Position $ $ $Compensation/(1)/ Options(#)
- ------------------ ------ -------- ------- -------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
R. Christopher Hoehn-Saric, 1996 225,000 112,500 6,600 -- --
Chairman of the Board and 1995 200,000 112,500 6,600 465,000(3) --
Co-Chief Executive Officer 1994 200,000 90,400 5,500 70,500 --
Douglas L. Becker, 1996 225,000 112,500 6,600 -- --
President, Co-Chief Executive 1995 200,000 112,500 6,600 465,000(3) --
Officer and Director 1994 200,000 90,400 5,500 70,500 --
B. Lee McGee, 1996 150,000 75,000 6,600 -- --
Senior Vice President and 1995 120,000 75,000 6,600 105,000(3) --
Chief Financial Officer 1994 120,000 62,640 6,600 22,500 --
Steven Hoffman, 1996 57,211 58,000 15,058 112,500 --
President-- 1995 -- -- -- -- --
Sylvan Prometric Division(2) 1994 -- -- -- -- --
Peter Cohen, 1996 64,211 28,000 6,540 112,500 --
President-- 1995 -- -- -- -- --
Learning Services Division(2) 1994 -- -- -- -- --
Paula Singer, 1996 115,209 40,350 6,600 18,750 --
President--Contract 1995 96,875 5,704 6,600 -- --
Educational Services Division 1994 92,000 6,900 6,600 -- --
</TABLE>
- ---------------------
(1) The amounts in this column represent automobile allowances and moving
expense reimbursement for Messrs. Hoffman and Cohen.
(2) Mr. Hoffman was hired on September 16, 1996. Mr. Cohen was hired on August
22, 1996.
(3) These options were granted in early 1996 as part of the Named Executive
Officer's 1995 compensation package.
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<PAGE>
Option Grants in Last Fiscal Year. The following table sets forth certain
information relating to options granted to the Named Executive Officers to
purchase shares of Sylvan Common Stock during 1996.
Individual Grants
<TABLE>
<CAPTION>
Percent of Potential Realized Value at
Total Options Assumed Annual Rates of Stock
Granted To Exercise or Price Appreciation for Option
Options Employees in Base Price Expiration Term
------------------------------
Name Granted Fiscal Year Per Share Date 5% 10%
- ------ ------- ------------- ----------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
R. Christopher Hoehn-Saric 465,000 25% $20.33 March 29, 2006 $5,947,350(1) $15,066,000(1)
Douglas L. Becker 465,000 25% $20.33 March 29, 2006 $5,947,350(1) $15,066,000(1)
B. Lee McGee 105,000 6% $20.33 March 29, 2006 $1,342,950(1) $ 3,402,000(1)
Steven Hoffman 112,500 6% $24.00 September 16, 2002 $ 918,000(2) $ 2,083,500(2)
Peter Cohen 112,500 6% $24.00 August 22, 2002 $ 918,000(2) $ 2,083,500(2)
Paula Singer 18,750 1% $25.13 December 18, 2002 $ 160,313(3) $ 363,563(3)
</TABLE>
- ---------------------
(1) The assumed annual rates of appreciation of five and ten percent would
result in the price of Sylvan's stock increasing to $33.12 and $52.73,
respectively. The options expire ten years from date of grant.
(2) The assumed annual rates of appreciation of five and ten percent would
result in the price of Sylvan's stock increasing to $32.16 and $42.52,
respectively. The options expire six years from date of grant.
(3) The assumed annual rates of appreciation of five and ten percent would
result in the price of Sylvan's stock increasing to $33.68 and $44.52,
respectively. The options expire six years from date of grant.
Over the last two years, the market price of Sylvan's stock has
increased at a compounded annual rate of 48.54%.
The 5% and 10% assumed annual rates of stock price appreciation used
to calculate potential gains to optionees are mandated by the rules of the
Securities and Exchange Commission.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End
Option Values. The following table sets forth certain information concerning the
exercise of stock options, the number of unexercised options and the value of
unexercised options at the end of 1996, for the Named Executive Officers. Value
is considered to be, in the case of exercised options, the difference between
exercise price and market price on the date of exercise, and, in the case of
unexercised options and exercisable options, the difference between exercise
price and market price at December 31, 1996.
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<PAGE>
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Shares Acquired Value Exercisable/Unexercisable In-the-Money Options
Name Upon Exercise Realized Options at Year-End/(1)/ at Year-End/(1)/
- -------------------------- --------------- ---------- --------------------------- ----------------------
<S> <C> <C> <C> <C>
504,095(E) $10,229,288(E)
R. Christopher Hoehn-Saric 0 -- 570,000(U) $ 7,186,800(U)
504,095(E) $10,229,288(E)
Douglas L. Becker 0 -- 570,000(U) $ 7,186,800(U)
69,450(E) $ 1,254,471(E)
B. Lee McGee 0 -- 112,500(U) $ 1,259,100(U)
-- (E) -- (E)
Steven Hoffman 0 -- 112,500(U) $ 412,875(U)
-- (E) -- (E)
Peter Cohen 0 -- 112,500(U) $ 506,250(U)
28,500(E) $ 663,480(E)
Paula Singer 0 -- 41,250(U) $ 586,988(U)
</TABLE>
- ---------------------
(1) (E) = Exercisable; (U) = Unexercisable.
Compensation Committee Report.
Introduction. The Compensation Committee consists of two outside
directors, none of whom has ever been an officer or employee of the Company.
The function of the Compensation Committee is to recommend to the Board of
Directors policies regarding the Company's compensation of, and to recommend
specific compensation for, the Company's executive officers. The Compensation
Committee's responsibilities also include administering the Company's stock
option plans and making decisions regarding option grants to officers and other
key employees. The Committee also periodically reviews the Company's employee
benefit plans that are intended to qualify under Section 401 of the Internal
Revenue Code to determine whether any changes to those plans may be appropriate.
The Compensation Committee meets at least once a year to review management
performance and compensation and to recommend to the Board bonuses and option
grants for current personnel. The Compensation Committee also meets on an as-
needed basis to recommend compensation for newly created or expanded executive
positions.
In February 1996, the Committee engaged an independent management
consulting firm to review the compensation of the Company's Co-CEOs and to
advise the Committee as to the appropriate level of base salary, short term and
long term incentive compensation, based on comparable public companies' plans
and the consultants' experience in assisting public companies to establish
management compensation plans.
Compensation Philosophy and Approach. The principal elements of the
Company's Executive Compensation Program consist of both annual and long-term
compensation, including base salary and annual incentive cash bonuses and, at
appropriate times, long-term incentive compensation in the form of stock
options. The Committee has put primary emphasis on long-term incentive stock
options based upon their belief that the Co-CEOs should have a significant
portion of their compensation contingent upon increases in the market price of
the Company's Common Stock. Aided by the review by the management consulting
firm, the Compensation Committee continues to believe that this approach and
philosophy is appropriate.
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<PAGE>
Base Salaries. The Company's executive officer base salary levels are
submitted for approval by the Board based on the Compensation Committee
recommendations. In establishing compensation for the Company's executive
officers, the Compensation Committee utilized recommendations of the management
consulting firm. Based on the management consulting firm's analysis of
executive compensation the salaries of the Co-CEOs was $250,000 in 1996.
Annual Incentive Cash Bonus. In addition to base salaries, executive
officers of the Company are eligible to receive annual cash bonuses, at the
discretion of the Board of Directors. Cash bonuses are determined on the basis
of (a) the overall financial performance of the Company, and (b) annual personal
performance objectives for each officer, established by the Compensation
Committee at the beginning of the year.
Long-term Incentive Stock Options. Options are granted to executive
officers and other key employees whom the Compensation Committee determines to
be essential to the future growth and profitability of the Company. Based upon
performance criteria similar to those applicable to the cash bonus payment, the
Compensation Committee determines the employees to whom options will be granted,
the number of shares covered by each grant, the exercise price and vesting
period for each grant. The Compensation Committee typically grants stock
options with relatively long vesting periods, creating strong incentives for
recipients of stock option grants to remain in the employ of the Company.
Messrs. Hoehn-Saric and Becker, the Co-Chief Executive Officers and
Mr. McGee, the Chief Financial Officer, have been entitled to annual stock
option grants under the Company's 1993 Management Stock Option Plan based on the
Company's performance as compared to profitability targets established by the
Compensation Committee and received grants in 1996 from the shareholder approved
1996 Senior Management Plan. No additional options have been granted from this
plan to date.
Equity Position in Caliber Learning Network, Inc. In July of 1996 the
Board of Directors approved the formation of an entity to pursue an opportunity
identified by Senior Management for establishing an international distribution
network of adult professional education services. The Board considered many
options for how to best structure the entity needed to pursue this opportunity.
Aided by the review of the independent management consulting firm of the Co-
CEOs' compensation it was concluded that the Co-CEOs receive an equity ownership
of 35% (17.5% each) of the entity as part of their overall compensation package.
Subsequently, the Board and Co-CEOs concluded that securing a strategic partner
for pursuing this opportunity was critical. In October 1996, Caliber Learning
Network, Inc. was established with MCI as the strategic partner and investor.
The Co-CEOs' equity ownership was diluted based on MCI's investment to 28% (14%
each) in October 1996. Messrs. Becker and Hoehn-Saric receive no additional
compensation as members of Caliber's board or for their executive position in
Caliber.
CEO's and President's Compensation. Mr. Hoehn-Saric has served as
Chief Executive Officer and Chairman of the Board since April 1993, and served
as President from 1988 to 1993. Mr. Becker has served as President of the
Company since April 1993, and served as CEO of the Sylvan Learning Center
division of the Company from February 1991 to April 1993. In December 1995, Mr.
Becker was named Co-Chief Executive Officer of the Company and continues to
serve as President of the Company.
Messrs. Becker and Hoehn-Saric executed employment agreements in 1996
with initial terms ending December 31, 1998.
Messrs. Hoehn-Saric and Becker, the Co-Chief Executive Officers, may
earn incentive cash bonuses based on the Company's actual annual financial
performance as compared to the annual operating budget and the accomplishment of
specific objectives established at the beginning of the year by the Compensation
Committee. Financial performance accounts for 80% of the potential bonus and
the remaining 20% is based on the
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<PAGE>
subjective determination by the Committee as to accomplishment of the specific
objectives. A financial performance bonus may be paid if at least 80% of the
financial performance objectives are achieved but is reduced from the target
bonus amount by a formula based on the percentage of the financial performance
objectives that are actually achieved. A bonus of up to 150% of the target bonus
amount can be earned if actual financial performance results were 200% of the
objectives.
In April 1997, the Compensation Committee recommended, and the Board
of Directors approved, cash bonuses for Messrs. Hoehn-Saric and Becker of
$112,500 each. These bonuses were based on financial performance and
accomplishment of specific objectives in 1996 as described above.
Mr. J. Phillip Samper
Mr. Donald V. Berlanti - Chairman
Stock Performance Table
COMPARISON OF 36 MONTH CUMULATIVE TOTAL RETURN*
AMONG SYLVAN LEARNING SYSTEMS, INC., THE NASDAQ STOCK MARKET-US INDEX
AND A PEER GROUP
<TABLE>
<CAPTION>
12/09/93 12/93 12/94 12/95 12/96
<S> <C> <C> <C> <C> <C>
Sylvan Learning
Systems, Inc. 100 117 168 253 364
Peer Group 100 99 78 113 187
Nasdaq Stock Market-US 100 102 100 141 173
</TABLE>
* $100 INVESTED ON 12/09/93 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
INFORMATION REGARDING THE SYLVAN BOARD, COMMITTEES AND REMUNERATION
During calendar year 1996, there were seven meetings of the Board of
Directors of Sylvan. Each director attended at least 80% of the combined total
number of meetings of the Board and Board committees of which he was a member
except for Richard P. Campbell who attended two meetings prior to his
resignation. The Sylvan Board has an Audit Committee and a Compensation
Committee.
The Audit Committee meets with Sylvan's independent accountants to review
whether satisfactory accounting procedures are being followed by Sylvan and
whether its internal accounting controls are adequate, to monitor non-audit
services performed by the independent accountants and review fees charged by the
independent accountants. The Audit Committee also recommends to the Board of
Directors the selection of independent accountants. During 1996, non-employee
directors, Richard P. Campbell, Jr., G. Cook Jordan, Jr. and Patrick A. Hopf,
were the members of the Audit Committee. Messrs. Berlanti and McGuire replaced
Messrs. Campbell and Jordan upon their resignations from the Sylvan Board during
1996. There were three meetings of the Committee during fiscal year 1996.
The Compensation Committee establishes the compensation for executive
officers of Sylvan and generally reviews benefits and compensation for all
officers and employees. It also administers Sylvan's stock option plans.
During 1996, non-employee directors, Richard P. Campbell, Jr., J. Phillip
Samper, and Donald V. Berlanti, were the members of the Compensation Committee,
which met on two occasions. The report of the Compensation Committee required
by the rules of the Securities and Exchange Commission (SEC) is included in this
Form 10-K/A.
-7-
<PAGE>
Directors who are not employees of Sylvan receive options to purchase
common stock of the Company under the 1993 Director Stock Option Plan.
Otherwise, directors do not receive compensation for service on the Sylvan Board
or any committee thereof, but are reimbursed for their out-of-pocket expenses in
connection with attending meetings. Under the 1993 Director Stock Option Plan,
each non-employee director, upon appointment, election, or re-election to the
Sylvan Board, and who continues to serve on the Sylvan Board as of the date of
an annual meeting at which directors are elected or re-elected, is granted an
option to purchase 11,250 shares of Sylvan Common Stock at an exercise price
equal to the fair market value of the stock on the date of the grant. In 1996,
no options were granted under this plan, and no options are available for grant.
No director shall receive an option to purchase more than 11,250 shares in any
calendar year, and no director shall be granted options to purchase more than
33,750 shares in total under the plan.
All officers have made timely filings of all change in beneficial ownership
declarations required by the SEC during the year ended December 31, 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
None of the directors serving on the Compensation Committee are employees
of Sylvan, and neither the Chief Executive Officer nor any of the named
Executive Officers have served on the Compensation Committee. No director or
executive officer of Sylvan is a director or executive officer of any other
corporation that has a director or executive officer who is also a director or
board committee member of Sylvan.
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<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of Sylvan Common Stock as of March 17, 1997 by (i) each person who
owns beneficially more than 5% of Sylvan Common Stock, (ii) each of the director
nominees and directors of Sylvan, (iii) the Co-Chief Executive Officers and each
of the Named Executive Officers, and (iv) all directors and executive officers
as a group. Unless otherwise indicated, the named persons exercise sole voting
and investment power over the shares that are shown as beneficially owned by
them.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-------------------------
NAME NUMBER PERCENT
----- ------ --------
<S> <C> <C>
Donald V. Berlanti (1).......................... 1,435,319 5.8%
Douglas L. Becker (2)(3)(4)..................... 2,184,564 8.6%
R. Christopher Hoehn-Saric (2)(3)(4)............ 2,191,941 8.6%
J. Phillip Samper............................... 41,536 *
Nancy A. Cole (6)............................... -- *
R. William Pollock (5).......................... 3,485,715 14.2%
Nasser J. Kazeminy (5).......................... 2,223,776 9.1%
James H. McGuire................................ -- *
B. Lee McGee (2)................................ 181,950 *
Steven Hoffman (2).............................. 120,700 *
Paula Singer (2)................................ 69,750 *
Peter Cohen (2)................................. 112,500 *
T. Rowe Price (7)............................... 1,365,751 5.6%
Denver Investment Partners (8).................. 1,738,949 7.1%
All directors and executive officers as 7,707,366 31.2%
a group (11 persons)
</TABLE>
_____________
* Represents beneficial ownership of not more than one percent of the
outstanding Sylvan Common Stock.
(1) The address of this holder is 145 Barranca Road, Santa Fe, New Mexico 87501.
Includes shares held by Quince Associates Limited Partnership, of which Mr.
Berlanti is sole general partner, and shares held by trusts for the benefit
of Mr. Berlanti's children for which Mr. Berlanti serves as trustee.
Includes options and warrants to purchase 189,542 shares. Also included are
shares held by trusts for the benefit of Richard and Don Berlanti's children
for which Richard Berlanti, Don Berlanti's brother, is trustee.
(2) The address of Ms. Singer and Messrs. Becker, Hoehn-Saric, McGee, Hoffman
and Cohen is 1000 Lancaster Street, Baltimore, Maryland 21202.
(3) Includes options and warrants to purchase 1,024,095 shares.
(4) Includes the 810,961 shares issued to Messrs. Kazeminy and Pollock in
connection with Sylvan's acquisition of Drake Prometric, L.P. in December
1995 and subject to a Voting Trust Agreement pursuant to which Messrs.
Becker and Hoehn-Saric are voting trustees.
(5) Includes the shares subject to the Voting Trust Agreement (see note 4
above).
(6) Ms. Cole is the President of ETS and serves on its Board of Trustees. ETS
owns 425,810 shares of stock in the Company, as to which Ms. Cole disclaims
beneficial ownership.
(7) T. Rowe Price exercises sole voting and investment power over 198,901 of the
1,365,751 shares held.
(8) Denver Investment Partners exercises sole voting and investment power over
1,098,250 of the 1,738,949 shares held.
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<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Ms. Nancy Cole, director, is the President of Educational Testing Service
and serves on its Board of Trustees. Educational Testing Service owns 425,810
shares of stock in Sylvan Learning Systems, Inc. In the ordinary course of its
business, the Company entered into both a domestic and international contract
with Educational Testing Service for the delivery of testing domestically and
delivery and development of a testing network internationally. The Company
generated $19.6 million, $17.3 million and $10.3 million revenues in calendar
year 1996, 1995, and 1994 respectively, from these ETS contracts.
In July of 1996 the Board of Directors approved the formation of an entity
to pursue an opportunity identified by Senior Management for establishing an
international distribution network of adult professional education services. The
Board considered many options for how to best structure the entity needed to
pursue this opportunity. Aided by the review of the independent management
consulting firm of the Co-CEOs' compensation it was concluded that the Co-CEOs
receive an equity ownership of 35% (17.5% each) of the entity as part of their
overall compensation package. Subsequently, the Board and Co-CEOs concluded that
securing a strategic partner for pursuing this opportunity was critical. In
October 1996, Caliber Learning Network, Inc. was established with MCI as the
strategic partner and investor. The Co-CEOs' equity ownership was diluted based
on MCI's investment to 28% (14% each) in October 1996. Messrs. Becker and Hoehn-
Saric receive no additional compensation as members of Caliber's board or for
their executive position in Caliber.
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<PAGE>
SIGNATURES
PURSUANT TO REQUIREMENTS OF SECTION 13 OF THE SECURITIES EXCHANGE ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF OF
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED ON APRIL 29, 1997.
SYLVAN LEARNING SYSTEMS, INC. (REGISTRANT)
By: /s/ R. CHRISTOPHER HOEHN-SARIC
-----------------------------------
R. CHRISTOPHER HOEHN-SARIC
CHAIRMAN OF THE BOARD
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES ON APRIL 29, 1997.
SIGNATURE CAPACITY
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/s/ R. Christopher Hoehn-Saric Director and Chairman of the Board
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R. CHRISTOPHER HOEHN-SARIC
/s/ Douglas L. Becker Secretary
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DOUGLAS L. BECKER
/s/ B. Lee McGee Vice President and Chief Financial
- ---------------------------------------- Officer
B. LEE MCGEE
/s/ Donald Berlanti Director
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DONALD BERLANTI
/s/ Phillip Samper Director
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PHILLIP SAMPER
/s/ James H. McGuire Director
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JAMES H. MCGUIRE
