<PAGE>
As filed with the Securities and Exchange Commission on February 6,1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
__________________________
SYLVAN LEARNING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 52-1492296
(State of Incorporation) (I.R.S. Employer Identification No.)
1000 Lancaster Street
Baltimore, Maryland 21202
(410) 843-8000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Douglas L. Becker
President, Co-Chief Executive Officer and Secretary
Sylvan Learning Systems, Inc.
1000 Lancaster Street
Baltimore, Maryland 21231
(410) 843-8000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all communications, including all communications sent to the agent for
service, should be sent to:
Richard C. Tilghman, Jr., Esquire
Jill Cantor Nord, Esq.
Piper & Marbury
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: [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================================
Title of Shares to be Registered Proposed Maximum Aggregate Offering Price Amount of Registration Fee
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.01 par value $11,764,010 $3,565
=============================================================================================================
</TABLE>
(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.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ [Information contained herein is subject to completion or amendment. A +
+ registration statement relating to these securities has been filed with +
+ the Securities and Exchange Commission. These securities may not be sold +
+ nor may offers to buy be accepted prior to the time the registration +
+ statement becomes effective. This prospectus shall not constitute an offer +
+ to sell or the solicitation of an offer to buy nor shall there be any sale +
+ of these securities in any jurisdiction in which such offer, solicitation +
+ or sale would be unlawful prior to registration or qualification under the +
+ securities laws of any such jurisdiction.] +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
February 6, 1996
PROSPECTUS
398,780 Shares
SYLVAN LEARNING SYSTEMS, INC.
Common Stock
___________
The shares of Common Stock of Sylvan Learning Systems, Inc. (the "Company")
covered by this Prospectus are outstanding shares which may be offered and sold
from time to time by the stockholders named herein. See "Selling Stockholders."
The Company will not receive any proceeds from the sale of the shares by the
Selling Stockholders.
The Common Stock is quoted on the Nasdaq Stock Market (National Market)
under the symbol "SLVN." On February 5, 1997 the last sale price for the Common
Stock as reported on the Nasdaq Stock Market was $ . per share.
The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol "SLVN." The Selling Stockholders may from time to time sell shares of
the Common Stock offered hereby in transactions on the Nasdaq Stock Market, in
privately-negotiated transactions or otherwise, in each case at negotiated
prices. See "Plan of Distribution." The brokers or dealers through or to whom
the shares of Common Stock covered hereby may be sold may be deemed
"underwriters" within the meaning of the Securities Act of 1933, in which event
all brokerage commissions or discounts and other compensation received by such
brokers or dealers may be deemed underwriting compensation.
___________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
___________
The date of this Prospectus is , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by the Company with the Commission, including the reports and
other information incorporated by reference into this Prospectus, can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at its regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at rates prescribed by the Commission or from the Commission's Internet
web site at http:\\www.sec.gov. The Common Stock of the Company is quoted on the
Nasdaq National Market. Reports, proxy statements and other information
concerning the Company can be inspected at the offices of the Nasdaq Stock
Market, 1735 K Street, Washington, D.C. 20006. This Prospectus does not contain
all the information set forth in the Registration Statement of which this
Prospectus is a part and exhibits relating thereto which the Company has filed
with the Commission. Copies of the information and exhibits are on file at the
offices of the Commission and may be obtained, upon payment of the fees
prescribed by the Commission, may be examined without charge at the offices of
the Commission or through the Commission's Internet web site.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No. 0-
22844) pursuant to the 1934 Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1995 and Quarterly Reports on Form 10-Q for each of the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996.
2. The Company's Current Report on Form 8-K dated September 27, 1996,
relating to the Company's declaration of a three-for-two stock split in the form
of a stock dividend and the adoption of a Shareholder Rights Plan and the
Company's Registration Statement on Form 8-A, filed on October 29, 1996,
registering the Preferred Share Purchase Rights to be distributed in connection
with the Company's Shareholder Rights Plan.
3. The Company's Current Report on Forms 8-K and 8-K/A dated November 8,
1996 relating to the purchase by the Company of 20,000 shares of Series A
Preferred Stock of JLC Learning Corporation.
4. The Company's Current Report on Form 8-K dated November 20, 1996 relating
to litigation brought by ACT, Inc. against the Company.
5. The Company's Current Report on Form 8-K dated January 28, 1997 relating
to the Company's acquisition of Wall Street Institute.
6. 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
7. All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the 1934 Act subsequent to the date of filing of the
Registration Statement of which this Prospectus is a part and prior to the
termination of the offering made hereby.
The Company will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon the request of any such person, a copy of any or
all of the documents which have been incorporated herein by reference, other
than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Requests for such documents
should be directed to Sylvan Learning Systems, Inc., 1000 Lancaster Street,
Baltimore, Maryland 21231, Attention: Chief Financial Officer, telephone: (410)
843-8000.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
-2-
<PAGE>
THE COMPANY
Sylvan Learning Systems, Inc. (the "Company" or "Sylvan") is a leading
international private provider of educational and computer-based testing
services. The Company delivers a broad array of supplemental and remedial
educational services and computer-based testing through three principal
divisions. Through its Core Educational Services division, the Company designs
and delivers individualized tutorial services to school-age children through its
608 franchised and Company-owned Sylvan Learning Centers in 50 states, five
Canadian provinces, and Hong Kong. The Company's Testing Services division
administers computer-based tests for major corporations, professional
associations and government agencies through its network of centers ("Technology
Centers"), which are located throughout the world. In addition, the Company's
Contract Educational Services division offers educational services to public and
non-public school districts receiving funding under federal and state programs
and provides contract educational and training services on-site to employees of
large corporations. In 1995, total system-wide revenues were approximately
$194.1 million, composed of $132.1 million from core educational services
($115.3 million from franchised Learning Centers and $16.8 million from Company-
owned Learning Centers, product sales and franchise sales fees), $34.6 million
from testing services and $27.4 million from contract educational services.
Sylvan has developed a proprietary program that enables professionals
throughout the Sylvan Learning Center network to deliver consistent, high
quality, individualized tutoring. During the 15 years of Sylvan Learning Center
operations, more than 600,000 students have completed the Sylvan tutorial
program. From the end of 1991, during which year the current management of the
Company assumed control, through 1995, average monthly royalties from franchised
Learning Centers grew approximately 65%, primarily because of a wider array of
services offered and increased student enrollment.
Sylvan began providing computer-based testing services in 1992. The
Company's testing services revenues grew from $3.6 million in 1993 to $34.6
million in 1995. With its acquisition of Drake Prometric, L.P. in December
1995, Sylvan has established a worldwide network of computer-based testing
centers and has the current capacity to deliver more than 1.6 million computer-
based tests annually through 1,218 Technology Centers. The Company serves as
the exclusive commercial provider of computer-based standardized tests currently
administered by Educational Testing Service ("ETS"), the leading educational
testing organization in the United States. ETS develops and administers more
than 9.5 million tests annually. The Company currently offers the Graduate
Record Exam ("GRE"), the registered and practical nurses licensing exam
("NCLEX") and the National Teachers Exam (the "PRAXIS" series). Sylvan expects
to begin offering the computer-based version of the Graduate Management
Admissions Test ("GMAT"), the graduate business school entrance examination, in
October 1997. In addition, the Company entered into a ten-year contract with
ETS to develop test sites and provide computer-based testing internationally,
and initial testing under this contract began in early 1995. ETS has stated its
intention to make computer-based testing available through Sylvan in 170
countries by 1997. The Company also offers computer-based tests for
organizations licensing or certifying pilots, airplane mechanics, life insurance
agents and pathology laboratory technicians and recently began offering
computer-based tests for Novell certification.
Sylvan offers its educational services under contract to public and non-
public school districts receiving funds under federal and state educational
programs. The Company's revenues from contract educational services grew from
$13.6 million to $27.4, or 102%, from 1994 to 1995. The Title I program,
administered by the U.S. Department of Education, allocated approximately $6.6
billion during the 1995-96 school year to local school districts through state
governments to provide supplemental and remedial educational services to
academically and economically disadvantaged students attending public and non-
public schools. As of December 31, 1995, the Company had contracts to provide
remedial educational services to an aggregate of 52 public schools located in
Baltimore and other Maryland school districts, the District of Columbia, Ohio,
Pennsylvania, Texas, Florida, Minnesota, Delaware, New Jersey and, pursuant to a
contract executed in July 1995, Chicago, Illinois. In addition, Sylvan offers
its contract educational services to adults in the corporate workplace through
its PACE subsidiary and its Sylvan-At-Work program.
-3-
<PAGE>
The Company's principal executive offices are located at 1000 Lancaster
Street, Baltimore, Maryland 21202, (410)843-8000.
USE OF PROCEEDS
All of the proceeds from the sale of the shares of the Company's Common Stock
offered hereby will be received by the Selling Stockholders. The Company will
receive none of the proceeds from the sale of the shares of Common Stock.
SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial ownership
of the Company's Common Stock by the persons listed therein (the "Selling
Stockholders") prior to this offering, the maximum number of shares of Common
Stock to be sold by the Selling Stockholders hereby, and the beneficial
ownership of the Company's Common Stock by the Selling Stockholders after this
offering, assuming that all shares of Common Stock offered hereby are sold.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to Offering Shares To Owned After Offering
--------------------------- Be Sold In ------------------------
Name and Address of Beneficial This
Owner(1) Number Percent Offering Number Percent
- -------------------------------- ------------ ----------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C>
Nicholas R. and Janet K. Eian........... 37,500 * 18,750 18,750 *
c/o Rachel E. Soffer, Esq.
Petersen, Tews & Squires, P.A.
4800 I D S Center, 80 S. 8th Street
Minneapolis, MN 55402
Bruce L. Goldman (1)(2)................. 153,902 * 126,676 27,226 *
Jill E. Becker (1)...................... 136,393 * 126,677 9,717 *
Kathy J. Taslitz (1)(2)................. 109,348 * 99,631 9,717 *
K JT Annuity Trust U/A/D/12/15/93(1).... 27,046 * 27,046 -- --
The Baltimore Children's Museum, Inc.... 4,795 * 4,795 -- --
34 Market Plaza, Suite 905
Baltimore, Maryland 21202
- -------------
</TABLE>
* Less than 1%.
(1) The address of this stockholder is c/o Goldman Acquisition Corp., 650
Dundee Road, Northbrook, Illinois 60062.
(2) Excludes shares held of record by the KJT Annuity Trust U/A/D/12/15/93, as
to which Mr. Goldman and Ms. Taslitz disclaim beneficial ownership. Mr.
Goldman and Mr. Steven Taslitz, Ms. Taslitz's husband, serve as co-trustees
of the KJT Annuity Trust U/A/D/12/15/93.
Nicholas R. and Janet K. Eian (the "Jannick Stockholders") acquired their
shares of Common Stock pursuant to an Agreement and Plan of Reorganization
effective as of October 1, 1996 (the "Jannick Agreement"), by and among the
Company, Jannick Education Corporation ("Jannick") and the Jannick Stockholders,
as sole stockholders of Jannick.
-4-
<PAGE>
Pursuant to the Jannick Agreement, Jannick was merged with and into the Company,
and the Company acquired all of the outstanding stock of Jannick from the
Jannick Stockholders in exchange for 25,000 shares of Common Stock of the
Company, all of which are being offered in this Prospectus, as required by the
Jannick Agreement. [As a result of the Company's acquisiton, Ms. Janet K. Eian
became and continues to be an employee of the Company.][Neither of the Jannick
Stockholders nor any of their affiliates is an officer, director, employee or
affiliate of of the Company.]
Mr. Bruce Goldman, Ms. Jill E. Becker, Ms. Kathy J. Taslitz and the KJT
Annuity Trust U/A/D/12/15/93 (collectively, the "Goldman Stockholders") acquired
an aggregate of 380,030 shares of Common Stock pursuant to the Agreement and
Plan of Reorganization by and between Goldman Acquisition Corp. ("Goldman"), the
Company and the stockholders of Goldman (the "Goldman Agreement"). Pursuant to
the Goldman Agreement, Sylvan acquired all of the assets and certain liabilities
of Goldman in exchange for 633,383 shares of Sylvan Common Stock, immediately
after which Goldman was dissolved and the shares of Sylvan Common Stock were
distributed to the Goldman Stockholders and Messrs. Douglas L. Becker and R.
Christopher Hoehn-Saric, the other stockholders of Goldman. Messrs. Becker and
Hoehn-Saric are Co-Chief Executive Officers of Sylvan. Upon its dissolution,
Goldman distributed 126,676 shares of Sylvan Common Stock to each of
Messrs.Becker and Hoehn-Saric, none of which are being offered hereby. All
shares of Sylvan Common Stock distributed by Goldman to the Goldman Stockholders
pursuant to the Goldman Agreement are being offered in this Prospectus, as
required by the Goldman Agreement.
The Baltimore Children's Museum, Inc. acquired the shares of Sylvan Common
Stock it is offering hereby on October 2, 1996, as a gift from the 1995 Nasser
J. Kazeminy Revocable Trust, a trust controlled by Mr. Nasser J. Kazeminy, a
principal stockholder of Sylvan.
PLAN OF DISTRIBUTION
The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol "SLVN." The Selling Stockholders may from time to time sell shares of
Common Stock offered hereby in transactions on the Nasdaq Stock Market, in
privately-negotiated transactions or otherwise, in each case at negotiated
prices. The broker-dealers through or to whom the shares of Common Stock offered
hereby may be sold may be deemed "underwriters" within the meaning of the
Securities Act of 1933, in which event, all brokerage commissions or discounts
and other compensation received by such broker-dealer may be deemed underwriting
compensation.
The Common Stock offered hereby will be sold by the Selling Stockholders
acting as principal for their own account, and the Company will receive no
proceeds from this offering. The Selling Stockholders will pay all applicable
stock transfer taxes, transfer fees and brokerage commissions or discounts. The
Company has agreed to bear the cost of preparing the Registration Statement of
which this Prospectus is a part and all filing fees and legal and accounting
expenses in connection with registration of the shares of Common Stock offered
by the Jannick Stockholders hereby under federal and state securities laws (the
"Registration Fees"). The Goldman Stockholders have agreed to pay the Company
that portion of the Registration Fees that are attributable to the shares of
Common Stock being offered hereby by the Goldman Stockholders.
LEGAL MATTERS
The legality of the shares offered hereby has been passed upon for the
Company by Piper & Marbury L.L.P., Baltimore, Maryland.
EXPERTS
The consolidated financial statements and schedule of Sylvan Learning
Systems, Inc. appearing in the Annual Report of Sylvan Learning Systems, Inc.
(Form 10-K) for the year ended December 31, 1995 have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements have been incorporated herein by reference in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
-5-
<PAGE>
================================================================================
398,780 Shares
SYLVAN LEARNING
SYSTEMS, INC.
Common Stock
PROSPECTUS
, 1997
No person has been authorized by the Company to give any information or to
make any representations other than those contained in this Prospectus in
connection with the offer contained in this Prospectus, and if given or made,
such information or representations may not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to sell
or a solicitation of an offer to buy any of the securities in any jurisdiction
in which such offer or solicitation is not authorized, or in which the person
making such offer or solicitation is not qualified to do so, or to any person to
whom it is unlawful to make such offer or solicitation. Neither the delivery of
this Prospectus nor any sale made hereunder shall create an implication that
there has been no change in the affairs of the Company since the date hereof.
-------------------------------
TABLE OF CONTENTS
Page
----
Available Information..................................................... 2
Incorporation of Certain
Documents by Reference................................................... 2
The Company............................................................... 3
Use of Proceeds........................................................... 4
Selling Stockholders...................................................... 4
Plan of Distribution...................................................... 4
Legal Matters............................................................. 5
Experts................................................................... 5
================================================================================
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
Filing Fee-Securities and Exchange Commission.......... $ 3,565
Nasdaq Listing Fees.................................... 12,677
Fees and Expenses of Counsel........................... 7,500
Miscellaneous Expenses................................. 1,258
-------
TOTAL................................................. $25,000
=======
</TABLE>
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
<PAGE>
Item 16. Exhibits.
Exhibit No. Description
- ----------- -----------
3.1 Articles of Amendment and Restatement*
3.2 Amended and Restated By-Laws*
4.1 Specimen Stock Certificate*
4.2 Stockholders' Agreement dated as of January 26, 1993 by and
among the Registrant, Certain Stockholders and the Investors
named therein.*
4.3 Agreement and Plan of Reorganization dated as of October 1,
1996 by and among the Registrant, Jannick Education
Corporation and the stockholders named therein.
4.4 Agreement and Plan of Reorganization dated as of January 31,
1997 by and among the Registrant, Goldman Acquisition Corp.
and the stockholders named therein.
5.1 Opinion of Piper & Marbury L.L.P. regarding the legality of
the securities being registered.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Piper & Marbury L.L.P. (included in Exhibit 5.1)
24.1 Power of Attorney (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.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suite or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has
II-2
<PAGE>
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(d) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the information required to be included in a post-effective
amendment by those paragraphs in contained in periodic reports filed by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") that are incorporated by reference
in the registration statement.
(2) That for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement or Amendment to be signed on its behalf by the undersigned, thereunto
duly authorized, in Baltimore, Maryland, on this 6th day of February, 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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Co-Chief Executive Officer and Chairman of the
/s/ R. Christopher Hoehn-Saric Board of Directors (Principal Executive Officer) February 6, 1997
- ------------------------------
R. Christopher Hoehn-Saric
Co-Chief Executive Officer President,
/s/ Douglas L. Becker Secretary and Director February 6, 1997
- ---------------------------
Douglas L. Becker
Chief Financial Officer (Principal Financial
/s/ B. Lee McGee and Accounting Officer) February 6, 1997
- ---------------------------
B. Lee McGee
/s/ Donald V. Berlanti Director February 6, 1997
- --------------------------
Donald V. Berlanti
Director , 1997
- --------------------------
R. William Pollock
Director , 1997
- --------------------------
Patrick A. Hopf
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Director , 1997
- --------------------------
J. Phillip Samper
/s/ Nancy A. Cole Director February 6, 1997
- --------------------------
Nancy A. Cole
/s/ James H. McGuire Director February 6, 1997
- --------------------------
James H. McGuire
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.1 Articles of Amendment and Restatement*
3.2 Amended and Restated By-Laws*
4.1 Specimen Stock Certificate*
4.2 Stockholders' Agreement dated as of January 26, 1993 by and
among the Registrant, Certain Stockholders and the Investors
named therein.*
4.3 Agreement and Plan of Reorganization dated as of
October 1, 1996 by and among the Registrant, Jannick
Education Corporation and the stockholders named therein.
4.4 Agreement and Plan of Reorganization dated as of
January 31, 1997 by and among the Registrant, Goldman
Acquisition Corp. and the stockholders named therein.
5.1 Opinion of Piper & Marbury L.L.P. regarding the legality of
the securities being registered.
23.1 Consent of Ernst & Young L.L.P.
23.2 Consent of Piper & Marbury L.L.P. (included in Exhibit 5.1)
24.1 Power of Attorney (included on signature page)
- -------------------
</TABLE>
* Incorporated by reference from the Registrant's Registration Statement on
Form S-1 (No. 33-69558), filed on September 28, 1993.
II-6
<PAGE>
Exhibit 4.3
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), effective as of
September 30, 1996 but dated this ____ day of October 1996, by and among SYLVAN
LEARNING SYSTEMS, INC., a Maryland corporation (the "Purchaser"), JANNICK
EDUCATION, CORP., a Minnesota corporation (the "Company"), which has elected to
be treated as an S Corporation pursuant to Subchapter S of the Internal Revenue
Code of 1986, as amended (the "Code") and Jan Eian and Nick Eian, husband and
wife, and the sole stockholders of the Company (the "Stockholder").
W I T N E S S E T H:
- - - - - - - - - -
The Stockholder owns all the issued and outstanding capital stock of the
Company. The Purchaser and the Stockholder wish to enter into an agreement for
the acquisition of the Company by the Purchaser through a merger of the Company
into the Purchaser in a transaction qualifying as a tax-free reorganization
under Section 368(a)(1)(A) of the Code (the "Merger"). The parties agree and
acknowledge that for accounting purposes, the Merger is to be treated as a
pooling-of-interests. The Purchaser, the Company and the Stockholder wish to
enter into a definitive agreement setting forth the terms and conditions of the
Merger.
Accordingly, in consideration of the foregoing and of the covenants,
agreements, representations and warranties hereinafter contained, the Purchaser,
the Company and the Stockholder hereby agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants to the Company and the Stockholder as follows:
1.1 Organization and Standing. The Purchaser is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of the State of
Maryland and has the corporate power to carry on its business as it is now being
conducted and to own or hold under lease the properties and assets it now owns
or holds under lease. Copies of the Charter and By-Laws of the Purchaser have
been delivered to the Company, and such copies are complete and correct and in
full force and effect on the date of this Agreement. The Purchaser has at all
times in the past operated and used its assets in material compliance with, and
currently is not in violation of, and has obtained all material licenses and
permits required by, any law, rule or regulation.
1.2 Financial Statements. The Purchaser has delivered to the Company
--------------------
copies of the Purchaser's audited consolidated financial statements for the
fiscal years ended December 31, 1994 and 1995. These financial statements are
true and complete in all material respects, have been prepared in accordance
with generally accepted accounting principles
-1-
<PAGE>
("GAAP") consistently followed throughout the periods covered by such statements
(except as may be stated in the explanatory notes to such statements), and
present fairly the consolidated financial position and results of operations of
the Purchaser at the dates of such statements and for the periods covered
thereby. The Purchaser also has delivered to the Company copies of its Annual
Report on Form 10-K for the year ended December 31, 1995, its proxy statement
dated May 1, 1996 and all other reports or documents required to be filed with
the Securities and Exchange Commission pursuant to Sections 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), after the
filing of such Annual Report on Form 10-K and prior to the date of this
Agreement.
1.3 No Conflict With Other Documents. Neither the execution and
--------------------------------
delivery of this Agreement nor the carrying out of the transactions contemplated
hereby will result in any violation, termination or modification of, or be in
conflict with, the Purchaser's Charter or By-Laws, or, any terms of any
contract, instrument or other agreement to which the Purchaser is a party or by
which it or any of its properties is bound or affected, or any law, rule,
regulation, license, permit, judgment, decree or order applicable to the
Purchaser or by which any of its properties or assets are bound or affected, or
result in any breach of or constitute a default (or with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation, or result in the creation
of any lien, charge or encumbrance upon any of its properties or assets, except
where such event or occurrence would not, singly or in the aggregate, have a
material adverse on the Purchaser.
1.4 Brokers and Advisors. The Purchaser has taken no action which
--------------------
would give rise to a valid claim against any party hereto for a brokerage
commission, finder's fee, counseling or advisory fee, or like payment.
1.5 Authority. The execution, delivery and performance of this
---------
Agreement by the Purchaser have been duly authorized by its Board of Directors,
and this Agreement is a valid, legally binding and enforceable obligation of the
Purchaser. Upon the satisfaction of all conditions contained herein and the
filing of the Articles of Merger (as defined in Section 4.2) with the Maryland
State Department of Assessments and Taxation and the Secretary of State of the
State of Florida, this Agreement will result in the valid, legally binding and
enforceable statutory merger of the Company and the Purchaser.
1.6 Validity of Common Stock. The shares of Purchaser's Common Stock
------------------------
to be issued and delivered by the Purchaser in connection with the Merger have
been duly authorized for issuance and will, when issued and delivered as
provided in this Agreement, be duly and validly issued, fully paid and non-
assessable.
1.7 Registration Statement on Form S-3. As of the date hereof, the
----------------------------------
Purchaser is aware of no events, actions or conditions which would prevent the
Purchaser from being able to comply with the provisions of Section 11.1(a) of
this Agreement, and will use its
-2-
<PAGE>
best efforts to continue to be eligible to comply with the provisions of Section
11.1(a).
1.8 Tax-Free Reorganization. The Purchaser is not aware of any
-----------------------
events or conditions relating to the Purchaser which would preclude the Company
or the Stockholder from treating the Merger as a tax-free reorganization under
Section 368(a)(1)(A) of the Code.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS.
The Company and each of the Stockholder hereby jointly and severally represent
and warrant to the Purchaser as follows:
2.1 Authorized and Issued Shares. The Company's entire authorized
----------------------------
capital stock consists of _______________ thousand (______________) shares of
Common Stock, $____________ par value per share (the "Company Common Stock"), of
which ______ shares are issued and outstanding. No shares of Company Common
Stock are held in the Company's treasury and no shares are reserved for
issuance. All outstanding shares of Company Common Stock have been duly
authorized and are validly issued and are fully paid and non-assessable and are
owned by the Stockholder. The Company is not a party to or bound by any
options, calls, contracts, preemptive rights or commitments of any character
relating to any issued or unissued capital stock, or any other equity security
issued or to be issued by the Company.
2.2 Organization. The Company is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of Minnesota,
and has the corporate power and authority to carry on its business as it is now
being conducted and to own or hold under lease the properties or assets it now
owns or holds under lease and to perform the actions contemplated hereby.
Complete and accurate copies of the current Charter, By-Laws, minute books and
stock transfer books of the Company have been provided to the Purchaser, and
such copies are complete and correct and in full force and effect. The Company
does not own or have any direct or indirect interest in any other corporation,
firm, partnership, joint venture enterprise or other business entity. (The
Company has duly and effectively elected to be treated as an S Corporation under
and is presently operating in accordance with the provisions of Subchapter S of
the Code.
2.3 Transactions with Affiliates. Except as set forth in Section 2.3
----------------------------
of the disclosure schedule delivered to the Purchaser pursuant to this Agreement
(the "Disclosure Schedule") or in the Company Financial Statements (as
hereinafter defined), the Company is not a party to any contract, agreement or
other arrangement with any current or former officer, director or stockholder or
any affiliate of any such persons. Each transaction required to be listed on
the Disclosure Schedule is on terms no less favorable than terms available from
unrelated parties.
2.4 Financial Statements. The Company has provided to the Purchaser
--------------------
the unaudited financial statements for the fiscal years of the Company ended on
December 31, 1995
-3-
<PAGE>
and the preliminary balance sheet and income statement for the nine month period
ending September 30, 1996, which shall be reviewed as soon as practicable after
the Closing (collectively, the "Company Financial Statements"). The Company
Financial Statements are complete and correct, have been prepared on a
consistent basis throughout the periods covered thereby and present fairly and
accurately the financial position and results of operations of the Company as of
and for the periods indicated. There are no material liabilities or obligations
of the Company, whether contingent or absolute, as of the dates of such
statements, including liability for taxes of any type, which in accordance with
GAAP consistently applied should have been shown or provided for in the Company
Financial Statements and are not so shown or provided for. Since September 30,
1996, there has been no material adverse change in the condition (financial or
otherwise), assets, liabilities, earnings, net worth, financial position,
business, operations, properties or prospects of the Company. The Company's
accounts receivable arose, and all accounts receivable that will be outstanding
as of the Closing Date shall have arisen, from bona fide transactions in the
---- ----
ordinary course of business and will be collectible by the Company in full (but
which are not material), less applicable reserves shown in the Company Financial
Statements, in the ordinary course of business within ninety days of the Closing
Date, and there are no offsets or claims related to such accounts receivable.
2.5 Taxes. The Company and the Stockholder have properly prepared
-----
and filed all federal, state and other tax returns required to be filed in
connection with the operations of the Company. True and complete copies of all
federal and state income tax returns for the Company and the Stockholder for
each of the years ended December 31, 1992 through December 31, 1995 have been
delivered or made available to the Purchaser on or prior to the date hereof and
copies of other returns will be made available upon request. Except as set
forth on Section 2.5 of the Disclosure Schedule, neither the Company nor the
Stockholder has any liability for any federal, state, county, local or other
taxes whatsoever that arose or otherwise was incurred on or before the date of
the balance sheet for 1993 included in the Company Financial Statements. No
proposed taxes, additions to tax, interest or penalties have been asserted or
are pending against the Company or the Stockholder with respect to periods
ending on or before Closing, and no such matters are under discussion with the
applicable authorities. There are no agreements, waivers, or other arrangements
providing for extensions of time with respect to the assessment or collection of
any unpaid tax against the Company or the Stockholder. The Company and the
Stockholder have withheld or otherwise collected all taxes or amounts it or he
was required to withhold or collect under any applicable federal, state or local
law, including, without limitation, any amounts required to be withheld or
collected with respect to employee state and federal income tax withholding,
social security, unemployment compensation, sales or use taxes or workmen's
compensation, and all such amounts have been timely remitted to the proper
authorities.
2.6 Agreements. Section 2.6 of the Disclosure Schedule identifies
----------
each of the following agreements, contracts, documents and other items (whether
written or oral) as to which the Company is a party or otherwise is bound (and
all such contracts, or summaries
-4-
<PAGE>
thereof, have been made available to the Purchaser): (i) all documents relating
to indebtedness for money borrowed or collateral therefor, including guarantees;
(ii) all agreements or plans relating to employment, compensation of or benefits
for officers or employees of the Company; (iii) all contracts for the purchase
of materials, supplies, services, merchandise or equipment involving
consideration of more than $10,000 or involving purchases in excess of normal
operating requirements; (iv) any contract, agreement, or instrument not entered
into in the ordinary course of the business of the Company on a basis consistent
with past practice; (v) any contract containing restrictions on the Company's
operations or its ability to compete in any geographic region or in any line of
business; (vi) any lease of real property and all personal property leases
calling for annual lease payments in excess of $10,000; and (vii) each and every
other contract which is material to the financial condition, earnings, operation
or business of the Company. Each of the contracts and agreements so listed
(collectively, the "Contracts") is a valid and existing contract or agreement in
full force and effect and there exists no default thereunder. None of the
Contracts will be violated or breached and no default or right of termination or
modification shall arise thereunder as a result of the consummation of the
transactions contemplated by this Agreement.
2.7 Property. Section 2.7 of the Disclosure Schedule sets forth a
--------
schedule (the "Property Schedule") of (i) all real property owned or leased by
the Company (the "Real Property"), (ii) all individual items of tangible
personal property and assets (other than inventory) of the Company having a fair
market value in excess of $10,000, and (iii) all patents, trademarks, trade
names, service marks, trade secrets, copyrights, franchise rights or
applications therefor which are held, used, prepared in connection with or
otherwise related to the conduct of the business of the Company. Except as set
forth in the Property Schedule, the Company has good and marketable title to all
of such property and assets owned by it, free of any pledge, mortgage, lien,
lease, security agreement, encumbrance, charge or claim of any nature
whatsoever. The machinery and equipment of the Company are, in all material
respects, in good operating condition and repair, ordinary wear and tear
excepted. To the Company's knowledge, the Company is not infringing on any
patent, trademark, trade name, service mark, trade secret or copyright of
another entity and has received no notice or claim of any such infringement.
2.8 Legal Proceedings, Etc. Except as set forth in Section 2.8 of
-----------------------
the Disclosure Schedule, there are no legal, administrative, arbitration, or
other proceedings or governmental investigations pending or, to the best of the
Company's and the Stockholder's knowledge, threatened against the Company, the
Stockholder or the respective properties or assets of the Company and the
Stockholder.
2.9 Compliance; Licenses. The Company has at all times in the past
--------------------
operated and used its assets in material compliance with, and currently is not
in violation of, and has obtained all material licenses and permits required by,
any law, rule or regulation. Section 2.9 of the Disclosure Schedule contains a
true and complete list of all material licenses, permits,
-5-
<PAGE>
approvals, franchises and other authorizations as are necessary in order to
enable the Company to own and conduct its business.
2.10 Bank Accounts, etc. Section 2.10 of the Disclosure Schedule sets
------------------
forth a true and complete list of all bank accounts, safe deposit boxes and lock
boxes of the Company including, with respect to each such account and lock box
identification of all authorized signatories.
2.11 Insurance. Section 2.11 of the Disclosure Schedule sets forth a
---------
summary of all general liability, product liability, fire, casualty, motor
vehicle and other insurance currently maintained by or on behalf of the Company.
All requirements and provisions thereof are being complied with. True and
correct copies of all insurance policies relating to such coverage have been
provided by the Company to the Purchaser. No notice of cancellation has been
given to or received by the Company with respect to any of its insurance
policies, and no such policies are subject to any retroactive rate or audit
adjustments or coinsurance arrangements.
2.12 Employee Matters. Except as set forth in Section 2.12 of the
----------------
Disclosure Schedule, the Company does not maintain, sponsor or contribute to any
plans in effect for pension, profit-sharing, deferred compensation, severance
pay, bonuses, stock options, stock purchases, or any other retirement or
deferred benefit, or for any health, accident or other welfare plan, or any
other employee or retired employee benefits or incentive plan, program,
contract, understanding or arrangement in which any employee, former employee,
retired employee, or beneficiary of any of these, of the Company is entitled to
participate. The plans, programs, contracts, understandings and arrangements
listed on the Disclosure Schedule pursuant to this Section 2.12 are hereinafter
referred to as the "Employee Plans." The Company has supplied the Purchaser
with complete and accurate copies of each such Employee Plan. Each Employee
Plan has been operated according to its terms in compliance with all applicable
laws.
2.13 Recent Operations; Employee Matters. Since December 31, 1995,
-----------------------------------
(i) the Company has operated its business substantially as it was operated
immediately prior to said date and only in the ordinary course, and the Company
and the Stockholder have used their best efforts to preserve intact the
Company's business relationships, (ii) there have been no bonuses paid to or
increases in the compensation of officers or employees, except as set forth in
Section 2.13(i) of the Disclosure Schedule, and (iii) except as set forth in
Section 2.13(ii) of the Disclosure Schedule, the Company has not declared or
paid any dividend or made any other distribution with respect to its capital
stock.
2.14 Stockholder Distributions. The aggregate of all dividends and
-------------------------
distributions declared and/or paid to the Stockholder (whether in cash or other
assets) after December 31, 1995 through the date hereof (the "1996 Period"),
when stated as a percentage of the Company's EBIT (as hereinafter defined) for
the 1996 Period, does not exceed the aggregate
-6-
<PAGE>
of all distributions declared or paid to the Stockholder (whether in cash or
other assets) during the twelve month period ending December 31, 1995 when
stated as a percentage of the Company's EBIT for such twelve month period.
"EBIT" means the Company's net revenues minus all of its expense items,
including any extraordinary and non-recurring items and depreciation and
amortization but excluding interest and taxes.
2.15 Environmental Matters. No storage tanks, underground or
---------------------
otherwise, are now located on any properties occupied by the Company. The
Company has complied in all material respects with all environmental laws
relating to its operations or properties occupied by it. There are no asbestos
containing materials located on properties occupied by the Company. The Company
has not received any notice, demand, suit or information request pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
or any comparable state law, nor does it have knowledge of any other party's
receipt of same relating to any properties occupied by the Company.
2.16 Disclosure. The Company and the Stockholder have disclosed to
----------
the Purchaser all facts material to the assets, business, operations, financial
condition and prospects of the Company. All agreements, schedules, exhibits,
documents, certificates, reports or statements furnished or to be furnished to
the Purchaser by or on behalf of the Company in connection with this Agreement
or the transactions contemplated hereby are true, complete and accurate in all
material respects, and no such items contain any untrue statement of a material
fact or omit a material fact necessary in order to make the statements contained
herein and therein not misleading.
2.17 No Conflict With Other Documents. Neither the execution and
--------------------------------
delivery of this Agreement, nor the carrying out of any of the transactions
contemplated hereby, will result in any violation, termination or modification
of, or be in conflict with, the Company's Articles of Incorporation or By-Laws,
any terms of any contract, instrument or other agreement to which the Company is
a party or by which it or any of its properties is bound or affected, or any
law, rule, regulation, license, permit, judgment, decree or order applicable to
the Company or by which any of its properties or assets are bound or affected,
or result in any breach of or constitute a default (or with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation, or result in the creation
of any lien, charge or encumbrance upon any of its properties or assets, except
where such event or occurrence would not, singly or in the aggregate, have a
material adverse effect on the Company.
2.18 Brokers and Advisors. The Company has taken no action which
--------------------
would give rise to a valid claim against any party hereto for a brokerage
commission, finder's fee, counseling or advisory fee, or like payment.
-7-
<PAGE>
2.19 Authority. The execution, delivery and performance of this
---------
Agreement by the Company have been duly authorized by the sole Director and the
Stockholder, and this Agreement is a valid and legally binding and enforceable
obligation of the Company. Upon the satisfaction of all conditions contained
herein and the filing of the Articles of Merger with the Maryland State
Department of Assessments and Taxation and the Secretary of State of the State
of Florida, this Agreement will result in the valid, legally binding and
enforceable statutory merger of the Company and the Purchaser, under Florida
law.
3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each Stockholder
hereby represents and warrants to the Purchaser as follows:
3.1 Ownership of Company Common Stock. Such Stockholder has good and
---------------------------------
marketable title to the number of issued and outstanding shares of Company
Common Stock set forth opposite his or her name on Section 3.1 of the Disclosure
Schedule hereto, free and clear of any pledges, liens, restrictions, claims or
encumbrances of any kind. Such Stockholder is not a party to or bound by any
options, calls, contracts, or commitments of any character relating to any
issued or unissued stock or any other equity security issued or to be issued by
the Company.
3.2 No Conflicts. Neither the execution and delivery of this
------------
Agreement nor the carrying out of the transactions contemplated hereby, will
result in any breach of or constitute a default (or with notice or lapse of time
or both would become a default), or give to others any rights, under the terms
of any contract, instrument or other agreement to which such Stockholder is a
party or is otherwise bound, or any judgment, decree or order applicable to such
Stockholder.
3.3 Binding Effect. This Agreement is a valid and legally binding
--------------
and enforceable obligation of the Stockholder.
3.4 Litigation. There is no litigation, proceeding or governmental
----------
investigation pending or threatened or in prospect against or relating to such
Stockholder or the shares of Company Common Stock owned by him or her or the
transactions contemplated by this Agreement.
3.5 Brokers and Advisors. Such Stockholder has taken no action which
--------------------
would give rise to a valid claim against any party hereto for a brokerage
commission, finder's fee, counseling or advisory fee, or like payment.
3.6 Investment Intent. It is understood that the shares of Purchaser
-----------------
Common Stock to be delivered to the Stockholder pursuant to this Agreement are
not being registered, for purposes of the transactions hereunder, under the
Securities Act of 1933, as amended (the "Securities Act") or any state
securities laws, and the shares are being delivered without registration in
reliance upon an exemption from the registration requirements of the Securities
Act or any state securities laws. The Stockholder is acquiring the Purchaser
Common Stock
-8-
<PAGE>
hereunder only for his own account and not with any intention of making, or with
a view to, or for sale in connection with, any distribution thereof within the
meaning of the Securities Act unless such shares first are registered under the
Securities Act.
In connection with the foregoing, each of the Stockholder hereby
represents and warrants that:
(a) such Stockholder has reviewed, discussed and evaluated the
information delivered under Section 1.2 and has had the opportunity to ask
questions of, and receive answers from, executive officers of the Purchaser
concerning the terms and conditions of this Agreement and to obtain any
additional information which such Stockholder considered necessary to verify the
accuracy of the information delivered under Section 1.2;
(b) such Stockholder understands that he or she must bear the economic
risks of the investment in Purchaser Common Stock to be made hereunder for an
indefinite period of time because such stock has not been registered under the
Securities Act and, therefore, may not be sold until such stock subsequently is
registered under the Securities Act or an exemption from registration is
available; and
(c) such Stockholder has sufficient knowledge and experience in
financial and business matters to enable such Stockholder to be capable of
evaluating the merits and the risks of the exchange of the Company Common Stock
for the Purchaser Common Stock contemplated by this Agreement and such
Stockholder's prospective investment in the Purchaser.
3.7 Legends. It is understood and agreed that, to implement the
-------
requirements of the Securities Act and state securities laws and evidence the
restrictions upon transfer contained in this Agreement, the Purchaser will cause
a legend to be conspicuously noted on the certificates representing the
Purchaser Common Stock deliverable hereunder, and that the Purchaser will issue
stop transfer instructions to its transfer agent, to the effect that such stock
has not been registered under the Securities Act and that no transfer may take
place except as permitted by Section 11 of this Agreement and after delivery of
an opinion of Purchaser's counsel to the effect that registration thereof for
the purpose of transfer is not required under the Securities Act or that the
stock proposed to be transferred has been effectively registered for that
purpose under the Securities Act.
3.8 No Agreements with Respect to Purchaser Common Stock.
----------------------------------------------------
Stockholder has not entered into any agreement or understanding with anyone for
the sale, at Stockholder's option or otherwise, of any of the Purchaser Common
Stock to be delivered hereunder to Stockholder at the Closing.
-9-
<PAGE>
4. COVENANTS OF THE PURCHASER. The Purchaser covenants to the Company
and the Stockholder that, except as otherwise consented to in writing by the
Company after the date of this Agreement:
4.1 Stock Reservation. Between the date hereof and the Closing Date,
-----------------
the Purchaser will keep available and reserve a sufficient number of shares of
Purchaser Common Stock for issuance and delivery to the Stockholder as
contemplated in this Agreement.
4.2 Cause Conditions to be Satisfied. The Purchaser will use its
--------------------------------
best efforts to cause all of the conditions described in Sections 8 of this
Agreement to be satisfied (to the extent such matters reasonably are within its
control).
4.3 Registration Statement on Form S-3. The Purchaser will use its
----------------------------------
best efforts to meet the requirements for eligibility set forth in paragraph A.
of the General Instructions to Form S-3, as promulgated by the U.S. Securities
and Exchange Commission in fulfilling its obligations under Section 11 hereof.
4.4 Tax-Free Reorganization. The Purchaser recognizes that the
-----------------------
Company and the Stockholder desire to treat the Merger as a tax-free
reorganization under Section 368(a)(1)(A) of the Code and will use its best
efforts to cooperate with the Company and the Stockholder in this regard.
5. COVENANTS OF THE COMPANY AND THE STOCKHOLDERS. The Company and the
Stockholder jointly and severally covenant to the Purchaser that, except as
otherwise consented to in writing by the Purchaser after the date of this
Agreement:
5.1 Conduct of Business. After the date hereof and through the date
-------------------
of the Closing, with respect to the Company (a) its business will be conducted
only in the ordinary course; (b) it will terminate each of its Employee Plans
and will not enter into, adopt or amend any employee benefit plan, agreement or
arrangement, enter into or amend any employment contracts, or increase the
salaries or compensation of its officers or employees, other than ordinary
increases in salaries in accordance with past practices; (c) it shall repay in
full all debt outstanding on the date hereof and it shall not incur any
additional liability for borrowed money, or encumber any of its assets; (d) all
outstanding loans payable by the Company to either of the Stockholder or
receivable by the Company from either of the Stockholder or any employee shall
be repaid in full by the appropriate party; (e) its current assets at all times
will be greater than its current liabilities; (f) it will use its best efforts
to preserve its business organization intact, to keep available the service of
its officers and employees and to preserve the goodwill of suppliers, customers
and others doing business with it; (g) it will not enter into any agreement for
the purchase, sale or other disposition, or purchase, sell or dispose of, any
equipment, supplies, inventory, investments or other assets (other than sales of
inventory and purchases of materials
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and supplies in the ordinary course of business and in accordance with past
practices); (h) it will not compromise or write off any material account
receivable other than by collection of the full recorded amount thereof; (i) no
change shall be made in its Charter or By-Laws; (j) no change shall be made in
the number of shares or terms of its authorized, issued or outstanding capital
stock, nor shall it enter into or grant any options, calls, contracts or
commitments of any character relating to any issued or unissued capital stock;
and (k) no dividend or other distribution or payment shall be declared or paid
in respect of its capital stock, except as permitted by Section 2.14.
5.2 Pre-Tax Income of the Company. The Company's Pre-Tax Income for
-----------------------------
the nine months ending September 30, 1996 will be equal to or greater than
$______________. "Pre-Tax Income" means the Company's EBIT minus interest,
taxes and any distributions or dividends to the Stockholder.
5.3 Consents. The Company and the Stockholder agree to take all
--------
necessary corporate or other action and to use their best efforts to obtain all
consents and approvals required for consummation of the transactions
contemplated by this Agreement.
5.4 Audited Financial Statements. The Stockholder will cause the
----------------------------
Company to deliver to Purchaser audited financial statements for the year ended
December 31, 1995, as soon as practicable after the Closing.
5.5 Cause Conditions to Be Satisfied. The Company and the
--------------------------------
Stockholder will use their best efforts to cause all of the conditions described
in Sections 7 and 8 of this Agreement to be satisfied (to the extent such
matters reasonably are within their control).
6. MERGER OF PURCHASER AND THE COMPANY. Subject to the terms and
conditions of this Agreement, the Purchaser and the Company agree to effect the
following transactions at the Closing:
6.1 Conditions. The Purchaser and the Company will deliver to the
----------
other appropriate evidence of the satisfaction of the conditions to their
respective obligations hereunder.
6.2 Merger. At the Closing, the Company will be merged with and into
------
the Purchaser pursuant to the provisions and with the effect provided in the
general corporation laws of the States of Maryland and Minnesota. The parties
shall prepare and execute appropriate merger documents under the corporate laws
of Maryland and Minnesota, containing the terms provided in this Agreement,
including a Certificate and Articles of Merger which shall be filed with the
Maryland State Department of Assessments and Taxation and with the Secretary of
State of the State of Minnesota on the date of the Closing. The Purchaser shall
be the surviving corporation in the Merger.
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6.3 Conversion Amount; Conversion of the Company Shares. As a result
---------------------------------------------------
of the Merger and without any action by the holders thereof, all of the shares
of Company Common Stock issued and outstanding immediately prior to the Merger
and all rights in respect thereof, shall be converted into that number shares of
Purchaser Common Stock having a market value of $______________ (the "Conversion
Amount"). As a result of such conversion, each of the Stockholder will receive,
based upon the number of shares of Company Common Stock owned by such
Stockholder immediately prior to the Merger, his or her pro rata share of the
number of shares of Purchaser Common Stock to be issued pursuant to the Merger,
rounded to the nearest whole share. In order to effect such conversion, (i)
each of the Stockholder will deliver to the Purchaser at the Closing
certificates in due and proper form representing the shares of Company Common
Stock owned by such Stockholder, duly endorsed or accompanied by duly executed
stock powers, with signatures guaranteed by a commercial bank or a member of the
National Association of Securities Dealers, Inc., and (ii) the Purchaser shall
deliver to each of the Stockholder a certificate, in due and proper form,
representing the number of shares of Purchaser Common Stock to which such
Stockholder is entitled. Each share of Purchaser Common Stock issued pursuant
to the Merger shall be fully paid and non-assessable. For purposes of the
foregoing, the market value of the Purchaser Common Stock shall equal the
average of the closing price reported in the Wall Street Journal for each the 10
trading days immediately preceding October 1, 1996.
6.4. Closing. The closing (the "Closing") of the transactions
-------
contemplated by this Agreement shall take place at the offices
of _________________________________, _____________________________________,
___________________________, Minnesota beginning at 10:00 a.m. on
October _____, 1996, or at such other time and place as may be agreed upon in
writing by the Purchaser and the Company (the "Closing Date").
7. CONDITIONS TO THE PURCHASER'S OBLIGATIONS. Unless waived by the
Purchaser in writing in its sole discretion, all obligations of the Purchaser
under this Agreement are subject to the fulfillment, prior to or at the Closing,
of each of the following conditions:
7.1. Opinion of Counsel. The Company and the Stockholder shall have
------------------
delivered to the Purchaser a favorable opinion of their counsel,
___________________________, dated the date of Closing, in form and substance
satisfactory to the Purchaser and its counsel, to the effect that: (a) the
Company is a corporation duly organized, validly existing and whose status is
active under the laws of the State of Minnesota and has the corporate power to
carry on its business as it is now being conducted, to own or hold under lease
the properties and assets it now owns or holds under lease and to enter into and
perform its obligations under this Agreement, and such counsel has no reason to
believe that the Company is not operating in material compliance with all
applicable laws and regulations; (b) the authorized, issued and outstanding
capital stock of the Company is as set forth in Section 2.1 of this Agreement,
and each of the issued and outstanding shares of such stock has been duly
authorized and issued and is fully paid and non-assessable and
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<PAGE>
is reflected on the stock ledger of the Company as being issued and solely owned
on the date of such opinion by the Stockholder as set forth on Section 3.1 of
the Disclosure Schedule to this Agreement; (c) to the knowledge of such counsel,
the Stockholder have good and marketable title to the Company Stock, free and
clear of any pledges, liens, restrictions, encumbrances or claims of any kind;
(d) the execution, delivery and performance of this Agreement and all other
documents to be executed by the Company in connection with this Agreement (the
"Company Documents") have been duly authorized and approved by all requisite
action of the sole director and stockholder of the Company, and this Agreement
and all other Company Documents have been duly executed and delivered by the
Company and constitute valid and legally binding obligations of the Company
subject to applicable bankruptcy, insolvency, moratorium and other similar laws
of general application and such general principles of equity as a court having
jurisdiction may apply; (e) this Agreement and all other documents to be
executed by the Stockholder prior to or at the Closing in connection with this
Agreement (the "Stockholder Documents") have been duly executed and delivered by
the Stockholder, and constitute valid and legally binding obligations of the
Stockholder, subject to applicable bankruptcy, insolvency, moratorium and other
similar laws of general application and such general principles of equity as a
court having jurisdiction may apply; (f) the execution and delivery of this
Agreement and the other Company Documents did not, and the consummation of the
transactions contemplated hereby and thereby will not, violate any provision of
the Charter or By-Laws of the Company; (g) the execution and delivery of this
Agreement and the other Company Documents and Stockholder Documents did not, and
the consummation of the transactions contemplated hereby and thereby will not,
violate any provision of any agreement, instrument, order, judgment or decree,
of which such counsel has knowledge, to which the Stockholder or the Company may
be a party or by which either of them is bound; (h) except as may be specified
by such counsel, such counsel does not know of any suit or proceeding pending or
threatened against or affecting the Company or the Stockholder, the respective
businesses or properties of the Company or the Stockholder or the consummation
of the transactions contemplated hereunder, or which seeks to restrain or
prohibit the transactions contemplated by this Agreement; (i) the Certificate
and Articles of Merger have been duly authorized by all requisite action of the
sole director and the sole stockholder of the Company, has been duly executed
and delivered by the Company and, upon the filing thereof with the Maryland
State Department of Assessments and Taxation and the Secretary of State of the
State of Minnesota will be valid and effective as a statutory merger of the
Purchaser and the Company under Minnesota law, in accordance with the terms
thereof; (j) to the knowledge of such counsel, all regulatory and governmental
approvals, consents and filings required of the Company or the Stockholder for
the consummation of the transactions contemplated by this Agreement or any of
the other Company Documents and Stockholder Documents have been obtained or
made; and (k) to the knowledge of such counsel, all federal state and local
taxes owed by the Company have been duly paid and that there are no outstanding
tax liens or tax deficiency notices affecting the Company, and all such
approvals, consents or filings remain in full effect as of the date of such
opinion.
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<PAGE>
7.2. Approvals of Governmental Authorities. All governmental
-------------------------------------
approvals necessary or advisable in the reasonable opinion of the Purchaser's
counsel to consummate the transactions contemplated by this Agreement shall have
been received and shall not contain any provision which, in the reasonable
judgment of the Purchaser, is unduly burdensome.
7.3 No Adverse Proceedings or Events. No suit, action or other
--------------------------------
proceeding against the Company or the Purchaser, or their respective officers or
directors, or either of the Stockholder, shall be threatened or pending before
any court or governmental agency in which it will be, or it is, sought to
restrain or prohibit any of the transactions contemplated by this Agreement or
to obtain damages or other relief in connection with this Agreement or the
transactions contemplated hereby.
7.4. Consents and Actions; Contracts. All requisite consents of any
-------------------------------
third parties and other actions which the Company has covenanted to use its best
efforts to obtain and take under Section 5.2 hereof shall have been obtained and
completed. All material contracts and agreements of the Company, including,
without limitation, all contracts and agreements listed on Section 2.6 of the
Disclosure Schedule, shall be in full force and effect and shall not be affected
by the consummation of the transactions contemplated hereby.
7.5 Other Evidence. The Purchaser shall have received from the
--------------
Company and the Stockholder such further certificates and documents evidencing
due action in accordance with this Agreement, including certified copies of
proceedings of the Board of Directors and stockholders of the Company, as the
Purchaser reasonably shall request.
7.6 Employment Agreement. The Purchaser and Jan Eian shall have
--------------------
entered into an Employment Agreement in substantially the form of Exhibit A
---------
attached hereto.
7.7 Current Financial Statements and Projections. The Company shall
--------------------------------------------
have provided to Purchaser the unaudited financial statements for the month of
September 1996 and the first nine months of 1996 as well as a projection of
revenues and expenses for the remaining three months of 1996, which projection
reflects net income of at least $_______________ for such three month period.
8. CONDITIONS TO THE COMPANY'S AND THE STOCKHOLDERS' OBLIGATIONS.
Unless waived by the Company and the Stockholder' all obligations of the Company
and the Stockholder under this Agreement are subject to the fulfillment, prior
to or at the Closing, of each of the following conditions:
8.1. Opinion of Counsel to Purchaser. The Purchaser shall have
-------------------------------
delivered to the Company and the Stockholder a favorable opinion of the
Purchaser's counsel, Piper & Marbury, dated the date of Closing, in form and
substance satisfactory to the Company, the Stockholder and their counsel, to the
effect that (a) the Purchaser is a corporation duly organized,
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<PAGE>
validly existing and in good standing under the laws of the State of Maryland;
(b) the Purchaser has the corporate power to carry on its business as it is now
being conducted and to own or hold under lease the properties and assets it now
owns or holds under lease and such counsel has no reason to believe that
Purchaser is not operating its business in material compliance with all
applicable laws and regulations; (c) the Purchaser has the corporate power to
enter into the transactions contemplated by this Agreement and perform it
obligations hereunder; (d) the execution, delivery and performance of this
Agreement and all other documents to be executed by the Purchaser in connection
with this Agreement (the "Purchaser Documents") have been duly authorized and
approved by all requisite action of the Board of Directors of the Purchaser, and
this Agreement and all other Purchaser Documents have been duly executed and
delivered by the Purchaser and constitute valid and legally binding obligations
of the Purchaser, subject to applicable bankruptcy, insolvency, moratorium and
other similar laws of general application and such general principles of equity
as a court having jurisdiction may apply; (e) the execution and delivery of this
Agreement and the other Purchaser Documents did not, and the consummation of the
transactions contemplated hereby or thereby will not, violate or conflict with
any provision of the Charter or By-Laws of the Purchaser; (f) the execution and
delivery of this Agreement and the other Purchaser Documents did not, and the
consummation of the transactions contemplated hereby or thereby will not,
violate any provision of any agreement, instrument, order, judgment or decree,
of which such counsel has knowledge, to which the Purchaser may be a party or by
which it is bound; (g) except as may be specified by such counsel, such counsel
does not know of any material suit or proceeding pending or threatened against
the Purchaser which seeks to restrain or prohibit the consummation of the
transactions contemplated by this Agreement other than those which have been
disclosed in filings made prior to the execution of this Agreement by Purchaser
pursuant to the Securities Exchange Act of 1934; (h) upon the appropriate filing
of the Certificate and Articles of Merger with the Maryland State Department of
Assessments and Taxation and the Secretary of State of the State of Minnesota
the merger will be valid and effective as a statutory merger of the Purchaser
and the Company, in accordance with the terms thereof under the laws of the
State of Maryland; (i) the shares of Purchaser Common Stock to be issued in
connection with the Merger are duly authorized and reserved for issuance and,
when issued and delivered in accordance with this Agreement, will be duly and
validly issued and outstanding shares of Purchaser Common Stock, fully paid and
non assessable under the laws of the State of Maryland; (j) to the knowledge of
such counsel, all regulatory and governmental approvals, consents and filings
required of the Purchaser for the consummation of the transactions contemplated
by this Agreement or any of the other Purchaser Documents have been obtained or
made, and to the knowledge of such counsel, all such approvals, consents or
filings remain in full effect as of the date of such opinion; and (k) to such
further effect regarding the validity and sufficiency of legal proceedings and
matters relative to the transactions contemplated by this Agreement as the
Company may reasonably request.
8.2. No Adverse Proceedings or Events. No suit, action or other
--------------------------------
proceeding against the Company or the Purchaser, or their respective officers or
directors, or any of the Stockholder, shall be threatened or pending before any
court or governmental agency in which it
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<PAGE>
will be, or it is, sought to restrain or prohibit or to obtain damages or other
relief in connection with this Agreement or the transactions contemplated
hereby.
8.3. Consents and Actions. All requisite consents of any third
--------------------
parties and other actions which the Purchaser has covenanted to use its best
efforts to obtain and take under Section 4.4 of this Agreement shall have been
obtained and completed.
8.. Other Evidence. The Company and the Stockholder shall have
--------------
received from the Purchaser such further certificates and documents evidencing
due action in accordance with this Agreement, including certified copies of
proceedings of the Board of Directors and Stockholder of the Purchaser, as the
Company and the Stockholder reasonably shall request.
9. INDEMNIFICATION.
9.1. Indemnification by the Stockholder. The Stockholder hereby
----------------------------------
covenants and agrees to indemnify and hold harmless the Purchaser and its
respective successors and assigns, at all times from and after the date of
Closing against and in respect of the following:
(i) any damage or loss resulting from any misrepresentation, breach of
representation or warranty or breach or non-fulfillment of any agreement or
covenant on the part of the Company or the Stockholder under this Agreement, or
from any inaccuracy or misrepresentation in or omission from any certificate or
other instrument or document furnished or to be furnished by the Company or the
Stockholder hereunder;
(ii) arises out of any liabilities or obligations of the Company or
the Stockholder for federal, state or local income tax or, to the extent not
accrued or reflected in the Financial Statements, any personal property, FICA,
withholding, excise, unemployment, sales or franchise taxes arising from
operations of the Company prior to the Closing;
(iii) all claims, actions, suits, proceedings, demands, assessments,
judgments, costs, reasonable attorneys' fees and expenses of any nature incident
to any of the matters indemnified against pursuant to this Section 9.1,
including, without limitation, all such costs and expenses incurred in the
defense thereof or in the enforcement of any rights of the Purchaser hereunder.
9.2. Notice and Defense. The Purchaser shall notify the Stockholder
------------------
of any asserted liability, damage, loss or expense claimed to give rise to
indemnification hereunder. Thereafter, the Purchaser shall have, at its
election, the right to compromise or defend any such matter at the Stockholder'
sole cost and expense through counsel chosen by the Purchaser and reasonably
acceptable to the Stockholder; provided, however, that any such compromise or
defense shall be conducted in a manner which is reasonable and the Stockholder
shall in all events have a right to veto any such compromise or defense which
might increase the potential liability of, or create a new liability for, the
Stockholder (other than under Section 9.1). Each
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<PAGE>
party agrees in all cases to cooperate with the defending party and its or his
counsel in the compromise of or defending of any such liabilities or claims. In
addition, the non defending party shall at all times be entitled to monitor such
defense through the appointment, at its or his own cost and expense, of advisory
counsel of its own choosing.
9.3. Indemnification by the Purchaser. From and after the Closing
--------------------------------
Date, the Purchaser hereby covenants and agrees to indemnify and hold harmless
the Stockholder against and in respect of the following:
(i) any liability, loss, damage or expense resulting from any
misrepresentation, breach of warranty or non-fulfillment of any agreement or
covenant on the part of Purchaser under this Agreement, or from any
misrepresentation in or omission from any certificate or other instrument or
document furnished or to be furnished by the Purchaser hereunder; and
(ii) all claims, actions, suits, proceedings, demands, assessments,
judgments, costs, reasonable attorneys' fees and expenses of any nature incident
to any of the matters indemnified against pursuant to this Section 9.3,
including without limitation, all such costs and expenses incurred in the
defense thereof or in the enforcement of any rights of the Stockholder
hereunder.
The Stockholder shall notify the Purchaser of any asserted liability,
damage, loss or expense claimed to give rise to indemnification hereunder and
thereafter the Purchaser shall have the right to defend, compromise and settle
such matter provided that the Stockholder are fully protected from any cost or
expense in connection therewith.
10. SURVIVAL; LIMITATIONS.
10.1 Survival. The representations, warranties and agreements made by
--------
the parties in this Agreement and in any other certificates and documents
delivered in connection herewith, including the indemnification obligations of
the Stockholder and Purchaser set forth in Section 9 hereof, shall survive the
Closing under this Agreement regardless of any investigation made by the party
making claim hereunder, except that, subject to the provisions of the next
sentence, neither the Purchaser, on the one hand, nor the Stockholder, on the
other, shall have any liability with respect to any matter if notice of a claim
has not been provided on or prior to December 31, 1999. Notwithstanding the
foregoing, (i) any indemnification obligations of the Stockholder relating to
federal, state or local tax matters or environmental matters of any sort shall
continue in full force and effect without limitation until expiration of the
statute of limitations applicable to such tax or environmental matters, (ii) the
representation and warranty contained in Sections 3.1, 3.3 or 3.6 and any
indemnification obligations of the Stockholder in connection therewith shall
continue in full force and effect without any limitation, (iii) any claims,
actions or suits the Purchaser, on the one hand, or the Company or the
Stockholder, on
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<PAGE>
the other hand, may have which arises from any fraud or willful misconduct on
the part of the Stockholder or the Company, or any representative of either, on
the one hand, and the Purchaser or any representative of it, on the other hand,
shall continue in full force and effect without limitation until expiration of
the statute of limitations applicable thereto.
10.2 Limitations. No indemnified party shall be entitled to
-----------
indemnification hereunder until such time as a single loss or an aggregate of
several losses equals Ten Thousand Dollars ($10,000), at which time such
indemnified party shall be entitled to indemnification for all losses sustained,
incurred, paid or required to be paid by such indemnified party in excess of the
$10,000; and in no event shall any party to this Agreement be entitled to
indemnification for a single loss or an aggregate of several losses which
exceeds $______________________.
11. REGISTRATION RIGHTS.
11.1 Registration Procedures and Expenses. So long as Jan Eian has
------------------------------------
not terminated her employment with the Purchaser pursuant to Section 4.04 of the
Employment Agreement between the Jan Eian and the Purchaser dated as of the date
hereof, Purchaser shall:
(a) as soon as practicable after ___________________, 199___ but in no
event later than ___________________, prepare and file with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-3
which meets the requirements of Rule 415 promulgated under the Securities Act (a
"Shelf Registration Statement") covering the sale by the Stockholder from time
to time of one-half of the shares of the Purchaser Common Stock received by each
Stockholder in the Merger and as soon as practicable after December 9, 1995 a
Shelf Registration Statement covering the sale by the Stockholders from time to
time of the remaining shares of Purchaser Common Stock received by each
Stockholder in the merger.
(b) use its best efforts, subject to receipt of necessary information
from the Stockholder, to cause each of the Shelf Registration Statements to
become effective;
(c) prepare and file with the Commission such amendments and
supplements to the Shelf Registration Statements and the prospectus used in
connection therewith as may be necessary to keep the Shelf Registration
Statements effective until the earlier of the date on which the Purchaser Common
Stock registered by such Shelf Registration Statement has been sold, or two
years after the closing;
(d) during the period referred to in (c) above, prepare and promptly
file with the Commission, and promptly notify the Stockholder of the filing of,
such amendment or supplement to each such Shelf Registration Statement and the
prospectus as may be necessary to correct any statements or omissions if, at any
time when a prospectus relating to the Purchaser Common Stock is required to be
delivered under the Securities Act, any event has occurred the result of which
is that any such prospectus then in effect would include or incorporate an
untrue
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<PAGE>
statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading in light of the circumstances in
which they were made;
(e) advise the Stockholder, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of any of such Shelf Registration Statements or the
initiation or threatening of any proceeding for that purpose and promptly use
its diligent best efforts to prevent the issuance of any stop order and to
obtain its withdrawal if such stop order should be issued;
(f) furnish to the Stockholder with respect to the Purchaser Common
Stock registered under any of the Shelf Registration Statements such number of
copies of prospectuses and preliminary prospectuses in conformity with the
requirements of the Securities Act and such other documents as the Stockholder
may reasonably request (but in no event more than 100), in order to facilitate
the public sale or other disposition of all or any of the registered Purchaser
Common Stock by the Stockholder; provided, however, that the obligation of
-------- -------
Purchaser to deliver copies of prospectuses or preliminary prospectuses to the
Stockholder shall be subject to the receipt by Purchaser of reasonable
assurances from the Stockholder that the Stockholder will comply with the
applicable provisions of the Securities Act and of such other securities or blue
sky laws as may be applicable in connection with any use of such prospectuses or
preliminary prospectuses;
(g) file documents required of Purchaser for normal blue sky clearance
in states reasonably specified in writing by the Stockholder, provided, however,
that Purchaser shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or
has not so consented; and
(h) bear all expenses in connection with the procedures in paragraphs
(a) through (g) of this Section 11.1 and the registration of the Purchaser
Common Stock pursuant to each of the Shelf Registration Statements, other than
fees and expenses, if any, of counsel or other advisers to the Stockholder.
11.2 Engagement of Underwriters. The parties hereto agree that the
--------------------------
Purchaser shall have no obligation to (i) conduct, arrange or coordinate any
distribution or sales activities on behalf of the Stockholder with respect to
the Purchaser Common Stock other than as set forth in Section 11.1 above or (ii)
retain any underwriter(s) in connection with the registration and/or
distribution of the Purchaser Common Stock pursuant to this Section 11. The
Stockholder agrees that any underwriter(s) or counsel engaged in connection with
the registration or distribution of the Purchaser Common Stock required to be
registered pursuant to this Section 11 will be retained by and at the sole
expense of the Stockholder and agrees further that any discounts or commissions
payable to such underwriter(s) shall also be an expense solely of the
Stockholder. In the event the Stockholder engages one or more underwriters
pursuant to this Section 11.2, the
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<PAGE>
Stockholder shall enter into an underwriting agreement with the managing or lead
managing underwriter in the form customarily used by such underwriter with such
changes thereto as the parties thereto shall agree; and, further, shall provide
to such underwriter any documents or other information as is necessary, in the
underwriter's reasonable opinion, to facilitate the effectiveness of the Shelf
Registration Statement and the completion of the distribution of the Purchaser
Common Stock so registered.
11.3 Indemnification with respect to Shelf Registration Statements.
-------------------------------------------------------------
Purchaser hereby agrees to indemnify the Stockholder against liability arising
out of or based upon any untrue statement or alleged untrue statement of
material fact in any of the Shelf Registration Statements filed by Purchaser
pursuant hereto, or the omission or alleged omission to state or incorporated by
reference in such Shelf Registration Statements any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, other than any such statement included or incorporated by reference
in, or omitted from, such Shelf Registration Statements by Purchaser in reliance
upon and in conformity with written information furnished to Purchaser
specifically for use therein by or on behalf of the Stockholder. The
Stockholder hereby agrees to indemnify Purchaser against liability arising out
of or based upon any untrue statement or alleged untrue statement of a material
fact included or incorporated by reference in the Shelf Registration Statements
or the omission or alleged omission to state or incorporate by reference therein
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading, if such statement or omission was made by
Purchaser in reliance upon and in conformity with written information furnished
to Purchaser for use or incorporation by reference in such Shelf Registration
Statements.
12. CONFIDENTIALITY. After the date hereof, the Stockholder will hold in
confidence and not reveal to any third parties any knowledge or information of a
confidential nature with respect to the business, products, know-how and methods
of operation of the Company, and will not disclose, publish or make use of the
same, provided, however, that the foregoing shall not be applicable to any
disclosure or use of confidential information or knowledge that can be
demonstrated to have (i) been publicly known prior to the date of this
Agreement, (ii) become well known by publication or otherwise not due to the
unauthorized act or omission on the part of the Stockholder, or (iii) been
supplied to the Stockholder by a third party without violation of the rights of
the Company or the Purchaser or any other party. The parties agree that the
remedy at law for any breach by the Stockholder of this Section 13 shall be
inadequate and that the aggrieved party shall be entitled to injunctive relief
in addition to any other remedy.
13. EXPENSES. Each party to this Agreement shall pay all of its expenses
relating hereto, including fees and disbursements of its counsel, accountants
and financial advisors, whether or not the transactions hereunder are
consummated. It is expressly understood that the Stockholder will bear, and
will not cause the Company to pay, any legal fees or other expenses incurred in
connection with the transactions contemplated by this agreement, except that the
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Company may bear the cost of furnishing the audited and reviewed Company
Financial Statements referred to in Section 2.4; provided, however, that in the
event of any litigation between the parties hereto relating to or arising from
this Agreement, the prevailing party in such litigation shall be entitled to
payment by the non-prevailing party of all reasonable attorney's fees and costs.
14. NOTICES. Except as otherwise provided herein, all notices, requests,
demands and other communications under or in connection with this Agreement
shall be in writing, and, (a) if to the Purchaser, shall be addressed to:
B. Lee McGee, Chief Financial Officer
Sylvan Learning Systems, Inc.
9135 Guilford Road
Columbia, Maryland 21046
with a copy to:
Richard C. Tilghman, Jr., Esquire
Piper & Marbury
36 South Charles Street
Baltimore, Maryland 21201
(b) if to the Company or the Stockholder, shall be addressed to:
Jan Eian
with a copy to:
(Eian's Attorney)
All such notices, requests, demands or communications shall be mailed
postage prepaid, certified mail, return receipt requested, or by overnight
delivery or delivered personally, and shall be sufficient and effective when
delivered to or received at the address so specified. Any party may change the
address at which it is to receive notice by like written notice to the other.
15. ENTIRE AGREEMENT. This Agreement (including the exhibits hereto and
the lists, schedules and documents delivered pursuant hereto, which are a part
hereof) is intended by the parties to and does constitute the entire agreement
of the parties with respect to the transactions contemplated by this Agreement.
This Agreement supersedes any and all prior understandings, written or oral,
between the parties, and this Agreement may be amended, modified, waived,
discharged or terminated only by an instrument in writing signed by the party
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<PAGE>
against which enforcement of the amendment, modification, waiver, discharge or
termination is sought.
16. GENERAL. The paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns, but nothing herein, express or implied, is
intended to or shall confer any rights, remedies or benefits upon any person
other than the parties hereto. This Agreement may not be assigned by any party
hereto. This Agreement shall be construed in accordance with and governed by
the laws of the State of Maryland.
IN WITNESS WHEREOF, the Purchaser, the Company and the Stockholder have
caused this Agreement to be duly executed and their respective seals to be
hereunto affixed as of the date first above written.
WITNESS: SYLVAN LEARNING SYSTEMS, INC.
By: /s/
- ------------------------- -------------------------
ATTEST: JANNICK EDUCATION, CORP.
By: /s/
- ------------------------- -------------------------
, Secretary
[Corporate Seal]
WITNESS: STOCKHOLDER:
/s/ Jan Eian
- ------------------------- -------------------------(Seal)
Jan Eian
/s/ Nick Eian
-------------------------(Seal)
Nick Eian
-22-
<PAGE>
EXHIBIT 4.4
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
Sylvan Learning Systems, Inc.
and
Goldman Acquisition Corp.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I CONVEYANCE OF ASSETS
Section 1.01 Conveyance of Assets..................................... 1
Section 1.02 No Assumption of Obligations and Liabilities............. 2
Section 1.03 Purchase Price........................................... 2
Section 1.04 Distribution............................................. 2
ARTICLE II REPRESENTATIONS OF GOLDMAN
AND THE GOLDMAN STOCKHOLDERS................................................. 2
Section 2.01 Organization, Valid Authorization and Good Standing....... 2
Section 2.02 Compliance................................................ 3
Section 2.03 Approvals................................................. 3
Section 2.04 Capitalization............................................ 3
Section 2.05 Disclosure................................................ 3
Section 2.06 Title to Goldman Assets................................... 4
Section 2.07 Tax Matters............................................... 4
Section 2.08 Investment Intent......................................... 4
Section 2.09 Legends................................................... 4
ARTICLE III REPRESENTATIONS OF SYLVAN......................................... 5
Section 3.01 Organization, Valid Authorization and Good Standing....... 5
Section 3.02 Compliance................................................ 5
Section 3.03 Approvals................................................. 5
Section 3.04 Capitalization............................................ 6
Section 3.05 Disclosure................................................ 6
Section 3.06 Validity of Exchange Shares............................... 6
Section 3.07 Tax Matters............................................... 6
ARTICLE IV ADDITIONAL AGREEMENTS.............................................. 6
Section 4.01 Current Public Information................................ 6
Section 4.02 Registration Rights....................................... 6
Section 4.03 Sylvan Liabilities........................................ 7
ARTICLE V CLOSING............................................................. 7
Section 5.01 Closing................................................... 7
Section 5.02 Documents to be Delivered by Goldman and the Goldman
Stockholders.............................................. 7
Section 5.03 Documents to be Delivered by Sylvan....................... 8
ARTICLE VI INDEMNIFICATION.................................................... 8
(i)
<PAGE>
Section 6.01 Indemnification by Goldman and the Goldman Stockholders... 8
Section 6.02 Indemnification by Sylvan................................. 8
Section 6.03 Notice and Defense........................................ 9
Section 6.04 Survival................................................. 10
ARTICLE VII MISCELLANEOUS.................................................... 10
Section 7.01 Remedies Not Exclusive................................... 10
Section 7.02 Parties Bound............................................ 10
Section 7.03 Notices.................................................. 10
Section 7.04 Choice of Law............................................ 11
Section 7.05 Entire Agreement; Amendments and Waivers................. 11
Section 7.06 Attorneys' Fees.......................................... 12
Section 7.07 Further Assurances....................................... 12
Section 7.08 No Tax Representations................................... 12
Section 7.09 No Rights as Stockholder................................. 12
Section 7.10 Multiple Counterparts.................................... 12
Section 7.11 Headings................................................. 12
Section 7.12 Severability............................................. 12
Section 7.13 Gender and Number........................................ 12
(ii)
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization ("Agreement"), dated as of January
31, 1997, is made by and among Sylvan Learning Systems, Inc., a Maryland
corporation ("Sylvan"), and Goldman Acquisition Corp., an Illinois corporation
("Goldman") (Sylvan and Goldman are individually referred to herein as a "Party"
and collectively referred to herein as the "Parties").
WITNESSETH:
WHEREAS, Douglas L. Becker, Jill E. Becker, Bruce L. Goldman, Rudolph C.
Hoehn-Saric, Steven Taslitz and Bruce Goldman, Trustees of the KJT Annuity Trust
U/A/D 12/15/93 and Kathy J. Taslitz, (the "Goldman Stockholders") are the sole
stockholders of Goldman.
WHEREAS, Sylvan is engaged in the business of educational services.
WHEREAS, Goldman desires to sell and transfer all of the assets consisting
solely of 634,468 shares of Common Stock of Sylvan, par value $.01 per share,
(the "Sylvan Stock") and those certain liabilities of Goldman specifically
listed on Exhibit A hereto (collectively, the "Goldman Assets") solely in
exchange for 633,382 shares of Common Stock of Sylvan, $.01 par value per share
(the "Exchange Shares"), and Sylvan desires to purchase and acquire the Goldman
Assets, in a transaction that, for Federal income tax purposes, is intended to
qualify as a reorganization under the provisions of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the "Code"), subject to the terms set
forth in this Agreement.
WHEREAS, the Parties desire to effect this Agreement for good business
purposes including, but not limited to (i) eliminating the possibility that two
of Sylvan's executive officers will be forced to sell, transfer, or otherwise
convey a portion of the Sylvan Stock beneficially owned by them through Goldman
since such a sale may subject the Sylvan executive officers to strict liability
under the Securities and Exchange Act of 1934, as amended, and (ii) eliminating
Goldman as a holding company of Sylvan Stock in order to reduce the
administrative costs of the current holding company structure.
1
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
CONVEYANCE OF ASSETS
Section 1.01 Conveyance of Assets. Subject to the terms and conditions
--------------------
herein set forth, and in reliance upon the representations and warranties set
forth herein, Goldman agrees to sell, convey, assign, transfer and deliver to
Sylvan, and Sylvan agrees to acquire, the Goldman Assets owned by Goldman as of
the Closing Date.
Section 1.02 No Assumption of Obligations and Liabilities. Sylvan shall
--------------------------------------------
not assume or be deemed to have assumed and shall not be responsible for any
obligation or liability of Goldman, direct or indirect, known or unknown,
absolute or contingent other than those liabilities specifically set forth on
Exhibit A hereto (the "Goldman Liabilities").
Section 1.03 Purchase Price. As full consideration for the sale, transfer,
--------------
conveyance and delivery of the Goldman Assets, and subject to and in reliance
upon the terms and conditions of this Agreement, Sylvan agrees to issue to
Goldman stock certificates representing that number of Exchange Shares having an
aggregate Fair Market Value on the Closing Date equal to (A) the aggregate Fair
Market Value of the Goldman Assets on the Closing Date minus (B) the Goldman
-----
Liabilities. The Fair Market Value of each share of the Sylvan Stock and each
share of the Exchange Stock on the Closing Date shall be the average of the per
share closing price of the Common Stock of Sylvan on the Nasdaq Stock Market, as
reported in the Wall Street Journal (Eastern Edition), on each of the fifteen
-------------------
business days immediately preceding the Closing Date.
Section 1.04 Distribution. Goldman and the Goldman Stockholders agree that
------------
Goldman will immediately distribute to the Goldman Stockholders the Exchange
Shares in complete liquidation of Goldman and promptly thereafter dissolve
Goldman as an integral part of the transaction.
2
<PAGE>
ARTICLE II
REPRESENTATIONS OF GOLDMAN AND
THE GOLDMAN STOCKHOLDERS
Each of the Goldman Stockholders, jointly and severally, and Goldman, jointly
and severally with the Goldman Stockholders, represent and warrant to Sylvan
that:
Section 2.01 Organization, Valid Authorization and Good Standing. Goldman
---------------------------------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Illinois and is not required to be qualified to do business
in any state or jurisdiction other than the State of Illinois. Goldman does not
have any subsidiaries. Goldman has the power and authority to own all of the
Goldman Assets. Goldman and the Goldman Stockholders have the power and
authority to enter into this Agreement and to carry out their obligations
thereunder. The execution and delivery of this Agreement and related
transaction documents to which any of Goldman and the Goldman Stockholders are
party and the consummation of this Agreement and the transactions contemplated
hereby and thereby have been duly and validly authorized by such party, and no
other corporate or other proceedings on the part of Goldman are necessary to
authorize this Agreement and related transaction documents and the transactions
contemplated thereby. This Agreement has been duly and validly executed and
delivered by each of Goldman and the Goldman Stockholders and constitutes the
valid and binding agreement that is enforceable against each such party in
accordance with its terms.
Section 2.02 Compliance. The execution and delivery of this Agreement and
----------
related transaction documents and the consummation of the transactions
contemplated thereby by Goldman and the Goldman Stockholders (A) will not
(i) violate any provision of Goldman's charter or by-laws, (ii) violate any
provision of, or result in the breach of or entitle any party to accelerate
(whether after the giving of notice or lapse of time or both) any obligation
under any mortgage, lien, lease, contract, license, instrument or any other
agreement to which Goldman or any of the Goldman Stockholders is a party,
(iii) result in the creation or imposition of any lien, charge, pledge, security
interest or other encumbrance upon any property of Goldman or any of the Goldman
Stockholders, or (iv) violate or conflict with any order award, judgment or
decree or other material restriction or any law, ordinance or regulation to
which Goldman or any of the Goldman Stockholders or property of Goldman or any
of the Goldman Stockholders is subject and (B) do not require the consent or
other authorization of any Party to any lease, lien, contract, license,
instrument or other agreement to which Goldman or any of the Goldman
Stockholders is also party.
Section 2.03 Approvals. To the best of Goldman's and the Goldman
---------
Stockholders' knowledge, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental authority or other
person is required in connection with the execution and delivery of this
Agreement and related transaction documents by each of Goldman and the Goldman
Stockholders for the consummation by such Party of the transactions contemplated
thereby.
Section 2.04 Capitalization. The entire authorized capital of Goldman
--------------
consists of 1,000 shares of common stock, no par value, of which 100 shares are
issued and outstanding (the
3
<PAGE>
"Goldman Shares"). The Goldman Stockholders are and on the Closing Date will be
the only record and beneficial owners and holders of the Goldman Shares, free
and clear of all liens, claims or encumbrances of any kind. All of the
outstanding Goldman Shares have been duly authorized and validly issued and are
fully paid and nonassessable. There are no agreements or contracts relating to
the voting, issuance, sale, or transfer of any Goldman Shares or securities
convertible into Goldman Shares, including any shareholders' agreements, voting
agreements or trusts and any agreements relating to the issuance of any options,
warrants puts, or calls.
Section 2.05 Disclosure. No representation, warranty or statement made by
----------
Goldman or the Goldman Stockholders in this Agreement, or any agreements,
certificates, documents or instruments delivered or to be delivered to Sylvan in
accordance with this Agreement or the related transaction documents contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading.
Section 2.06 Title to Goldman Assets. Goldman is the owner and has as of
-----------------------
the date hereof, good and marketable title to the Goldman Assets, free and clear
of any and all liens, charges, pledges, claims, security interests, exceptions
or other encumbrances of any kind.
Section 2.07 Tax Matters. Goldman and each of the Goldman Stockholders
-----------
agree that each shall report the transaction described herein as a tax-free
reorganization pursuant to Section 368(a)(1)(C) of the Code for federal income
tax purposes and that each will take or omit to make any and all actions
required or recommended by its respective counsel to cause the transaction to
qualify as a tax-free reorganization pursuant to Section 368(a)(1)(C) of the
Code for federal income tax purposes.
Section 2.08 Investment Intent. It is understood that the Exchange Shares
-----------------
to be delivered to Goldman and distributed to the Goldman Stockholders pursuant
to this Agreement are not being registered, for purposes of the transactions
hereunder, under the Securities Act of 1933, as amended (the "Securities Act")
or any state securities laws, and the Exchange Shares are being delivered
without registration in reliance upon an exemption from the registration
requirements of the Securities Act or any state securities laws. Each of
Goldman and the Goldman Stockholders is acquiring the Purchaser Common Stock
hereunder only for his own account for investment and not with any intention of
making, or with a view to, or for sale in connection with, any distribution
thereof within the meaning of the Securities Act unless such shares first are
registered under the Securities Act.
In connection with the foregoing, each of the Goldman Stockholders hereby
represents and warrants that:
(a) he or she has reviewed, discussed and evaluated the information
delivered under this Agreement and has had the opportunity to ask questions of,
and receive answers from, executive officers of Sylvan concerning the terms and
conditions of this Agreement and to obtain any additional information which he
or she considered necessary to verify the accuracy of the information delivered
hereunder;
4
<PAGE>
(b) he or she understands that he or she must bear the economic risks
of the investment in the Exchange Shares to be made hereunder for an indefinite
period of time because such stock has not been registered under the Securities
Act and, therefore, may not be sold until such stock subsequently is registered
under the Securities Act or an exemption from registration is available; and
(c) he has sufficient knowledge and experience in financial and
business matters to enable him or her to be capable of evaluating the merits and
the risks of the exchange of the Goldman Assets for the Exchange Shares
contemplated by this Agreement and his or her prospective investment in Sylvan.
Section 2.09 Legends. It is understood and agreed that, to implement the
-------
requirements of the Securities Act and state securities laws and evidence the
restrictions upon transfer contained in this Agreement, Sylvan will cause a
legend to be conspicuously noted on the certificates representing the Exchange
Shares deliverable hereunder, and that Sylvan will issue stop transfer
instructions to its transfer agent, to the effect that such stock has not been
registered under the Securities Act and that no transfer may take place except
as permitted by Section 5.03 of this Agreement and after delivery of an opinion
of counsel satisfactory to Sylvan to the effect that registration thereof for
the purpose of transfer is not required under the Securities Act or that the
stock proposed to be transferred has been effectively registered for that
purpose under the Securities Act.
ARTICLE III
REPRESENTATIONS OF SYLVAN
Sylvan represents and warrants to each of Goldman and the Goldman
Stockholders that:
Section 3.01 Organization, Valid Authorization and Good Standing. Sylvan is
---------------------------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland. Sylvan is duly qualified to transact business in
the State of Maryland. Sylvan has the power and authority to own all of its
properties and assets and to conduct its business, except where the failure to
have such power and authority would not have a material adverse effect on the
business of Sylvan. Sylvan has the power and authority to enter into this
Agreement and related transaction documents to which it is a party and to carry
out its obligations thereunder. The execution and delivery of the transaction
documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Board of Directors of Sylvan, and no other corporate or other proceedings on the
part of Sylvan is necessary to authorize this Agreement and related transaction
documents and the transactions contemplated hereby and thereby. This Agreement
has been duly and validly executed and delivered by Sylvan and constitutes the
valid and binding agreement of Sylvan enforceable in accordance with its terms.
Section 3.02 Compliance. The execution and delivery of this Agreement and
----------
related transaction documents and the consummation of the transactions
contemplated thereby by Sylvan (A) will not (i) violate any provision of its
charter or bylaws, (ii) violate any provision of or result in the breach of or
entitle any party to accelerate (whether after the giving of notice or lapse of
time
5
<PAGE>
or both) any obligation under any mortgage, lien, lease, contract, license,
instrument or any other agreement to which Sylvan is a party, (iii) result in
the creation or imposition of any lien, charge, pledge, security interest or
other encumbrance upon any property of Sylvan, or (iv) violate or conflict with
any order, award, judgment or decree or other restriction or any law, ordinance
or regulation to which Sylvan is subject and (B) do not require the consent or
other authorization of any party to any lease, lien, contract, license,
instrument or other agreement to which Sylvan is also party.
Section 3.03 Approvals. To the best of Sylvan's knowledge, no consent,
---------
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Authority or other person is required in connection with
the execution and delivery of this Agreement or related transaction documents by
Sylvan or the consummation by Sylvan of the transactions contemplated thereby,
except for any filings and approvals required under the rules and regulations of
the Securities and Exchange Commission, and filings and approvals required by
the Blue Sky laws of the various states.
Section 3.04 Capitalization. The entire authorized capital stock of Sylvan
--------------
as of the date of this Agreement consists of 40 million shares of common stock,
$.01 par value, and 10 million shares of preferred stock, $.01 par value.
Section 3.05 Disclosure. To the best of Sylvan's knowledge, no
----------
representation, warranty or statement made by Sylvan in this Agreement, or any
agreements, certificates, documents or instruments delivered or to be delivered
to Goldman and the Goldman Stockholders in accordance with this Agreement or the
related transaction documents contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances under
which they were made, not misleading.
Section 3.06 Validity of Exchange Shares. The Exchange Shares to be
---------------------------
delivered by Sylvan hereunder have been duly authorized for issuance and will,
when issued and delivered as provided in this Agreement, be duly and validly
issued, fully paid and non-assessable.
Section 3.07 Tax Matters. Sylvan agrees to (i) report the transaction
-----------
described herein as a tax-free reorganization pursuant to Section 368(a)(1)(C)
of the Code for federal income tax purposes and (ii) take or omit to take any
and all actions required or recommended by its counsel and independent auditors
to cause the transaction to qualify as a tax-free reorganization pursuant to
Section 368(a)(1)(C) of the Code for federal income tax purposes. Sylvan has no
plan or intention to (i) reacquire any of the Exchange Shares or (ii) sell or
otherwise dispose of the Goldman Assets.
ARTICLE IV
ADDITIONAL AGREEMENTS
Section 4.01 Current Public Information. At all times that any Exchange
--------------------------
Shares remain outstanding, Sylvan shall comply with the requirements of Rule 144
under the Securities Act regarding the availability of current public
information to the extent required to enable any holder
6
<PAGE>
of Exchange Shares to sell such shares without registration under the Securities
Act pursuant to Rule 144.
Section 4.02 Registration Rights. Sylvan shall use its best efforts to file
-------------------
within 90 days a registration statement on Form S-3 covering the sale from time
to time of the Exchange Shares by Goldman or the Goldman Stockholders, and shall
use its best efforts to cause the Registration Statement to become effective and
to maintain its effectiveness until the earlier of (i) such time as all of the
Exchange Shares have been sold pursuant thereto and (ii) such time as the
Exchange Shares are eligible for transfer without restriction pursuant to Rule
144(k) under the Securities Act if not held by Sylvan Affiliates. Sylvan will
also furnish to the Goldman Stockholders with respect to the Exchange Shares
registered under the Registration Statement such number of copies of
prospectuses and preliminary prospectuses in conformity with the requirements of
the Securities Act and such other documents as the Goldman Stockholders may
reasonably request, in order to facilitate the public sale or other disposition
of all or any of the Exchange Shares by the Goldman Stockholders, provided,
however, that the obligation of Sylvan to deliver copies of prospectuses or
preliminary prospectuses to the Goldman Stockholders shall be subject to the
receipt by Sylvan of reasonable assurances from the Goldman Stockholders that
the Goldman Stockholders will comply with the applicable provisions of the
Securities Act and of such other securities or blue sky laws as may be
applicable in connection with any use of such prospectuses or preliminary
prospectuses. Sylvan will file documents required of Sylvan for blue sky
clearance for the Goldman Stockholders to offer and sell the Exchange Shares in
all states reasonably requested, provided, however, that Sylvan shall not be
required to qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so consented. The
Goldman Stockholders have agreed to bear all expenses in connection with the
obligations described in this Section 4.02 and the registration of the Exchange
Shares pursuant to a registration statement, including brokerage commissions,
placement agent fees, underwriting discounts and fees and expenses, if any, of
counsel or other advisers to Sylvan and the Goldman Stockholders only as the
same applies to the registration contemplated by this Section 4.02. Other than
as described in this Section, Sylvan is under no other obligations to (i)
register any of the Exchange Shares on behalf of the Goldman Stockholders under
the Securities Act (ii) conduct, arrange or coordinate any distribution of the
Exchange Shares, (iii) retain any underwriters in connection with the
negotiation and/or distribution of the Exchange Shares or (iv) assist the
Goldman Stockholders in complying with any exemption from registration of the
Exchange Shares under the Securities Act.
Section 4.03 Sylvan Liabilities. Within 30 days following the Closing, the
------------------
Goldman Stockholders, jointly and severally, agree to remit payment by check in
immediatley available funds for the Sylvan Transaction Costs (as defined in
Section 5.03 below) by remitting payment to Sylvan at the address provided in
Section 7.03.
ARTICLE V
CLOSING
Section 5.01 Closing. The Closing will take place at the offices of Piper &
-------
Marbury, L.L.P., 36 South Charles Street, Baltimore, Maryland 21201 on January
31, 1997 ("Closing Date") at 10:00 a.m. (local time) or such other place and
time as the parties may agree upon.
7
<PAGE>
Section 5.02 Documents to be Delivered by Goldman and the Goldman
----------------------------------------------------
Stockholders. At the Closing, pursuant to this Agreement, Goldman shall
- ------------
deliver, or cause to be delivered, to Sylvan the following:
(a) Bills of sale or other instruments that effectuate the transfer of
the Goldman Assets;
(b) Good standing certificate of Goldman issued by the State of
Illinois;
(c) Certified copy of corporate resolutions authorizing the transaction
contemplated by this Agreement; and
(d) Executed direction of Goldman directing distribution of the
Exchange Shares directly to the Goldman Stockholders.
Section 5.03 Documents to be Delivered by Sylvan. At the Closing, pursuant
-----------------------------------
to this Agreement, Sylvan shall deliver the following:
(a) One or more stock certificates representing Exchange Shares issued
hereunder;
(b) Good standing certificate of Sylvan issued by the State of
Maryland;
(c) Certified copy of corporate resolutions authorizing the
transactions contemplated by this Agreement; and
(d) An invoice for the costs and expenses incurred by Sylvan in
connection with the negotiation and preparation of this Agreement and related
transaction documents and the consummation of the transactions contemplated
hereby and thereby, in the amounts listed on Exhibit B hereto (the "Sylvan
Transaction Costs").
ARTICLE VI
INDEMNIFICATION
Section 6.01 Indemnification by Goldman and the Goldman Stockholders.
-------------------------------------------------------
Goldman and each of the Goldman Stockholders hereby, jointly and severally,
covenant and agree to indemnify and hold harmless Sylvan and each subsidiary,
affiliate, director, officer, agent and representative of Sylvan (the "Sylvan
Affiliates") and each of their respective assigns at all times from and after
the Closing against and in respect of the following:
(a) any liability, loss, damage or expense resulting from any
misrepresentation, breach of representation or warranty or non-fulfillment of
any agreement or covenant on the part of Goldman or the Goldman Stockholders
under this Agreement, or from any inaccuracy or misrepresentation in or omission
from any certificate or other instrument or document furnished or to be
furnished by Goldman or the Goldman Stockholders hereunder; and
8
<PAGE>
(b) all claims, actions, suits, proceedings, demands, assessments,
judgements, costs, reasonable attorneys' fees and expenses of any nature
incident to any of the matters indemnified against pursuant to this Section
6.01, including, without limitation, all such costs and expenses incurred in the
defense thereof or in the enforcement of any rights of Sylvan hereunder.
Section 6.02 Indemnification by Sylvan. Sylvan hereby covenants and agrees
-------------------------
to indemnify and hold harmless Goldman or the Goldman Stockholders and each
affiliate, director, officer, agent and representative of Goldman or the Goldman
Stockholders (the "Goldman Affiliates") against and in respect of the following:
(a) any liability, loss, damage or expense resulting from any
misrepresentation, breach of representation or warranty or non-fulfillment of
any agreement or covenant on the part of Sylvan under this Agreement, or from
any misrepresentation in or omission from any certificate or other instrument or
document furnished or to be furnished by Sylvan hereunder;
(b) all claims, actions, suits, proceedings, demands, assessments,
judgements, costs, reasonable attorneys' fees and expense of any nature incident
to any of the matters indemnified against pursuant to this Section 6.02,
including without limitation, all such costs and expenses incurred in the
defense thereof or in the enforcement of any rights of Goldman or the Goldman
Stockholders hereunder; and
(c) failure to take or omit to take any and all actions required or
recommended by its respective counsel to cause the transaction to qualify as a
tax-free reorganization pursuant to Section 368(a)(1)(C) of the Code for federal
income tax purposes.
Section 6.03 Notice and Defense. If at any time a party entitled to
------------------
indemnification hereunder (the "Indemnitee") shall receive notice of any
asserted liability, damage, loss or expense (together, a "Loss") claimed to give
rise to indemnification hereunder, the Indemnitee shall promptly give notice
thereof ("Claims Notice") to the party obligated to provide indemnification (the
"Indemnitor") of such Loss. The Claims Notice shall set forth a brief
description of the Loss, and, if known, the amount of the Loss that has been or
may be suffered by the Indemnitee. The final determination of a Loss shall be
calculated after the Indemnitee has determined the tax benefit or insurance
recovery related to such Loss, if any. Thereafter, the Indemnitor shall have,
at its election, the right to compromise or defend any such matter at
Indemnitor's sole cost and expense through counsel chosen by the Indemnitor and
approved by the Indemnitee (which approval shall not unreasonably be withheld);
provided, however, that any such compromise or defense shall be conducted in a
manner which is reasonable and not contrary to the Indemnitee's interest and the
Indemnitee shall in all events have a right to veto any such compromise or
defense which is unreasonable or which would jeopardize in any material respect
any assets or business of the Indemnitee or any of its affiliates or increase
the potential liability of, or create a new liability for, the Indemnitee or any
of its affiliates and, provided further that the Indemnitor shall in all events
indemnify the Indemnitee and its affiliates against any damage resulting from
the manner in which such matter is compromised or defended. In the event that
the Indemnitor does so undertake to compromise and defend a claim, the
Indemnitor shall notify the Indemnitee of its intention to do so. Even if the
Indemnitor undertakes to compromise or defend a claim, the Indemnitee shall have
the right to settle any matter for which a claim for indemnification has been
made hereunder upon
9
<PAGE>
notice to the Indemnitor and by waiving any right against Indemnitor with
respect to such matter. Each party agrees in all cases to cooperate with the
defending party and its counsel in the compromise of or defending of any such
liabilities or claims. In addition, the non-defending party shall at all times
be entitled to monitor such defense through the appointment, at its own costs
and expense, of advisory counsel of its own choosing.
Section 6.04 Survival. The representations, warranties and agreements made
--------
by the Parties in this Agreement and in any other certificates and documents
delivered at the Closing, including the indemnification rights and obligations
of the Parties set forth in Sections 6.01 and 6.02 hereof, shall survive the
Closing under this Agreement.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Remedies Not Exclusive. No remedy conferred by any of the
----------------------
specific provisions of this Agreement or any other transaction document is
intended to be exclusive of any other remedy, and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise. The
election of any one or more remedies by any party hereto shall not constitute a
waiver of the right to pursue other available remedies.
Section 7.02 Parties Bound. Except to the extent otherwise expressly
-------------
provided herein, this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, representatives,
administrators, guardians, successors and assigns; and no other person shall
have any right, benefit or obligation hereunder.
Section 7.03 Notices. All notices, reports, records or other communications
-------
that are required or permitted to be given to the parties under this Agreement
shall be sufficient in all respects if given in writing and delivered in person,
by telecopy, by overnight courier or by registered or certified mail, postage
prepaid, return receipt requested, to the receiving party at the following
address:
If to Sylvan, addressed to:
B. Lee McGee
Sylvan Learning Systems, Inc.
1000 Lancaster Street
Baltimore, MD 21202
With copies to:
Jill C. Nord, Esq.
Piper & Marbury LLP
36 S. Charles Street
Baltimore, MD 21201
10
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If to Goldman or the Goldman Stockholders, addressed to:
Goldman Acquisition Corp.
c/o Tom Wippman
650 Dundee Road
Northbrook, IL 60062
With copies to:
Saul E. Rudo, Esq.
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661-3693
or to such other address as such party may have given to the other parties by
notice pursuant to this Section 7.03. Notice shall be deemed given on the date
of delivery, in the case of personal delivery or telecopy, or on the delivery or
refusal date, as specified on the return receipt, in the case of overnight
courier or registered or certified mail.
Section 7.04 Choice of Law. This Agreement shall be construed, interpreted,
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and the rights of the parties determined in accordance with, the laws of the
State of Maryland except with respect to matters of law concerning the internal
affairs of any corporate or partnership entity which is a party to or the
subject of this Agreement, and as to those matters the law of the state of
incorporation or organization of the respective entity shall govern. The Parties
agree that if a controversy or claim between or among them arises out of or in
relation to this Agreement and results in litigation, the courts of Maryland or
the courts of the United States of America located in Maryland shall have
jurisdiction to hear and decide such matter, and the Parties hereby submit to
jurisdiction to such courts.
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Section 7.05 Entire Agreement; Amendments and Waivers. This Agreement, the
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other transaction documents and all schedules hereto and thereto, constitutes
the entire agreement between the parties pertaining to the subject matter hereof
and supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties, and there
are no warranties, representations or other agreements between the parties in
connection with the subject matter hereof. No supplement, modification or waiver
of this Agreement shall be binding unless it shall be specifically designated to
be a supplement, modification or waiver of this Agreement and shall be executed
in writing by the Party to be bound thereby. No waiver of any of the provisions
of this Agreement shall be binding unless executed in writing by the Party to be
bound thereby. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
Section 7.06 Attorneys' Fees. Except as otherwise specifically provided
---------------
herein, if any action or proceeding is brought by any party with respect to this
Agreement or the other transaction documents, or with respect to the
interpretation, enforcement or breach hereof, the prevailing party in such
action shall be entitled to an award of all reasonable costs of litigation or
arbitration, including, without limitation, attorneys' fees, to be paid by the
losing party, in such amounts as may be determined by the court having
jurisdiction of such action or proceeding or by the arbitrators deciding such
action or proceeding.
Section 7.07 Further Assurances. From time to time hereafter and without
------------------
further consideration, each of the parties hereto shall execute and deliver such
additional or further instruments of conveyance, assignment and transfer and
take such actions as any of the other parties hereto may reasonably request in
order to more effectively consummate the transactions contemplated by this
Agreement and related transaction documents or as shall be reasonably necessary
or appropriate in connection with the carrying out of the parties' respective
obligations hereunder or the purposes of this Agreement.
Section 7.08 No Tax Representations. Each party acknowledges that it is
----------------------
relying solely on its advisors to determine the tax consequences of the
transactions contemplated hereunder and that no representation or warranty has
been made by any party as to the tax consequences of such transactions.
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Section 7.09 No Rights as Stockholder. The Goldman Stockholders shall not
------------------------
have any rights as a stockholder with respect to any Exchange Shares until there
have been issued a stock certificate in their names for such shares. No
adjustment shall be made for dividends or distributions or other rights for
which the record date is prior to such date any such stock certificate is
issued.
Section 7.10 Multiple Counterparts. This Agreement may be executed in one
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or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 7.11 Headings. The headings of the several Articles and Sections
--------
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.
Section 7.12 Severability. Each article, section, subsection and lesser
------------
section of this Purchase Agreement constitutes a separate and distinct
undertaking, covenants or provision hereof. In the event that any provision of
this Agreement shall finally be determined to be unlawful, such provision shall
be deemed severed from this Agreement, but every other provision of this
Agreement shall remain in full force and effect.
Section 7.13 Gender and Number. Whenever the context of this Agreement
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requires, the gender of all words herein shall include the masculine, feminine,
and neuter, and the number of all words herein shall include the singular and
plural.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the date set forth below their respective signatures.
SYLVAN LEARNING SYSTEMS, INC. GOLDMAN ACQUISITION CORP.
By: /s/ B. Lee McGee By: /s/ Bruce L. Goldman
----------------------------- --------------------
Its: Senior Vice President and CFO Its: President
----------------------------- --------------------
Date: January 31, 1997 Date: January 31, 1997
----------------------------- --------------------
THE GOLDMAN STOCKHOLDERS
/s/ Douglas L. Becker /s/ Jill E. Becker
---------------------------- ----------------------
Douglas L. Becker Jill E. Becker
/s/ Bruce L. Goldman /s/ R. Christopher Hoehn-Saric
---------------------------- ---------------------------------
Bruce L. Goldman R. Christopher Hoehn-Saric
/s/ Kathy J. Taslitz KJT ANNUITY TRUST U/A/D/12/15/93
----------------------------
Kathy J. Taslitz
By: /s/ Steven Taslitz
--------------------------------------
Steven Taslitz, Trustee
By: /s/ Bruce L. Goldman
--------------------------------------
Bruce Goldman, Trustee
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EXHIBIT 5.1
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[LETTERHEAD OF PIPER & MARBURY L.L.P. APPEARS HEAR]
February 6, 1997
Sylvan Learning Systems, Inc.
1000 Lancaster Street
Baltimore, Maryland 21201
Re: Registration Statement on Form S-3
----------------------------------
Dear Sirs:
We have acted as counsel to Sylvan Learning Systems, Inc., a Maryland
corporation (the "Company"), in connection with the Company's Registration
Statement on Form S-3 (the "Registration Statement") filed on the date hereof
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"). The Registration Statement
relates to 398,780 shares of the Company's Common Stock, par value $.01 per
share (the "Shares"), which were previously issued by the Company and are
being registered for resale by the holders thereof.
In this capacity, we have examined the Company's Charter and By-Laws,
the proceedings of the Board of Directors of the Company relating to the
issuance of the Shares and such other documents, instruments and matters of
law as we have deemed necessary to the rendering of this opinion. In such
examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the
conformity with originals of all documents submitted to us as copies.
Based upon the foregoing, we are of the opinion and advise you that each
of the Shares described in the Registration Statement has been duly
authorized and validly issued and is fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving our consent, we do not thereby admit that
we are in the category of persons whose consent is required under Section 7
of the Act or the Rules and Regulations of the Commission thereunder.
Very truly yours,
PIPER & MARBURY L.L.P.
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EXHIBIT 23.1
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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 398,780 shares of its
common stock and to the incorporation by reference therein of our report dated
February 16, 1996, with respect to the consolidated financial statements and
schedule of Sylvan Learning Systems, Inc. and subsidiaries included in its
Annual Report (Form 10-K) for the year ended December 31, 1995, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
Baltimore, MD
February 4, 1997
