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