<PAGE>
PROSPECTUS
Filed Pursuant to Rule 424(b)4 on
Registration Statement No. 333-43355.
300,000 SHARES
SYLVAN LEARNING SYSTEMS, INC.
COMMON STOCK
___________
All of the shares of Common Stock of Sylvan Learning Systems, Inc. (the
"Company") offered hereby will be sold by the Company upon exercise of options
(the "Options") granted by the Company to those of its franchisees who operate
Sylvan Testing Centers (the "Testing Franchisees") pursuant to the STC Stock
Option Plan (the "Plan"). See "Description of STC Stock Option Plan." The
Company will not receive any proceeds from the resale of the Common Stock by the
Franchisees other than the aggregate exercise price payable upon exercise of the
Options. The Common Stock is quoted on the Nasdaq National Market under the
symbol "SLVN." On January 9, 1998 the last sale price for the Common Stock as
reported on the Nasdaq Stock Market was $33.00 per share.
___________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
___________
PRICE TO PUBLIC PROCEEDS TO COMPANY(3)
- -------------------------------------------------------------------------------
Per Share (1)............ $ 30.70 $ 30.70
Total (2)................ $6,478,470 $6,478,470
================================================================================
(1) Equals the weighted average exercise price per share for all Options
outstanding on the date of this Prospectus.
(2) Assuming the exercise price for all Options are paid in cash and assuming
no other Options other than those outstanding on the date of this Prospectus
are granted under the Plan.
(3) Before deducting expenses payable by the Company estimated at $23,000.
The date of this Prospectus is January 12, 1998.
<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: (i) the
Company's Annual Report on Form 10-K for the year ended December 31, 1996, as
amended by its Annual Report on Form 10-K/A (with Items 6, 7 and 8 thereof
having been superseded by the information contained in the Company's Current
Report on Form 8-K dated July 15, 1997), (ii) the Company's Current Report on
Form 8-K and 8-K/A dated January 28, 1997, relating to the Company's acquisition
of Wall Street Institute; (iii) the Company's Current Report on Form 8-K/A dated
March 12, 1997, relating to the termination of the Company's Merger Agreement
with National Education Corporation; (iv) the Company's Current Report on Form
8-K and 8-K/A dated April 17, 1997 and May 30, 1997, relating to the Company's
acquisition of I-R, Inc. and Independent Child Study Teams, Inc. (collectively,
"Educational Inroads"); (v) the Company's Current Report on Form 8-K dated July
15, 1997, restating certain historical financial information to reflect the
acquisition of Educational Inroads; (vi) the Company's Quarterly Reports on Form
10-Q for the quarters ended March 31, 1997; June 30, 1997; and September 30,
1997; (vii) the description of Common Stock contained in Item 4 of the Company's
Registration Statement on Form 8-A, filed with the Commission under the 1934
Act; and (viii) all other documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of filing of
the Registration Statement of which this Prospectus is a part and prior to the
termination of the offering made hereby.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the request of any such person, a copy of any
or all of the documents which have been incorporated herein by reference, other
than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Requests for such documents
should be directed to Sylvan Learning Systems, Inc., 1000 Lancaster Street,
Baltimore, Maryland 21202, Attention: Chief Financial Officer, telephone: (410)
843-8000.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
-2-
<PAGE>
THE COMPANY
Sylvan Learning Systems, Inc. (the "Company" or "Sylvan") is a leading
international private provider of educational and testing services. The Company
delivers a broad array of supplemental and remedial educational services and
computer-based testing through three principal divisions. The Core Educational
Services division designs and delivers individualized tutorial services to
school-age children and adults at 669 franchised and Company-owned Sylvan
Learning Centers. Sylvan Prometric, the Company's testing services division,
administers computer-based tests for major organizations, corporations,
professional associations and governmental agencies through its worldwide
network of Testing Centers. The Contract Educational Services division provides
Sylvan's core educational services under federal and state funding programs to
more than 12,000 students in 89 public schools and more than 38,000 students in
507 non-public schools (including Educational Inroads) and provides on-site
educational and training services to employees of large corporations. Since
1994, the Company has substantially expanded its business through a combination
of internal growth and acquisitions and has increased revenue and operating
income from $68.7 million and $3.4 million, respectively, in 1994 to $181.9
million and $22.7 million, respectively, in 1996. Sylvan's 1996 systemwide
revenues were approximately $310.3 million, consisting of $165.1 million from
core educational services ($139.5 million from franchised Learning Centers and
$25.6 million from Company-owned Learning Centers, product sales and franchise
sales fees), $87.0 million from testing services and $58.2 million from contract
educational services.
Core Educational Services. The Company's Core Educational Services
division provides supplemental instruction in reading, mathematics and reading
readiness and features an extensive series of standardized diagnostic tests,
individualized instruction, a student motivational system and continued
involvement from both parents and the child's regular school teacher. As of
September 30, 1997, the Company or its franchisees operated 669 Learning Centers
in 49 states, five Canadian provinces, Hong Kong, South Korea and Guam, with 403
franchisees owning and operating 628 Sylvan Learning Centers and Sylvan owning
and operating 41 Learning Centers.
Sylvan Prometric Testing Services. As of September 30, 1997, Sylvan or its
authorized representatives operated 1,908 Testing Centers, 1,207 of which were
located in North America and the remainder in 97 foreign countries. The Company
enters into contracts directly with various professional licensure, educational
and information technology ("IT") businesses, organizations and agencies, under
which Sylvan receives a fee based upon the number of tests given for those
customers. Principal customers for the Company's testing services are
Educational Testing Services ("ETS") and, in the IT industry, Microsoft Corp.
and Novell, Inc.. IT customers sponsor worldwide certification programs for
various professionals such as network administrators and engineers, service
technicians and instructors. Sylvan has been designated as the exclusive
commercial provider of computer-based tests administered by ETS (excluding the
SAT and PSAT) and operates 47 testing centers in 33 countries to facilitate
delivery of international testing for ETS. The Company also provides testing
services for organizations responsible for licensing broker-dealers, pilots,
aviation mechanics, computer professionals and medical laboratory technicians.
Through the Company's December 1996 acquisition of Wall Street Institute
International B.V. and its affiliates ("Wall Street"), Sylvan now provides live
and computer-based English instruction and testing in Europe and Latin America
through a network of more than 180 franchised and Company-owned centers.
Contract Educational Services; PACE; Sylvan-at-Work; Caliber Learning
Network, Inc. Sylvan provides educational services under federal and various
state funding programs to students in 89 public and 507 non-public schools.
Sylvan provides educational and training services to large corporations
throughout the United States, including racial and gender workplace diversity
training and skills improvement programs such as writing, advanced reading,
listening and public speaking, through its wholly-owned subsidiary, The PACE
Group ("PACE"), and the Company's Sylvan-at-Work program. In November 1996,
Caliber Learning Network, Inc. was formed as a joint initiative of Sylvan and
MCI Telecommunications Corporation to become a worldwide distribution network of
professional education centers equipped with satellite-based video conferencing
and computer network capabilities. Sylvan currently owns a 10 percent interest
in Caliber Learning Network and has the option to acquire a majority interest in
the future.
-3-
<PAGE>
The Company's principal executive offices are located at 1000 Lancaster
Street, Baltimore, Maryland 21202, and its telephone number is (410) 843-8000.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Commmon Stock being
offered hereby are estimated to be approximately $6,455,470, assuming (i)
exercise of all of the Options for cash and (ii) other than the Options (as
defined below) no other options are granted under the Plan. See "Description of
Sylvan Technology Center Stock Option Plan." The Company will use the net
proceeds from this offering for general corporate purposes, which may include
the acquisition of complementary businesses. The Company intends to invest
substantially all of the net proceeds from this offering in interest-bearing,
investment-grade obligations pending application thereof in the manner described
above. The Company will not receive proceeds from any resales of the Common
Stock acquired by the Franchisees upon exercise of the Options.
DESCRIPTION OF STC STOCK OPTION PLAN
The Company adopted the Sylvan Technology Center Stock Option Plan (the
"Plan") in April 1997. Under the Plan, the Committee, comprised of the Company's
Co-Chief Executive Officers, R. Christopher Hoehn-Saric and Douglas L. Becker,
is authorized to grant options to purchase shares of Common Stock to any Sylvan
Learning Center franchisee who operates one or more Sylvan Technology Centers
(collectively, the "Franchisees") as compensation for services rendered or
contributions made to the Company. There are an aggregate of 300,000 shares
reserved for issuance upon exercise of options granted under the Plan. Options
to purchase an aggregate of 177,000 shares of Common Stock were granted to an
aggregate of 177 Franchisees on April 15, 1997 (the "April Options"); options to
purchase an aggregate of 6,000 shares of Common Stock were granted to 6
Franchisees on July 1, 1997 (the "July Options"); options to purchase an
aggregate of 6,000 shares of Common Stock were granted to 6 Franchisees on
October 1, 1997 (the "October Options"); and options to purchase an aggregate
of 22,000 shares of Common Stock were granted to 22 Franchisees on December 31,
1997 (the "December Options" and, together with the April Options, July Options
and October Options, the "Options").
The exercise prices of the Options are: $29.13 per share for the April
Options; $33.53 per share for the July Options; and $43.88 per share for the
October Options; and $39.00 per share for the December Options. The April
Options, July Options and October Options vest ratably beginning on January 1,
1998 and each of the successive anniversaries thereof, and the December Options
will vest ratably beginning on January 1, 1999 and each of the successive
anniversaries thereof; provided, however, that the Options will vest on the
specified vesting dates only if the Franchisee continues to operate one or more
Sylvan Technology Centers pursuant to a written agreement between the Company
and the the Franchisee. All Options, whether vested or unvested, terminate on
the tenth anniversary of the Grant Date specified in the Option Agreement
relating to said options, subject to earlier termination in the event of the
termination of a Franchisee's operation of the Sylvan Technology Center(s)
described in the Franchisee's Option Agreement or the termination of the
Optionholder's Sylvan Technology Center agency relationship with the Company by
the Company, for cause, or at the election of the Franchisee. \
The Stock Option Agreements pursuant to which the Options are or will be
granted provide that full payment for each share of Common Stock purchased upon
exercise of the Option shall be made no later than the time of exercise or, in
the discretion of the Committee, at such later time as the certificate for the
share is delivered, in (A) cash or certified check or (B) as long as the shares
of Common Stock of the Company remain registered under Section 12(b) or 12(g) of
the Securities Exchange Act of 1934, as amended, by delivery of a properly
executed exercise notice, together with irrevocable instructions: (i) to a
brokerage firm approved by the Company to deliver promptly to the Company the
aggregate amount of sale or loan proceeds to pay the exercise price and any
withholding tax obligations that may arise in connection with the exercise, and
(ii) to the Company to deliver the certificates for such purchased shares
directly to such brokerage firm. In the event any income or employment taxes
are required to be withheld with respect to an Option, payment of such taxes
must be made to the Company.
-4-
<PAGE>
Shares issuable upon exercise of Options will be shares of authorized but
unissued Common Stock. The Company will, during the term of the Plan, reserve
and keep available a number of shares of Common Stock sufficient to satisfy the
requirements of the Plan. Other than the exercise price described in the Stock
Option Agreement, there will be no fees, commissions or other charges paid in
connection with the exercise of Options.
The Plan imposes no restrictions on the resale of Common Stock acquired
upon the exercise of Options except that such shares of Common Stock may be
resold only in compliance with the registration requirements of the Securities
Act of 1933, as amended (the "Securities Act"), and applicable state securities
laws. The Committee may impose resale restrictions on all or a portion of the
shares of Common Stock delivered upon exercise of any Option to ensure
compliance with these laws. Under the Securities Act, affiliates of the Company
generally may resell shares of Common Stock purchased pursuant to the Plan only
(i) in accordance with the provisions of Rule 144 of the Securities Act
promulgated by the SEC or some other exemption from registration under the
Securities Act, or (ii) pursuant to an applicable current and effective
registration statement under the Securities Act.
Tax Summary. The following is a brief summary of the significant aspects
-----------
of current federal income tax treatment of the Options that may be granted under
the Plan. The grant of the Options does not result in tax consequences to the
Franchisees to whom the Options were granted. Upon the exercise of an Option,
the Franchisee will recognize ordinary income equal to the difference between
the option price and the Fair Market Value of the Common Stock on the date of
exercise. No amount other than the price paid under the Option shall be
considered as received by the Company for the Common Stock so issued. When the
Franchisee disposes of Common Stock acquired by the exercise of an Option, any
amount received in excess of the Fair Market Value of the Common Stock on the
date of exercise will be treated as a long- or short-term capital gain,
depending upon how long the Franchisee holds the Common Stock prior to selling
it. If the amount received is less than the Fair Market Value of the Common
Stock on the date of exercise, the loss will be treated as a long- or short-term
capital loss, depending upon the holding period of the Common Stock.
Except as noted below, the exercise of an Option by the exchange of shares
of Common Stock already owned by the Franchisee will not result in any taxable
gain or loss on the unrealized appreciation of the shares so used. The Internal
Revenue Service has ruled that, since the Options are non-qualified, if the
Option exercised (i) a number of shares of the Common Stock received equal to
the number of shares surrendered will have the same basis as the shares
surrendered, and (ii) the remaining shares received will have a basis equal to
their Fair Market Value on the date of exercise (the compensation income
recognized upon exercise). For purposes of determining whether shares have been
held for the long-term capital gain holding period, the holding period of shares
received will generally include the holding period of the shares surrendered
only if the shares received have the same basis, in whole or in part, in the
Franchisee's hands as the shares surrendered.
Section 401(a) of the Code is not applicable to the Plan.
PLAN OF DISTRIBUTION
The Registration Statement of which this Prospectus forms a part relates to
sales by the Company, from time to time, of up to an aggregate of 300,000 shares
of Common Stock to the Franchisees upon their exercise of the Options. If all
of the Options are exercised, the aggregate purchase price payable by the
Franchisees will equal $6,478,470, assuming that other than the Options, no
other options are granted under the Plan. The Franchisees are not obligated to
exercise any of the Options; however, options not exercised prior to their
expiration dates will terminate, and thereafter no shares of Common Stock will
be issued by the Company to the Franchisees in respect thereof.
The Common Stock the Franchisees acquire upon exercise of the Options
should be able to be resold by the Franchisees without further registration
under the Securities Act of 1933, as amended (the "Act") in reliance upon
Section 4(1) of the Act. However, resales of the Common Stock by Franchisees or
their transferees who are or become affiliates of the Company will be subject to
the limitations set forth in Rule 144 under the Act.
-5-
<PAGE>
LEGAL MATTERS
The legality of the shares offered hereby has been passed upon for the
Company by Piper & Marbury L.L.P., Baltimore, Maryland.
EXPERTS
The consolidated financial statements and schedule of Sylvan Learning
Systems, Inc. at December 31, 1996 and 1995 and for each of the three years in
the period ended December 31, 1996, incorporated by reference in this Prospectus
and Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein also
incorporated herein by reference which, as to the years 1996 and 1995, is based
in part on the reports of Deloitte & Touche LLP, independent auditors, and as to
the year 1994, is based in part on the report of Canterelli & Vernoia, CPAs,
independent auditors. Such consolidated financial statements have been
incorporated herein by reference in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
-6-
<PAGE>
================================================================================
No person has been authorized by the Company to give any information or to
make any representations other than those contained in this Prospectus in
connection with the offer contained in this Prospectus, and if given or made,
such information or representations may not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to sell
or a solicitation of an offer to buy any of the securities in any jurisdiction
in which such offer or solicitation is not authorized, or in which the person
making such offer or solicitation is not qualified to do so, or to any person to
whom it is unlawful to make such offer or solicitation. Neither the delivery of
this Prospectus nor any sale made hereunder shall create an implication that
there has been no change in the affairs of the Company since the date hereof.
_____________________________
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................... 2
THE COMPANY............................................................. 3
USE OF PROCEEDS......................................................... 4
SELLING STOCKHOLDERS.................................................... 4
PLAN OF DISTRIBUTION.................................................... 4
LEGAL MATTERS........................................................... 5
EXPERTS................................................................. 5
300,000 SHARES
SYLVAN LEARNING
SYSTEMS, INC.
COMMON STOCK
PROSPECTUS
January 12, 1998
================================================================================
