<PAGE>
Offer to Purchase for Cash
by
Sylvan Learning Systems, Inc.
of
Up to 6,000,000 Shares of its Common Stock
(Including the Associated Preferred Stock Purchase Rights)
At a Purchase Price Not Greater Than $15.00 nor Less Than $13.50 Per Share
The offer, proration period and withdrawal rights will expire at 12:00
Midnight, Eastern Time,
on Thursday, September 7, 2000, unless the offer is extended.
Sylvan Learning Systems, Inc., a Maryland corporation, invites its
shareholders to tender up to 6,000,000 shares of its common stock, $0.01 par
value per share, for purchase by it at a price not greater than $15.00 nor less
than $13.50 per share, net to the seller in cash, without interest. We will
select the lowest purchase price that will allow us to buy 6,000,000 shares or,
if a lesser number of shares are properly tendered, all shares that are
properly tendered and not properly withdrawn. All shares acquired in the offer
will be acquired at the same purchase price.
Only shares properly tendered at prices at or below the purchase price
selected by us, and not properly withdrawn, will be purchased. However, because
of the "odd lot" priority, proration and conditional tender provisions
described in this Offer to Purchase, all of the shares tendered at or below the
purchase price selected by us may not be purchased if more than the number of
shares we seek are properly tendered. Shares not purchased in the offer will be
returned as promptly as practicable following the Expiration Date. See Section
3.
We reserve the right, in our sole discretion, to purchase more than
6,000,000 shares pursuant to the offer. See Section 1.
THIS OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THIS OFFER, HOWEVER, IS SUBJECT TO OTHER CONDITIONS. SEE SECTION 7.
The shares are listed and traded on The Nasdaq Stock Market under the symbol
"SLVN." On August 9, 2000, the last full trading day before announcement of the
offer, the last reported sale price of the shares on The Nasdaq Stock Market
was $13.625. Shareholders are urged to obtain current market quotations for the
shares. See Section 8.
OUR BOARD OF DIRECTORS HAS APPROVED THIS OFFER. HOWEVER, NEITHER WE NOR OUR
BOARD OF DIRECTORS NOR THE DEALER MANAGER MAKES ANY RECOMMENDATION TO YOU AS TO
WHETHER TO TENDER OR REFRAIN FROM TENDERING YOUR SHARES OR AS TO THE PURCHASE
PRICE AT WHICH YOU MAY CHOOSE TO TENDER YOUR SHARES. YOU MUST MAKE YOUR OWN
DECISION AS TO WHETHER TO TENDER YOUR SHARES AND, IF SO, HOW MANY SHARES TO
TENDER AND THE PRICE OR PRICES AT WHICH YOU WILL TENDER THEM. IN DOING SO, YOU
SHOULD CONSIDER OUR REASONS FOR MAKING THIS OFFER, INCLUDING OUR RECENT CASH
SALE OF OUR COMPUTER-BASED TESTING BUSINESS AND OUR RECENTLY ANNOUNCED NEW
BUSINESS STRATEGY. SEE SECTION 2. OUR DIRECTORS AND EXECUTIVE OFFICERS HAVE
ADVISED US THAT THEY DO NOT INTEND TO TENDER ANY OF THEIR SHARES IN THE OFFER.
The Dealer Manager for the Offer is:
[LOGO]
August 10, 2000
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IMPORTANT
If you wish to tender all or any part of the shares registered in your name,
you must do one of the following before the offer expires:
. Follow the instructions described in Section 3 carefully, including
completing a Letter of Transmittal in accordance with the instructions
and delivering it, along with your share certificates and any other
required items, to First Union National Bank, the Depositary;
. If your shares are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee, contact the nominee if you desire
to tender your shares and request that the nominee tender them for you;
and
. Participants in our Employee Stock Purchase Plan or our 401(k) Retirement
Savings Plan who wish to tender any of their shares held in these plans
must follow the separate instructions and procedures described in Section
3 of this Offer to Purchase.
Any shareholder who desires to tender shares and whose certificates for the
shares are not immediately available or cannot be delivered to the Depositary
or who cannot comply with the procedure for book-entry transfer or whose other
required documents cannot be delivered to the Depositary prior to expiration of
the offer must tender the shares pursuant to the guaranteed delivery procedure
set forth in Section 3.
TO PROPERLY TENDER SHARES, YOU MUST VALIDLY COMPLETE THE LETTER OF
TRANSMITTAL, INCLUDING THE SECTION RELATING TO THE PRICE AT WHICH YOU ARE
TENDERING SHARES.
If you wish to maximize the chance that your shares will be purchased at the
purchase price determined by us, you should check the box in the section on the
Letter of Transmittal captioned "Shares Tendered at Price Determined Pursuant
to the Offer." Note that this election could result in your shares being
purchased at the minimum price of $13.50 per share.
If you have questions, need assistance or require additional copies of this
Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery, you should contact D.F. King & Co., Inc., the Information Agent, or
Credit Suisse First Boston Corporation ("Credit Suisse First Boston"), the
Dealer Manager for the offer, at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF
AS TO WHETHER YOU SHOULD TENDER OR REFRAIN FROM TENDERING YOUR SHARES OR AS TO
THE PURCHASE PRICE AT WHICH YOU MAY CHOOSE TO TENDER YOUR SHARES IN THIS OFFER.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH
WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFER OTHER
THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF
TRANSMITTAL. IF ANYONE MAKES ANY RECOMMENDATION OR GIVES ANY INFORMATION OR
REPRESENTATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION, INFORMATION OR
REPRESENTATION AS HAVING BEEN AUTHORIZED BY US OR THE DEALER MANAGER.
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SUMMARY OF TERMS
We are providing this summary of terms for your convenience. It highlights
material information in this document, but you should realize that it does not
describe all of the details of the offer to the same extent described in this
document. We urge you to read the entire document and the related letter of
transmittal because they contain the full details of the offer. Where helpful,
we have included references to the sections of this document where you will
find a more complete discussion.
WHO IS OFFERING TO PURCHASE MY
SHARES? We are Sylvan Learning Systems, Inc. We are
offering to purchase up to 6,000,000 shares
of our common stock and the associated
preferred stock purchase rights. No separate
consideration will be paid for these
preferred stock purchase rights.
WHAT WILL THE PURCHASE PRICE We are conducting the offer through a
FOR THE SHARES BE AND WHAT procedure commonly called a modified "Dutch
WILL BE THE FORM OF PAYMENT? Auction." This procedure allows you to select
the price within a price range specified by
us at which you are willing to sell your
shares. The price range for this offer is
$13.50 to $15.00. We will select the lowest
purchase price that will allow us to buy
6,000,000 shares or, if a lesser number of
shares are properly tendered, all shares that
are properly tendered and not properly
withdrawn. All shares we purchase will be
purchased at the same price, even if you have
selected a lower price, but we will not
purchase any shares above the purchase price
we determine. If you wish to maximize the
chance that your shares will be purchased,
you should check the box in the section on
the letter of transmittal indicating that you
will accept the purchase price we determine.
You should understand that this election
could result in your shares being purchased
at the minimum price of $13.50 per share. If
your shares are purchased in the offer, you
will be paid the purchase price, in cash,
without interest, as soon as practicable
after the expiration of the offer period.
Under no circumstances will we pay interest
on the purchase price, even if there is a
delay in making payment. See Section 1.
HOW MANY SHARES WILL SYLVAN We will purchase 6,000,000 shares in the
PURCHASE? tender offer or such lesser number of shares
as are properly tendered. 6,000,000 shares
represents approximately 14% of our
outstanding common stock. We will not pay any
additional consideration for the preferred
stock purchase rights. All the shares that
you tender in the offer may not be purchased
even if they are tendered at or below the
purchase price we select. If more than
6,000,000 shares are tendered, all shares
tendered at or below the purchase price will
be purchased on a pro rata basis, except for
"odd lots" (holders of less than 100 shares),
which will be purchased on a priority basis.
This preference is not available to partial
tenders or to beneficial or record holders of
an aggregate of 100 or more shares. We also
expressly reserve the right to purchase
additional shares representing up to 2% of
our outstanding shares and could decide to
purchase more shares subject to applicable
legal requirements. The offer is not
conditioned on any minimum number of shares
being tendered by shareholders. See Section
1.
i
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HOW WILL SYLVAN PAY FOR THE We will need a maximum of $90 million to
SHARES? purchase 6,000,000 shares, assuming the price
paid per share is $15.00. We recently
completed the sale of our computer-based
testing business for approximately $600
million in cash, net of tax and transaction
costs, and the sale of $100 million aggregate
principal amount of our 5% Convertible
Subordinated Debentures. We will use a
portion of these cash proceeds to pay for the
shares we purchase in the offer. See Section
9.
HOW LONG DO I HAVE TO TENDER You may tender your shares until the tender
MY SHARES? offer expires. The offer will expire on
Thursday, September 7, 2000, at 12:00
Midnight, Eastern time, unless we extend the
offer. We may choose to extend the offer at
any time. We cannot assure you, however, that
we will extend the offer or, if we extend it,
for how long. See Sections 1 and 15.
HOW WILL I BE NOTIFIED IF If the offer is extended, we will make a
SYLVAN EXTENDS THE OFFER? public announcement of the extension no later
than 9:00 a.m. on the first business day
after the previously scheduled expiration of
the offer period. See Section 15.
ARE THERE ANY CONDITIONS TO Yes. Our obligation to accept and pay for
THE OFFER? your tendered shares depends upon the
satisfaction or waiver of a number of
conditions, including:
. No significant decrease in the price of our
common stock or in the price of equity
securities generally and no adverse changes
in the U.S. stock markets or credit markets
shall have occurred during this offer.
. No legal action shall have been threatened,
pending or taken, that might adversely
affect the offer.
. No one shall have proposed, announced or
made a tender or exchange offer (other than
this offer), merger, business combination
or other similar transaction involving us.
. No material change in our business,
condition (financial or otherwise), assets,
income, operations, prospects or stock
ownership shall have occurred during this
offer.
For more information on conditions to the
offer, see Section 7.
HOW DO I TENDER MY SHARES? To tender your shares, prior to 12:00
Midnight, Eastern time, on Thursday,
September 7, 2000, unless the offer is
extended:
. you must deliver your share certificate(s)
and a properly completed and duly executed
letter of transmittal to the depositary at
the address appearing on the back cover
page of this document; or
. the depositary must receive a confirmation
of receipt of your shares by book-entry
transfer and a properly completed and duly
executed letter of transmittal or the other
documents described in this Offer to
Purchase; or
ii
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. you must comply with the guaranteed
delivery procedure outlined in Section 3.
You may also contact the information agent,
the dealer manager or your broker for
assistance. The contact information for the
information agent and dealer manager is set
forth on the back cover page of this
document. See Section 3 and the instructions
to the letter of transmittal.
Participants in our Employee Stock Purchase
Plan who wish to tender any of their shares
held in their accounts under the Employee
Stock Purchase Plan must instruct Salomon
Smith Barney to tender their shares at least
three business days before the expiration of
the offer by following the separate
instructions and procedures described in
Section 3.
Participants in our 401(k) Retirement Savings
Plan who wish to tender any of their shares
held in the savings plan must instruct the
trustee to tender their shares at least three
business days before the expiration of the
offer by following the separate instructions
and procedures described in Section 3.
ONCE I HAVE TENDERED SHARES IN Yes. You may withdraw your tendered shares at
THE OFFER, CAN I WITHDRAW MY any time before 12:00 Midnight, Eastern time,
TENDERED SHARES? on Thursday, September 7, 2000, unless we
extend the offer, in which case you can
withdraw your shares until the expiration of
the offer as extended. In addition, if we
have not accepted for payment the shares you
have tendered to us, you may also withdraw
your shares at any time after 12:00 Midnight,
Eastern time, on Thursday, October 5, 2000.
See Section 4.
HOW DO I WITHDRAW SHARES I To withdraw your shares, you must deliver on
PREVIOUSLY TENDERED? a timely basis a written, telegraphic or
facsimile notice of your withdrawal to the
depositary at the address appearing on the
back cover page of this document. Your notice
of withdrawal must specify your name, the
number of shares to be withdrawn and the name
of the registered holder of the shares. Some
additional requirements apply if the
certificates for shares to be withdrawn have
been delivered to the depositary or if your
shares have been tendered under the procedure
for book-entry transfer set forth in Section
3. See Section 4.
IN WHAT ORDER WILL TENDERED First, we will purchase shares from all
SHARES BE PURCHASED? holders of "odd lots" of less than 100 shares
(not including any shares held in our
Employee Stock Purchase Plan or our 401(k)
Retirement Savings Plan, which will not have
priority) who properly tender all of their
shares at or below the purchase price
selected by us. Second, after purchasing all
shares from the "odd lot" holders, we will
purchase shares from all other shareholders
who properly tender shares at or below the
purchase price selected by us, on a pro rata
basis, subject to the conditional tender
provisions described in Section 6. Therefore,
all of the shares that you tender in the
offer may not be purchased even if they are
tendered at or below the purchase price. See
Section 1.
iii
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IF I DECIDE NOT TO TENDER, HOW Shareholders who choose not to tender will
WILL THE OFFER AFFECT MY own a greater interest in us following the
SHARES? offer.
Our Board of Directors has approved this
WHAT DO SYLVAN AND ITS BOARD offer. However, neither we nor our Board of
OF DIRECTORS THINK OF THE Directors nor the dealer manager is making
OFFER? any recommendation whether you should tender
or refrain from tendering your shares or at
what purchase price you should choose to
tender your shares. You must decide whether
to tender your shares and, if so, how many
shares to tender and the price or prices at
which you will tender them. You should
discuss whether to tender your shares with
your broker or other financial advisor. Our
directors and executive officers have advised
us that they do not intend to tender any of
their shares in the offer. See Section 2.
WHEN WILL SYLVAN PAY ME FOR We will pay the purchase price, in cash,
THE SHARES I TENDER? without interest, for the shares we purchase
as promptly as practicable after the
expiration of the offer and the acceptance of
the shares for payment. See Sections 1 and 5.
WHAT IS THE RECENT MARKET On August 9, 2000, the last full trading day
PRICE OF MY SHARES? before the announcement of the offer, the
last reported sale price of the shares on The
Nasdaq Stock Market was $13.625. You are
urged to obtain current market quotations for
your shares.
WILL I HAVE TO PAY BROKERAGE If you are a registered shareholder and you
COMMISSIONS IF I TENDER MY tender your shares directly to the
SHARES? depositary, you will not incur any brokerage
commission. If you hold shares through a
broker or bank, we urge you to consult your
broker or bank to determine whether
transaction costs are applicable. See the
Introduction and Section 3.
WHAT ARE THE UNITED STATES Generally, you will be subject to United
FEDERAL INCOME TAX States federal income taxation when you
CONSEQUENCES IF I TENDER MY receive cash from us in exchange for the
SHARES? shares you tender. The receipt of cash for
your tendered shares will be treated either
as (1) a sale or exchange eligible for
capital gains treatment or (2) a dividend
subject to ordinary income tax rates. See
Section 14.
WILL I HAVE TO PAY STOCK If you instruct the depositary in the related
TRANSFER TAX IF I TENDER MY letter of transmittal to make the payment for
SHARES? the shares to the registered holder, you will
not incur any stock transfer tax. See Section
5.
WHOM DO I CONTACT IF I HAVE
QUESTIONS ABOUT THE OFFER? The information agent or dealer manager can
help answer your questions. The information
agent is D.F. King & Co., Inc. and the dealer
manager is Credit Suisse First Boston. Their
contact information is set forth on the back
cover page of this document.
iv
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TABLE OF CONTENTS
<TABLE>
<S> <C>
FORWARD LOOKING STATEMENTS................................................. 1
INTRODUCTION............................................................... 2
THE OFFER.................................................................. 4
1. Number of Shares...................................................... 4
2. Recent Developments; Purpose of the Offer; Certain Effects of the
Offer................................................................. 6
3. Procedures for Tendering Shares....................................... 12
4. Withdrawal Rights..................................................... 18
5. Purchase of Shares and Payment of Purchase Price...................... 19
6. Conditional Tender of Shares.......................................... 20
7. Conditions of the Offer............................................... 20
8. Price Range of Shares; Dividends; Our Rights Plan..................... 22
9. Source and Amount of Funds............................................ 23
10. Certain Information Concerning Us..................................... 23
</TABLE>
<TABLE>
<S> <C>
11. Interests of Directors and Executive Officers; Transactions and
Arrangements Concerning the Shares.................................... 24
12. Effects of the Offer on the Market for Shares; Registration Under the
Exchange Act.......................................................... 25
13. Certain Legal Matters; Regulatory Approvals........................... 26
14. Certain United States Federal Income Tax Consequences................. 26
15. Extension of the Offer; Termination; Amendment........................ 28
16. Fees and Expenses..................................................... 29
17. Miscellaneous......................................................... 30
</TABLE>
<PAGE>
FORWARD LOOKING STATEMENTS
This Offer to Purchase, the Introduction, Sections 2, 10 and 14 and
documents incorporated by reference contain statements that are not historical
facts and constitute projections, forecasts or forward-looking statements.
These statements may be identified by the use of forward-looking words or
phrases such as "believes," "expects," "anticipates," "intends," "plans,"
"estimates," "may" and "should". These statements are not guarantees of
performance. They are inherently subject to known and unknown risks,
uncertainties and assumptions that could cause our future results and
shareholder value to differ materially from those expressed in these
statements. Our actual actions or results may differ materially from those
expected or anticipated in the forward-looking statements. Specific factors
that might cause such a difference, include, but are not limited to:
. developments in the education and training markets;
. technological developments, particularly internet technology;
. the timing and success of our business development efforts;
. the level of competition we experience in our businesses and its effect
on pricing;
. consumer and business acceptance of the internet as a medium for
education and training;
. the success of our new internet incubator company and the start-up
companies in which we invest;
. other uncertainties, all of which are difficult to predict and many of
which are beyond our control; and
. general economic, business and social conditions.
We undertake no obligation to make any revision to the forward-looking
statements contained in this document or to update them to reflect events or
circumstances occurring after the date of this document.
1
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To the Holders of our Common Stock:
INTRODUCTION
Sylvan Learning Systems, Inc., a Maryland corporation, invites its
shareholders to tender shares of our common stock, $0.01 par value per share,
for purchase by it. We are offering to purchase up to 6,000,000 shares at a
price not greater than $15.00 nor less than $13.50 per share, net to the seller
in cash, without interest.
We will select the lowest purchase price that will allow us to buy 6,000,000
shares or, if a lesser number of shares are properly tendered, all shares that
are properly tendered and not properly withdrawn. All shares acquired in the
offer will be acquired at the same purchase price.
Our offer is being made upon the terms and subject to the conditions set
forth in this Offer to Purchase and in the related Letter of Transmittal which,
as they may be amended or supplemented from time to time, together constitute
this offer. All shares tendered and purchased will include the tender and
purchase of the associated preferred stock purchase rights issued pursuant to
the Amended and Restated Rights Agreement dated as of December 18, 1999,
between us and First Union National Bank, as rights agent, and, unless the
context otherwise requires, all references in this document to shares include
the associated preferred stock purchase rights.
Only shares properly tendered at prices at or below the purchase price we
select and not properly withdrawn will be purchased. However, because of the
"odd lot" priority, proration and conditional tender provisions described in
this Offer to Purchase, all of the shares tendered at or below the purchase
price will not be purchased if more than the number of shares we seek are
tendered. We will return shares tendered at prices in excess of the purchase
price that we determine and shares we do not purchase because of proration or
conditional tenders as promptly as practicable following the Expiration Date.
See Section 3.
We reserve the right, in our sole discretion, to purchase more than
6,000,000 shares pursuant to the offer, subject to certain limitations and
legal requirements. See Sections 1 and 15.
The offer is not conditioned on any minimum number of shares being tendered.
The offer is, however, subject to other conditions. See Section 7.
Our Board of Directors has approved this offer. However, neither we nor our
Board of Directors nor the Dealer Manager is making any recommendation whether
you should tender or refrain from tendering your shares or at what purchase
price you should choose to tender your shares. You must make your own decision
whether to tender your shares and, if so, how many shares to tender and the
price or prices at which you will tender them. In deciding whether to tender
and at what purchase price, you should consider our reasons for making this
offer and other available information about us. See Section 2. Our directors
and executive officers have advised us that they do not intend to tender any
shares in the offer. See Section 11.
If at the expiration of the offer, more than 6,000,000 shares (or such
greater number of shares as we may elect to purchase) are properly tendered at
or below the purchase price and not properly withdrawn, we will buy shares
first from all Odd Lot Holders (as defined in Section 1) who properly tender
all their shares at or below the purchase price, and second, on a pro rata
basis from all other shareholders who properly tender shares at or below the
purchase price, other than shareholders who tender conditionally, and for whom
the condition is not satisfied. See Section 1.
If you tender shares in the offer, your tender will include a tender of the
preferred stock purchase rights associated with your tendered shares. No
separate consideration will be paid for these rights. See Section 8.
The purchase price will be paid net to the tendering shareholder in cash,
without interest, for all shares purchased. Tendering shareholders who hold
shares registered in their own names and who tender their shares directly to
the Depositary will not be obligated to pay brokerage commissions, solicitation
fees or, subject to
2
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Instruction 7 of the Letter of Transmittal, stock transfer taxes on our
purchase of shares in the offer. Shareholders holding shares through brokers or
banks are urged to consult the brokers or banks to determine whether
transaction costs may apply if shareholders tender shares through the brokers
or banks and not directly to the Depositary. Also, any tendering shareholder or
other payee who fails to complete, sign and return to the Depositary the
Substitute Form W-9 that is included as part of the Letter of Transmittal or
Form W-8 obtained from the Depository may be subject to required United States
federal income tax backup withholding equal to 31% of the gross proceeds
payable to the tendering shareholder or other payee pursuant to the offer. See
Section 3.
We will pay the fees and expenses incurred in connection with the offer by
Credit Suisse First Boston, the Dealer Manager for this offer, First Union
National Bank, the Depositary for this offer, D.F. King & Co., Inc., the
Information Agent for this offer, Salomon Smith Barney, which administers our
Employee Stock Purchase Plan, and Putnam Fiduciary Trust Company, the Trustee
of our 401(k) Retirement Savings Plan. See Section 16.
Participants in our Employee Stock Purchase Plan may instruct Salomon Smith
Barney to tender some or all of the shares held in the participant's account by
following the instructions in the "Letter to Participants in Sylvan's Employee
Stock Purchase Plan" furnished separately and returning it to Salomon Smith
Barney in accordance with those instructions. If Salomon Smith Barney has not
received a participant's instructions at least three business days prior to the
Expiration Date, Salomon Smith Barney will not tender any shares held in a
participant's account under the Employee Stock Purchase Plan. Any employee
stock purchase plan shares tendered but not purchased will be returned to the
participant's account. See Section 3.
Participants in our 401(k) Retirement Savings Plan may instruct the Trustee
of the savings plan and holder of record, Putnam Fiduciary Trust Company, to
tender some or all of the shares held for the participant's account by
following the instructions in the "Letter to Participants in the Sylvan 401(k)
Retirement Savings Plan" furnished separately and returning it to First Union
National Bank in accordance with those instructions. If First Union National
Bank has not received a participant's instructions at least three business days
prior to the Expiration Date, the Trustee will not tender any shares held on
behalf of the participant in the savings plan. The proceeds received by the
Trustee from any tender of shares from a participant's account will be
reinvested pro-rata in accordance with the participant's current investment
directions for new elective deferral contributions. However, if the
participant's current investment directions for new elective deferral
contributions provide that some or all of the participant's contributions are
to be invested in our common stock, then that portion of the tender proceeds
will be invested in the Putnam Stable Value Fund. Once the tender proceeds have
been credited to the participant's savings plan accounts, the participant may
reallocate his or her investments among the various investment funds under the
savings plan in the usual manner. See Section 3.
As of August 9, 2000, we had 41,927,220 issued and outstanding shares, and
5,099,081 shares reserved for issuance upon exercise of outstanding stock
options under our stock option plans. The 6,000,000 shares that we are offering
to purchase pursuant to the offer represent approximately 14% of our shares
outstanding on August 9, 2000. The shares are listed and traded on The Nasdaq
Stock Market under the symbol "SLVN." On August 9, 2000, the last full trading
day before the announcement of the offer, the last reported sale price of the
shares as reported on The Nasdaq Stock Market was $13.625. Shareholders are
urged to obtain current market quotations for the shares. See Section 8.
3
<PAGE>
THE OFFER
1. Number of Shares.
Upon the terms and subject to the conditions of the offer, we will purchase
6,000,000 shares, or the lesser number of shares that are properly tendered and
not properly withdrawn in accordance with Section 4 before the Expiration Date,
as defined below, at prices not greater than $15.00 nor less than $13.50 per
share, net to the seller in cash, without interest.
The term "Expiration Date" means 12:00 Midnight, Eastern time, on Thursday,
September 7, 2000. We may, in our sole discretion, extend the period of time
during which the offer will remain open. In the event of an extension, the term
"Expiration Date" will refer to the latest time and date at which the offer, as
extended by us, will expire. See Section 15 for a description of our right to
extend, delay, terminate or amend the offer.
In accordance with Instruction 5 of the Letter of Transmittal, shareholders
desiring to tender shares must either (1) specify that they are willing to sell
their shares to us at the price determined in the offer, or (2) specify the
price, not greater than $15.00 nor less than $13.50 per share, at which they
are willing to sell their shares to us in the offer. As promptly as practicable
following the Expiration Date, we will, upon the terms and subject to the
conditions of the offer, determine a single per share purchase price (in
multiples of $0.125) that we will pay for shares properly tendered and not
properly withdrawn pursuant to the offer, taking into account the number of
shares tendered and the prices specified by tendering shareholders. We will
select the lowest purchase price that will allow us to buy 6,000,000 shares or,
if a lesser number of shares are properly tendered, all shares that are
properly tendered and not properly withdrawn. All shares purchased in the offer
will be purchased at the same purchase price even if you have specified a lower
price.
Only shares properly tendered at prices at or below the purchase price we
determine and not properly withdrawn will be purchased. However, because of the
"odd lot" priority, proration and conditional tender provisions, all of the
shares tendered at or below the purchase price will not be purchased if more
than the number of shares we seek are properly tendered. All shares tendered
and not purchased pursuant to the offer, including shares tendered at prices in
excess of the purchase price we determine and shares not purchased because of
proration or conditional tenders, will be returned to the tendering
shareholders at our expense as promptly as practicable following the Expiration
Date.
We reserve the right to purchase more than 6,000,000 shares pursuant to the
offer. In accordance with applicable regulations of the Securities and Exchange
Commission, we may purchase pursuant to the offer an additional number of
shares not to exceed 2% of the outstanding shares without amending or extending
the offer. See Section 15.
In the event of an oversubscription of the offer, shares tendered at or
below the purchase price before the Expiration Date will be subject to
proration, except for Odd Lots (as defined below). The proration period also
expires on the Expiration Date.
If we (1) increase the price that may be paid for shares above $15.00 per
share or decrease the price that may be paid for shares below $13.50 per share,
(2) materially increase the Dealer Manager's fee, (3) increase the number of
shares that we may purchase in the offer by more than 2% of our outstanding
shares, or (4) decrease the number of shares that we may purchase in the offer,
then the offer must remain open for at least ten business days following the
date that notice of the increase or decrease is first published, sent or given
in the manner specified in Section 15.
The offer is not conditioned on any minimum number of shares being tendered.
The offer is, however, subject to other conditions. See Section 7.
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Priority of Purchases. If more than 6,000,000 shares (or a greater number of
shares as we may elect to purchase) have been properly tendered at prices at or
below the purchase price selected by us and not properly withdrawn before the
Expiration Date, we will purchase properly tendered shares on the basis set
forth below:
. First, we will purchase all shares tendered by any Odd Lot Holder (as
defined below) who:
(1) tenders all shares owned beneficially or of record by the Odd Lot
Holder at a price at or below the purchase price selected by us
(tenders of less than all of the shares owned by the Odd Lot Holder
will not qualify for this preference); and
(2) completes the section entitled "Odd Lots" in the Letter of
Transmittal and, if applicable, in the Notice of Guaranteed Delivery.
. Second, after the purchase of all of the shares properly tendered by Odd
Lot Holders, subject to the conditional tender provisions described in
Section 6, we will purchase all other shares tendered at prices at or
below the purchase price, on a pro rata basis with appropriate
adjustments to avoid purchases of fractional shares, as described below.
Therefore, all of the shares that a shareholder tenders in the offer may not be
purchased even if they are tendered at prices at or below the purchase price.
Odd Lots. The term "Odd Lots" means all shares tendered at prices at or
below the purchase price selected by us by any person (an "Odd Lot Holder") who
owned beneficially or of record a total of fewer than 100 shares (not including
any shares held in our Employee Stock Purchase Plan or in our 401(k) Retirement
Savings Plan) and so certified in the appropriate place on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery. To
qualify for this preference, an Odd Lot Holder must tender all shares owned by
the Odd Lot Holder in accordance with the procedures described in Section 3.
Odd Lots will be accepted for payment before any proration of the purchase of
other tendered shares. This preference is not available to partial tenders or
to beneficial or record holders of an aggregate of 100 or more shares, even if
these holders have separate accounts or certificates representing fewer than
100 shares, or with respect to any shares held in our Employee Stock Purchase
Plan or in our 401(k) Retirement Savings Plan. By tendering in the offer, an
Odd Lot Holder who holds shares in its name and tenders its shares directly to
the Depositary would avoid the payment of brokerage commissions in a sale of
the holder's shares. Any Odd Lot Holder wishing to tender all of the
shareholder's shares pursuant to the offer should complete the section entitled
"Odd Lots" in the Letter of Transmittal and, if applicable, in the Notice of
Guaranteed Delivery.
We also reserve the right, but will not be obligated, to purchase all shares
properly tendered by any shareholder who tenders any shares owned beneficially
or of record, at or below the purchase price selected by us and who, as a
result of proration, would then own beneficially or of record, an aggregate of
fewer than 100 shares. If we exercise this right, we will increase the number
of shares that we are offering to purchase in the offer by the number of shares
purchased through the exercise of the right.
Proration. If proration of tendered shares is required, we will determine
the proration factor as promptly as practicable following the Expiration Date.
Proration for each shareholder tendering shares, other than Odd Lot Holders,
will be based on the ratio of the number of shares tendered by the shareholder
to the total number of shares tendered by all shareholders, other than Odd Lot
Holders, at or below the purchase price selected by us. Because of the
difficulty in determining the number of shares properly tendered and not
properly withdrawn, and because of the Odd Lot procedure described above and
the conditional tender procedure described in Section 6, we do not expect that
we will be able to announce the final proration factor or commence payment for
any shares purchased pursuant to the offer until about seven business days
after the Expiration Date. The preliminary results of any proration will be
announced by press release as promptly as practicable after the Expiration
Date. After the Expiration Date, shareholders may obtain preliminary proration
information from the Information Agent and also may be able to obtain the
information from their brokers.
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<PAGE>
As described in Section 14, the number of shares that we will purchase from
a shareholder pursuant to the offer may affect the United States federal income
tax consequences to the shareholder of the purchase and, therefore, may be
relevant to a shareholder's decision whether or not to tender shares. The
Letter of Transmittal affords each tendering shareholder the opportunity to
designate the order of priority in which shares tendered are to be purchased in
the event of proration.
This Offer to Purchase and the related Letter of Transmittal will be mailed
to record holders of the shares and will be furnished to brokers, banks and
similar persons whose names, or the names of whose nominees, appear on our
shareholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing for subsequent transmittal to
beneficial owners of shares.
2. Recent Developments; Purpose of the Offer; Certain Effects of the Offer.
Recent Developments
Introduction. Over the past year, our Board of Directors has conducted a
strategic review of our company, its structure and business prospects. The
Board considered several possible actions to maximize shareholder value. The
Board concluded that selling our computer-based testing business, known as
Prometric, would further our business objectives by allowing management to
focus on our core educational operating businesses and, by using the proceeds
of the sale, to finance new opportunities identified by our Board and
management.
Sale of Prometric. On January 26, 2000, we announced that we had entered
into an agreement with The Thomson Corporation to sell Prometric. The sale was
effective as of March 6, 2000. We received over $600 million in cash, net of
tax and transaction costs, from the sale of Prometric.
Investment in Sylvan. On February 24, 2000, we announced an intended
investment in us by affiliates of Apollo Management, L.P., a private equity
firm based in New York, Los Angeles and London. This investment was completed
on July 5, 2000 through the sale of $100 million aggregate principal amount of
our 5%, ten year Convertible Subordinated Debentures. Joining Apollo in this
investment were Investor AB and DB Capital Investors, L.P. The debentures are
convertible into our common stock at a rate of $15.735 per share. Laurence Berg
and Michael Gross, who are partners in Apollo Management, L.P., joined our
Board of Directors.
Use of Proceeds. Our Board has determined to use the proceeds from the sale
of Prometric and the sale of the 5% Convertible Subordinated Debentures for the
following purposes:
. approximately $130 million to pay down our revolving credit facility;
. approximately $100 million for expansion of our international university
initiative, which involves pursuing for-profit higher educational
opportunities outside the United States;
. approximately $220 million in cash to be invested over time in our new
internet incubator company;
. approximately $130 million for the self-tender offer we completed in May
2000; and
. approximately $120 million for this tender offer and working capital
purposes.
New Business Strategy. We also announced on February 24, 2000 our new
business strategy. Building on our brand recognition and industry-leading
position in education services, we will seek to create shareholder value by
capitalizing on the opportunity to establish a leadership position in the
education and training internet
6
<PAGE>
marketplace. We will also seek to maintain our leadership position in our core
educational services businesses. We will focus our business on these two areas:
. Internet incubator company. Launching Sylvan Ventures, LLC, an incubator
company, to invest in and incubate companies focusing on emerging
internet technology solutions for the education and training marketplace.
The goal of Sylvan Ventures is to create asset value by investing in,
starting and managing companies that have strong potential for market
leadership.
. Core educational services. Providing consumer-oriented educational
services, through an operating company that includes Sylvan Learning
Centers, our educational solutions business and our English language
instruction and our international university initiatives.
Investment in Sylvan Ventures. On July 5, 2000, we announced the closing of
the funding commitments for Sylvan Ventures. We contributed $65 million in
assets to Sylvan Ventures, including our investments in Caliber Learning
Network, OnlineLearning.net, ZapMe! Corp. and eSylvan, our online tutoring
venture. In addition, we committed $220 million in cash to Sylvan Ventures.
Affiliates of Apollo Management, L.P., committed $100 million in funding. Also,
certain members of Sylvan's management, including Messrs. Douglas Becker and
Christopher Hoehn-Saric, committed approximately $15 million in Sylvan
Ventures. Sylvan Ventures has the discretion to seek to raise another $100
million from strategic internet investors in the future
Organizational Changes. On February 24, 2000, we also announced
organizational changes to support our new business strategy. These
organizational changes include:
. Our President and Co-Chief Executive Officer, Douglas Becker, became our
Chairman of the Board and sole Chief Executive Officer.
. Christopher Hoehn-Saric assumed the leadership position at Sylvan
Ventures as Chairman and Chief Executive Officer.
Messrs. Becker and Hoehn-Saric shared the responsibility of our Chief Executive
Officer for the past nine years.
. Lee McGee became Executive Vice President of Sylvan Ventures. Mr. McGee,
our Executive Vice President and Chief Financial Officer, will continue
to serve in that capacity until his replacement is hired. Mr. McGee has
served as our Chief Financial Officer since 1987.
. Peter Cohen became our President and Chief Operating Officer and reports
to Mr. Becker. In this role, Mr. Cohen focuses on the performance of our
core educational services operating business. Mr. Cohen served as
President of the Sylvan Learning Center division since 1996.
. Raph Appadoo joined us as President and Chief Executive Officer of our
international university division in January 2000. In this newly created
position, Mr. Appadoo is responsible for pursuing higher educational
opportunities outside the United States and reports directly to Mr.
Becker. Mr. Appadoo joined Sylvan from Aetna where he served as executive
vice president of their international operations.
Prior Self-Tender Offer Completed in May 2000. On March 21, 2000, we
announced the commencement of our prior "Dutch Auction" self-tender offer. On
April 18, 2000, we announced that we were extending the tender offer period and
reducing the number of shares offered to purchase to 7.5 million from 9.5
million as a result of Nasdaq market volatility. On May 9, 2000, we announced
the final results of our self-tender offer which expired on May 1, 2000. We
purchased 8,432,308 shares of our common stock at $15.25 per share. The final
results represented proration of approximately 83.04% of those shares tendered
at or below the final purchase price. The 8,432,308 shares purchased
represented approximately 16.74% of our 50.36 million shares outstanding on May
1, 2000. The aggregate purchase price being paid was approximately $128.6
million.
Recent Earnings Announcement. On July 27, 2000, we announced financial
results for the second quarter and six months ended June 30, 2000.
7
<PAGE>
Second Quarter Results. Total revenues from continuing operations for the
second quarter of 2000 were $92.5 million, an increase of 3% compared to total
revenues of $89.9 million in the second quarter of 1999. Revenues were in line
with our expectations as well as expectations of analysts covering our stock,
given the changes in our business strategy announced earlier this year. Prior
period results for Prometric, our computer-based testing division which was
sold in the first quarter of 2000, and PACE, our corporate training business
which was sold in December 1999, have been classified as discontinued
operations in the financial table that follows.
We understand that the consensus estimate of analysts covering our stock for
our earnings per share for the second quarter was $0.12 per share, excluding
the impact of Sylvan Ventures. Earnings per share for the quarter, excluding
Sylvan Ventures' results, were $0.15, with the increase over the analysts'
consensus estimate resulting primarily from higher than expected non-operating
income.
For the second quarter of 2000, we reported income from continuing
operations (which included $4.0 million of costs and losses associated with the
portfolio companies of Sylvan Ventures) of $4.7 million, or $0.10 per share on
diluted shares outstanding of 45.8 million, compared to income from continuing
operations of $6.5 million, or $0.12 per share on diluted shares outstanding of
53.6 million for the same period in 1999.
Six Months Results. Total revenues from continuing operations for the six
months ended June 30, 2000 were $177.8 million, an increase of 12% compared to
total revenues of $159.3 million for the same period in 1999. Year to date
revenues were in line with our expectations as well as expectations of analysts
covering our stock given the changes in our business strategy announced earlier
this year.
For the six months ended June 30, 2000, we reported net income from
continuing operations of $5.9 million, or $0.12 per share on diluted shares
outstanding of 48.7 million, compared to income from continuing operations of
$9.3 million, or $0.17 per share on diluted shares outstanding of 53.5 million
for the same period in 1999. Income from continuing operations included $5.7
million of costs related to Sylvan Ventures. Excluding the impact of Sylvan
Ventures, net income from continuing operations for the six months ended June
30, 2000 was $9.3 million, or $0.19 per share on a diluted basis.
Revenues from the Learning Centers segment were $26.1 million for the second
quarter of 2000 compared to $23.6 million for the same period in 1999, an
increase of 11%. Same center revenue generated by the Sylvan Learning Center
franchised centers increased by 10% while Sylvan Learning Center company-owned
same center revenue increased 7% during the quarter. The remaining Sylvan
Learning Center growth was a result of opening 63 new franchised centers and
the acquisition of 11 Learning Centers from franchisees subsequent to the
second quarter of 1999.
Revenues from the Education Solutions segment (previously Contract Services)
were $30.1 million for the second quarter of 2000, an increase of 23% when
compared to $24.4 million for the same period in 1999. Sylvan at School
revenues decreased $0.4 million, or 2% as compared to the second quarter of
1999. The Sylvan at School revenue reduction was primarily the result of a
previously announced change in our contract model. The new model generates
lower revenue per school since the school is responsible for supplying and
paying teachers. Upon full implementation, it is anticipated that this new
model will result in greater operating margins for us. Canter teacher-training
revenues increased $5.7 million to $11.2 million in the second quarter 2000
from $5.5 million in the same period in 1999. $3.0 million of the Canter
revenue increase was the result of a change in the timing of enrollment from
Canter's distance learning masters program as compared to last year's quarter.
The remaining Canter revenue increase of $2.7 million was due to a significant
increase in enrollment in the masters degree programs.
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Revenues from the English Language Instruction segment were $22.4 million
for the second quarter 2000 compared to $27.2 million for the second quarter
1999. Wall Street Institute revenues decreased $2.0 million to $12.1 million in
the second quarter of 2000 from $14.1 million in the same period in 1999. The
primary reason for the revenue decrease in the second quarter of 2000 was that
sales of territory fees decreased to $0.5 million in 2000 from $4.0 in the same
period in 1999. The decline in territory fees resulted from a change in Wall
Street Institute's expansion strategy to retaining ownership of territories in
high potential markets. The decrease in territory fees at Wall Street Institute
was partially offset by $1.5 million in additional revenues resulting from
growth in educational product sales and growth in the operations of existing
centers. Aspect revenues decreased $2.8 million to $10.3 million in the second
quarter 2000 from $13.1 million in the same period in 1999. The disposal by
Aspect of a low margin line of business in 1999 accounted for $1.6 million of
the decrease in the quarter. The remaining decrease reflected lower sales
volume for Aspect's Language Schools and International Sales offices in the
second quarter of 2000 over the same period in 1999.
Revenues from the International University segment were $13.9 million for
the second quarter of 2000 compared to $14.7 million in the same period in
1999. These revenues were generated from the Universidad Europea de Madrid. The
decrease in revenue was due primarily to currency exchange differences as
revenues in the local currency increased 4% when compared to the same period in
1999. Additionally, revenues in 1999 included a program that was phased out in
1999. Revenue growth, excluding the phased out program, was 13% in 2000.
Management continues to be pleased with the enrollment trends and revenue
growth of the Universidad Europea de Madrid since its acquisition in the second
quarter of 1999.
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<PAGE>
Consolidated Statements of Operations
(Amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months
ended Six months ended
June 30, June 30,
---------------- ------------------
2000 1999 2000 1999
------- ------- -------- --------
<S> <C> <C> <C> <C>
Operating revenues....................... $92,490 $89,928 $177,773 $159,272
Operating expense:
Direct................................. 85,734 79,395 166,452 144,669
Sylvan Ventures development costs...... 3,207 -- 4,589 --
------- ------- -------- --------
Operating income......................... 3,549 10,533 6,732 14,603
Sylvan Ventures equity in affiliates..... (829) -- (1,109) --
Other income (loss), net................. 5,061 (2,835) 4,140 (4,293)
------- ------- -------- --------
Income from continuing operations before
income taxes............................ 7,781 7,698 9,763 10,310
Income tax expense....................... (3,112) (1,199) (3,905) (979)
------- ------- -------- --------
Income from continuing operations........ 4,669 6,499 5,858 9,331
Discontinued operations:
Income (loss) from operations of
discontinued operations, net of
tax(1)................................ -- 4,884 (1,647) 8,859
Gain on disposal of discontinued
operations, net of tax(2)............... -- -- 288,454 --
Cumulative effect of accounting change,
net of tax(3)......................... -- -- -- (1,323)
------- ------- -------- --------
Net income........................... $ 4,669 $11,383 $292,665 $ 16,867
======= ======= ======== ========
Earnings per share-diluted:
Income from continuing operations
excluding Sylvan Ventures............. $ 0.15 $ 0.12 $ 0.19 $ 0.17
Income from continuing operations...... 0.10 0.12 0.12 0.17
Income from discontinued operations,
net of tax............................ -- 0.09 5.89 0.17
Cumulative effect of accounting change,
net of tax............................ -- -- -- (0.02)
------- ------- -------- --------
Net income........................... $ 0.10 $ 0.21 $ 6.01 $ 0.32
======= ======= ======== ========
Shares used in computation............... 45,825 53,574 48,697 53,545
======= ======= ======== ========
</TABLE>
---------------------
(1) We reached a definitive agreement and closed the transaction to sell our
computer-based testing division, Sylvan Prometric, in the first quarter of
2000. The Company also completed a formal plan to dispose of the PACE Group
in the quarter ended September 30, 1999, and closed the transaction on
December 31, 1999.
(2) We reached a definitive agreement and closed the transaction to sell our
computer-based testing division, Sylvan Prometric, in the first quarter of
2000. The gain for the six months ended June 30, 2000 was net of tax
expense and transaction costs.
(3) We adopted AICPA Statement of Position No. 98-5, Reporting on the Costs of
Start-Up Activities (SOP 98-5), during the first quarter of 1999. SOP 98-5
requires expensing start-up costs as incurred, versus capitalization and
expensing them over a period of time. The adoption of SOP 98-5 resulted in
a cumulative effect of a change in method of accounting of approximately
$1.3 million, net of related income taxes.
Purpose of the Offer; Certain Effects of the Offer
Purpose of the Offer. Our new business strategy emphasizes both growing our
core educational services operating businesses and the significant value-
creation potential of our internet incubator company. We believe this new
strategy provides shareholders a unique investment opportunity and will enable
us to maximize
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<PAGE>
shareholder value. We are making the offer to buy back our shares because we
believe that our shares are undervalued in the public market and that the offer
is consistent with our long-term corporate goal of increasing shareholder
value. We believe that the offer is a prudent use of our financial resources,
given our recently- announced business strategy, as well as our assets and the
current market price of our common stock. We also believe that investing in our
own shares is an attractive use of capital and an efficient means to provide
value to our shareholders.
After the offer is completed, we believe that our anticipated cash flow from
operations, access to credit facilities and capital markets and financial
condition will be, taken together, adequate for our needs for at least the next
12 months. However, our actual experience may differ significantly from our
expectations. Future events may adversely or materially affect our business,
expenses or prospects and could affect our available cash or the availability
or cost of external financial resources.
Our Board has approved the offer. However, neither we nor our Board of
Directors nor the Dealer Manager makes any recommendation to shareholders as to
whether to tender or refrain from tendering their shares or as to the purchase
price at which shareholders should tender their shares, and none of them have
authorized any person to make any recommendation. Shareholders are urged to
evaluate carefully all information in the offer, consult with their own
investment and tax advisors and make their own decision whether to tender and,
if so, how many shares to tender and the price or prices at which to tender
them. We have been advised that none of our directors or executive officers
intends to tender any of their shares pursuant to this offer.
Certain Effects of the Offer. Upon the completion of the offer, non-
tendering shareholders will own a greater interest in a company focused on its
core educational services businesses and the new internet incubator company.
Our new business strategy may or may not be successful. Non-tendering
shareholders will realize a proportionate increase in their relative ownership
interest in our company and, thus, in our future earnings and assets, subject
to our right to issue additional shares and other equity securities in the
future. Shareholders may be able to sell non-tendered shares in the future on
Nasdaq or otherwise, at a net price significantly higher than the purchase
price in the offer. We can give no assurance, however, as to the price at which
a shareholder may be able to sell his or her shares in the future, which may be
higher or lower than the purchase price paid by us in this offer.
Shares that we acquire in this offer will be restored to the status of
authorized but unissued shares and will be available for us to issue in the
future without further shareholder action (except as required by applicable law
or Nasdaq rules) for all purposes, such as the acquisition of other businesses
or the raising of additional capital for use in our businesses. We have no
current plans for the issuance of shares repurchased pursuant to this offer.
Except as disclosed in this Offer to Purchase, we currently have no plans,
proposals or negotiations underway that relate to or would result in:
. any extraordinary transaction, such as a merger, reorganization or
liquidation, involving us or any of our subsidiaries;
. any purchase, sale or transfer of an amount of our assets or any of our
subsidiaries' assets which is material to us and our subsidiaries, taken
as a whole;
. any material change in amounts we have available for borrowing under our
$100 million revolving credit facility;
. any material change in our present Board of Directors or management or
any plans or proposals to change the number or the term of directors
(although we may fill an existing vacancy on the board) or to change any
material term of the employment contract of any executive officer;
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<PAGE>
. any material change in our present dividend policy of not paying cash
dividends, our capitalization, corporate structure or business;
. any class of our equity securities being delisted by Nasdaq or cease to
be authorized to be quoted in an automated quotations system operated by
a national securities association;
. any class of our equity securities becoming eligible for termination of
registration under section 12(g)(4) of the Securities Exchange Act of
1934, as amended (the "Exchange Act");
. the suspension of our obligation to file reports under Section 15(d) of
the Exchange Act;
. the acquisition or disposition by any person of our securities; or
. any changes in our charter, bylaws or other governing instruments or
other actions that could impede the acquisition of control of us.
Although we have no current plans to acquire additional shares of our common
stock other than through the offer, we may, in the future, purchase additional
shares in the open market, in private transactions, through tender offers or
otherwise, subject to the approval of our Board. Future purchases may be on the
same terms as this offer or on terms that are more or less favorable to
shareholders than the terms of this offer. However, Rule 13e-4 under the
Exchange Act prohibits us and our affiliates from purchasing any shares, other
than pursuant to the offer, until at least ten business days after the
Expiration Date. Any future purchases by us will depend on many factors,
including:
. the market price of the shares at that time;
. the results of this offer;
. our business strategy;
. our business and financial position; and
. general economic and market conditions.
3. Procedures for Tendering Shares.
Proper Tender of Shares. For shares to be tendered properly pursuant to the
offer, either (1) or (2) below must happen:
(1) the certificates for the shares, or confirmation of receipt of the
shares pursuant to the procedure for book-entry transfer set forth
below, together with (a) a properly completed and duly executed Letter
of Transmittal (or a manually signed facsimile of the Letter of
Transmittal), including any required signature guarantees, (b) an
Agent's Message (as defined below) in the case of a book-entry transfer
or (c) the specific acknowledgement in the case of a tender through the
Automated Tender Offer Program (as described below) of the Book-Entry
Transfer Facility (as defined below), and any other documents required
by the Letter of Transmittal, must be received before 12:00 Midnight,
Eastern time, on the Expiration Date by the Depositary at its address
set forth on the back cover of this Offer to Purchase; or
(2) the tendering shareholder must comply with the guaranteed delivery
procedure set forth below.
In accordance with Instruction 5 of the Letter of Transmittal, each shareholder
desiring to tender shares pursuant to the offer must either (1) check the box
in the section of the Letter of Transmittal captioned "Shares Tendered at Price
Determined Pursuant to the Offer" or (2) check one of the boxes in the section
of the Letter of Transmittal captioned "Price (In Dollars) per Share at Which
Shares Are Being Tendered" indicating the price at which shares are being
tendered. A tender of shares will be proper if and only if, one of these boxes
is checked on the Letter of Transmittal.
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<PAGE>
If tendering shareholders wish to maximize the chance that their shares will
be purchased, they should check the box in the section on the Letter of
Transmittal captioned "Shares Tendered at Price Determined Pursuant to the
Offer." Note that this election could result in the tendered shares being
purchased at the minimum price of $13.50 per share.
If tendering shareholders wish to indicate a specific price (in multiples of
$0.125) at which their shares are being tendered, they must check a box under
the section captioned "Price (In Dollars) per Share at Which Shares Are Being
Tendered." Tendering shareholders should be aware that this election could mean
that none of their shares will be purchased if they check a box other than the
box representing the lowest price. A shareholder who wishes to tender shares at
more than one price must complete separate letters of transmittal for each
price at which shares are being tendered. The same shares cannot be tendered
(unless previously properly withdrawn in accordance with the terms of the
offer) at more than one price.
Odd Lot Holders who tender all their shares must also complete the section
captioned "Odd Lots" in the Letter of Transmittal and, if applicable, in the
Notice of Guaranteed Delivery, to qualify for the preferential treatment
available to Odd Lot Holders as set forth in Section 1.
Shareholders who hold shares through brokers or banks are urged to consult
the brokers or banks to determine whether transaction costs may apply if
shareholders tender shares through the brokers or banks and not directly to the
Depositary.
Participants in our Employee Stock Purchase Plan who wish to tender some or
all of the shares held in their accounts under the plan must follow the
instructions in the "Letter to Participants in Sylvan's Employee Stock Purchase
Plan" furnished separately and return it to Salomon Smith Barney in accordance
with those instructions. The instructions must be received by Salomon Smith
Barney no later than three business days prior to the Expiration Date, or no
shares allocated to the participant's account will be tendered.
Participants in our 401(k) Retirement Savings Plan who wish to tender some
or all of the shares allocated to their accounts must follow the instructions
in the "Letter to Participants in Sylvan's 401(k) Retirement Savings Plan"
furnished separately and return it to First Union National Bank in accordance
with those instructions. The instructions must be received by First Union
National Bank no later than three business days prior to the Expiration Date,
or no shares allocated to the participant's account will be tendered.
Signature Guarantees and Method of Delivery. No signature guarantee is
required if:
(1) the Letter of Transmittal is signed by the registered holder of the
shares (which term, for purposes of this Section 3, will include any
participant in The Depository Trust Company (the "Book-Entry Transfer
Facility") whose name appears on a security position listing as the
owner of the shares) tendered and the holder has not completed either
the box entitled "Special Delivery Instructions" or the box entitled
"Special Payment Instructions" on the Letter of Transmittal; or
(2) shares are tendered for the account of a bank, broker, dealer, credit
union, savings association or other entity that is a member in good
standing of the Securities Transfer Agents Medallion Program or a bank,
broker, dealer, credit union, savings association or other entity that
is an "eligible guarantor institution," as the term is defined in Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended (each of
the foregoing constitutes an "Eligible Institution"). See Instruction 1
of the Letter of Transmittal.
If a certificate for shares is registered in the name of a person other than
the person executing a Letter of Transmittal, or if payment is to be made, or
shares not purchased or tendered are to be issued, to a person other than the
registered holder, then the certificate must be endorsed or accompanied by an
appropriate stock power, in either case, signed exactly as the name of the
registered holder appears on the certificate, with the signature guaranteed by
an Eligible Institution.
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In all cases, payment for shares tendered and accepted for payment pursuant
to the offer will be made only after timely receipt by the Depositary of
certificates for the shares (or a timely confirmation of the book-entry
transfer of the shares into the Depositary's account at the Book-Entry Transfer
Facility as described above), a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile of the Letter of Transmittal), an
Agent's Message in the case of a book-entry transfer or the specific
acknowledgment in the case of a tender through the Automated Tender Offer
Program of the Book-Entry Transfer Facility, and any other documents required
by the Letter of Transmittal.
The method of delivery of all documents, including certificates for shares,
the Letter of Transmittal and any other required documents, is at the election
and risk of the tendering shareholder. If delivery is by mail, we recommend
that shareholders use registered mail with return receipt requested, properly
insured. In all cases, sufficient time should be allowed to ensure timely
delivery.
Book-Entry Delivery. The Depositary will establish an account with respect
to the shares for purposes of the offer at the Book-Entry Transfer Facility
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of the shares by causing the
Book-Entry Transfer Facility to transfer shares into the Depositary's account
in accordance with the Book-Entry Transfer Facility's procedures for transfer.
Although delivery of shares may be effected through a book-entry transfer into
the Depositary's account at the Book-Entry Transfer Facility, either (1) a
properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile of the Letter of Transmittal), with any required signature
guarantees, an Agent's Message in the case of a book-entry transfer or the
specific acknowledgement in the case of a tender through the Automated Tender
Offer Program of the Book-Entry Transfer Facility, and any other required
documents must be transmitted to and received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase before the
Expiration Date, or (2) the guaranteed delivery procedure described below must
be followed. Delivery of the Letter of Transmittal and any other required
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Depositary.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgement from the participant in the Book-Entry
Transfer Facility tendering shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that we may
enforce such agreement against the participant.
Participants in the Book-Entry Transfer Facility may tender their shares in
accordance with the Automated Tender Offer Program to the extent it is
available to them for the shares they wish to tender. A shareholder tendering
through the Automated Tender Offer Program must expressly acknowledge that the
shareholder has received and agreed to be bound by the Letter of Transmittal
and that the Letter of Transmittal may be enforced against them.
Guaranteed Delivery. If a shareholder desires to tender shares pursuant to
the offer and the shareholder's share certificates are not immediately
available or cannot be delivered to the Depositary before the Expiration Date
(or the procedure for book-entry transfer cannot be completed on a timely
basis), or if time will not permit all required documents to reach the
Depositary before the Expiration Date, the shares still may be tendered, if all
of the following conditions are satisfied:
(1) the tender is made by or through an Eligible Institution;
(2) the Depositary receives by hand, mail, overnight courier, telegram or
facsimile transmission, on or before the Expiration Date, a properly
completed and duly executed Notice of Guaranteed Delivery substantially
in the form we have provided with this Offer to Purchase, including
(where required) a signature guarantee by an Eligible Institution in
the form set forth in the Notice of Guaranteed Delivery; and
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(3) the certificates for all tendered shares, in proper form for transfer
(or confirmation of book-entry transfer of the shares into the
Depositary's account at the Book-Entry Transfer Facility), together
with a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile of the Letter of Transmittal), including any
required signature guarantees, an Agent's Message in the case of a
book-entry transfer or the specific acknowledgement in the case of a
tender through the Automated Tender Offer Program of the Book-Entry
Transfer Facility, and any other documents required by the Letter of
Transmittal, are received by the Depositary within three Nasdaq trading
days after the date of receipt by the Depositary of the Notice of
Guaranteed Delivery.
Return of Unpurchased Shares. If any tendered shares are not purchased, or
if less than all shares evidenced by a shareholder's certificates are tendered,
certificates for unpurchased shares will be returned as promptly as practicable
after the expiration or termination of the offer or, in the case of shares
tendered by book-entry transfer at the Book-Entry Transfer Facility, the shares
will be credited to the appropriate account maintained by the tendering
shareholder at the Book-Entry Transfer Facility, in each case without expense
to the shareholder.
Determination of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the number of shares
to be accepted, the purchase price to be paid for shares to be accepted and the
validity, form, eligibility (including time of receipt) and acceptance for
payment of any tender of shares will be determined by us, in our sole
discretion, and our determination will be final and binding on all parties. We
reserve the absolute right to reject any or all tenders of any shares that we
determine are not in proper form or the acceptance for payment of or payment
for which may, in the opinion of our counsel, be unlawful. We also reserve the
absolute right to waive any of the conditions of the offer or any defect or
irregularity in any tender with respect to any particular shares or any
particular shareholder, and our interpretation of the terms of the offer will
be final and binding on all parties. No tender of shares will be deemed to have
been properly made until all defects or irregularities have been cured by the
tendering shareholder or waived by us. We will not, nor will the Dealer
Manager, the Depositary, the Information Agent or any other person, be
obligated to give notice of any defects or irregularities in tenders, nor will
any of them incur any liability for failure to give any notice.
Our Employee Stock Purchase Plan. Participants in our Employee Stock
Purchase Plan may instruct Salomon Smith Barney, which administers the Employee
Stock Purchase Plan, to tender some or all of the shares held in the
participant's account under the plan by following the instructions in the
"Letter to Participants in Sylvan's Employee Stock Purchase Plan" furnished
separately and returning it to Salomon Smith Barney in accordance with those
instructions. Each participant may direct that all, some or none of the shares
held in the participant's account under the Employee Stock Purchase Plan be
tendered and the price at which such participant's shares are to be tendered.
Any employee stock purchase plan shares tendered but not purchased will be
returned to the participant's employee stock purchase plan account. All
documents furnished to shareholders generally in connection with the offer will
be made available to participants whose accounts are credited with shares.
Participants in the Employee Stock Purchase Plan cannot use the Letter of
Transmittal to direct the tender of shares, but must use the separate
instruction letter sent to them.
Delivery of a Letter of Transmittal by an Employee Stock Purchase Plan
participant does not constitute proper tender of his or her employee stock
purchase plan shares. Proper tender can only be made by Salomon Smith Barney,
who is the record owner of these shares. Please note that the deadline for
submitting instruction letters to Salomon Smith Barney is earlier than the
Expiration Date. If Salomon Smith Barney has not received a participant's
instructions at least three business days prior to the Expiration Date, Salomon
Smith Barney will not tender any shares held in the participant's account under
the Employee Stock Purchase Plan. Participants in our Employee Stock Purchase
Plan are urged to read the separate instruction letter and related materials
carefully.
Our 401(k) Retirement Savings Plan. Participants in our 401(k) Retirement
Savings Plan may instruct the trustee of the plan, Putnam Fiduciary Trust
Company, to tender some or all of the shares allocated to a
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participant's account by following the instructions in the "Letter to
Participants in Sylvan's 401(k) Retirement Savings Plan" furnished separately
and returning it to First Union National Bank in accordance with those
instructions. All documents furnished to shareholders generally in connection
with the offer will be made available to participants whose savings plan
accounts are credited with shares. Participants in the savings plan cannot use
the Letter of Transmittal to direct the tender of shares, but must use the
separate instruction letter sent to them.
Our 401(k) Retirement Savings Plan is prohibited from selling shares to us
for a price that is less than the prevailing market price. Accordingly, if a
participant in the savings plan elects to tender shares at a price that is
lower than the prevailing market price of our common stock at the expiration of
the offer, the tender price elected by the participant will be deemed to have
been increased to the closest tender price that is not less than the closing
price of our common stock on The Nasdaq Stock Market on the Expiration Date.
Delivery of a Letter of Transmittal by a savings plan participant does not
constitute proper tender of his or her 401(k) Retirement Savings Plan shares.
Proper tender can only be made by the Trustee, who is the record owner of the
shares held in the savings plan. Please note that instruction letters must be
submitted to the Trustee prior to the Expiration Date. If a participant wishes
to tender some or all of the shares held on the participant's behalf in its
savings plan account, First Union National Bank must receive a participant's
instructions at least three business days prior to the Expiration Date,
otherwise the Trustee will not tender any shares held on behalf of the
participant in the savings plan.
The proceeds received by the Trustee from any tender of shares from a
participant's savings plan account will be reinvested pro-rata in accordance
with the participant's current investment directions for new elective deferral
contributions to that plan. However, if the participant's current investment
directions for new elective deferral contributions provide that some or all of
the participant's contributions are to be invested in our common stock, then
that portion of the tender proceeds will be invested in the Putnam Stable Value
Fund. Once the tender proceeds have been credited to the participant's savings
plan accounts, the participant may reallocate his or her investments among the
various investment funds under the savings plan in the usual manner.
Participants in our 401(k) Retirement Savings Plan are urged to read the
separate instruction letter and related materials carefully.
Tendering Shareholder's Representation and Warranty; Our Acceptance
Constitutes an Agreement. A tender of shares pursuant to any of the procedures
described above will constitute the tendering shareholder's acceptance of the
terms and conditions of the offer, as well as the tendering shareholder's
representation and warranty to us that (1) the shareholder has a "net long
position," within the meaning of Rule 14e-4 promulgated by the SEC under the
Exchange Act, in the shares or equivalent securities at least equal to the
shares being tendered, and (2) the tender of shares complies with Rule 14e-4.
It is a violation of Rule 14e-4 for a person, directly or indirectly, to tender
shares for that person's own account unless, at the time of tender and at the
end of the proration period or period during which shares are accepted by lot
(including any extensions thereof), the person so tendering (1) has a net long
position equal to or greater than the amount of (a) shares tendered or (b)
other securities convertible into or exchangeable or exercisable for the shares
tendered and will acquire the shares for tender by conversion, exchange or
exercise and (2) will deliver or cause to be delivered the shares in accordance
with the terms of the offer. Rule 14e-4 provides a similar restriction
applicable to the tender or guarantee of a tender on behalf of another person.
Our acceptance for payment of shares tendered pursuant to the offer will
constitute a binding agreement between the tendering shareholder and us on the
terms and conditions of the offer.
United States Federal Income Tax Backup Withholding. Under the United States
federal income tax backup withholding rules, unless an exemption applies under
the applicable law and regulations, 31% of the gross proceeds payable to a
shareholder or other payee pursuant to the offer must be withheld and remitted
to the United States Internal Revenue Service ("IRS"), unless the shareholder
or other payee provides his or her taxpayer identification number (employer
identification number or social security number) to the Depositary (as payor)
and certifies under penalties of perjury that the number is correct. Therefore,
each tendering shareholder
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should complete and sign the Substitute Form W-9 included as part of the Letter
of Transmittal so as to provide the information and certification necessary to
avoid backup withholding unless the shareholder otherwise establishes to the
satisfaction of the Depositary that the shareholder is not subject to backup
withholding. If the United States Holder does not provide the Depositary with
the correct taxpayer identification number, the United States Holder (as
defined in Section 14) may be subject to penalties imposed by the IRS. If
withholding results in an overpayment of taxes, a refund may be obtained from
the IRS in accordance with its refund procedures. Certain "exempt recipients"
(including, among others, all corporations and certain Non-United States
Holders (as defined in Section 14)) are not subject to these backup withholding
and information reporting requirements. In order for a Non-United States Holder
to qualify as an exempt recipient, that shareholder must submit an IRS Form W-8
or a Substitute Form W-8, signed under penalties of perjury, attesting to that
shareholder's exempt status. These statements can be obtained from the
Depositary. See Instruction 14 of the Letter of Transmittal.
To prevent United States federal income tax backup withholding equal to 31%
of the gross payments made to shareholders for shares purchased pursuant to the
offer, each shareholder who does not otherwise establish an exemption from the
backup withholding must provide the Depositary with the shareholder's correct
taxpayer identification number and provide other information by completing the
Substitute Form W-9 included as part of the Letter of Transmittal.
Withholding For Non-United States Holders. Even if a Non-United States
Holder has provided the required certification to avoid backup withholding, the
Depositary will withhold United States federal income taxes equal to 30% of the
gross payments payable to a Non-United States Holder or his agent unless the
Depositary determines that a reduced rate of withholding is available under a
tax treaty or that an exemption from withholding is applicable because the
gross proceeds are effectively connected with the conduct of a trade or
business within the United States. To obtain a reduced rate of withholding
under a tax treaty, a Non-United States Holder must deliver to the Depositary
before the payment a properly completed and executed IRS Form 1001. To obtain
an exemption from withholding on the grounds that the gross proceeds paid
pursuant to the offer are effectively connected with the conduct of a trade or
business within the United States, a Non-United States Holder must deliver to
the Depositary a properly completed and executed IRS Form 4224. A Non-United
States Holder that qualifies for an exemption from withholding by delivering
IRS Form 4224 will generally be required to file a United States federal income
tax return and will be subject to United States federal income tax on income
derived from the sale of shares pursuant to the offer in the manner and to the
extent described in Section 14 as if it were a United States Holder. The
Depositary will determine a shareholder's status as a Non-United States Holder
and eligibility for a reduced rate of, or exemption from, withholding by
reference to any outstanding certificates or statements concerning eligibility
for a reduced rate of, or exemption from, withholding (e.g., IRS Form 1001 or
IRS Form 4224) unless facts and circumstances indicate that reliance is not
warranted. A Non-United States Holder may be eligible to obtain a refund of all
or a portion of any tax withheld if the Non-United States Holder meets those
tests described in Section 14 that would characterize the exchange as a sale
(as opposed to a dividend) or is otherwise able to establish that no tax or a
reduced amount of tax is due.
Non-United States Holders are urged to consult their tax advisors regarding
the application of United States federal income tax withholding, including
eligibility for a withholding tax reduction or exemption, and the refund
procedure.
Lost or Destroyed Certificates. Shareholders whose certificates for part or
all of their shares have been lost, stolen, misplaced or destroyed may either
complete the box in the Letter of Transmittal entitled, "Affidavit of Lost or
Destroyed Certificate(s)" on page 6 of the Letter of Transmittal, and pay the
listed insurance premium or contact the Depositary at (800) 829-8432 for
instructions as to the documents that will be required to be submitted together
with the Letter of Transmittal in order to receive stock certificate(s)
representing the shares. Shareholders are requested to contact the Depositary
immediately in order to permit timely processing of this documentation.
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Certificates for shares, together with a properly completed Letter of
Transmittal and any other documents required by the Letter of Transmittal, must
be delivered to the Depositary and not to us. Any documents delivered to us
will not be forwarded to the Depositary and will not be deemed to be properly
tendered.
4. Withdrawal Rights.
Shares tendered pursuant to the offer may be withdrawn at any time before
the Expiration Date and, unless already accepted for payment by us pursuant to
the offer, may also be withdrawn at any time after 12:00 Midnight, Eastern
time, on Thursday, October 5, 2000. Except as otherwise provided in this
Section 4, tenders of shares pursuant to the offer are irrevocable.
For a withdrawal to be effective, a notice of withdrawal must be in written,
telegraphic, telex or facsimile transmission form and must be received in a
timely manner by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase. Any notice of withdrawal must specify the name
of the tendering shareholder, the number of shares to be withdrawn and the name
of the registered holder of the shares if different from that of the person who
tendered the shares. If the certificates for shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, before the release
of the certificates, the tendering shareholder must also submit the serial
numbers shown on the particular certificates for shares to be withdrawn and the
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution (except in the case of shares tendered for the account of an
Eligible Institution). If shares have been tendered pursuant to the procedure
for book-entry transfer described in Section 3, the notice of withdrawal also
must specify the name and the number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn shares and must otherwise comply
with the Book-Entry Transfer Facility's procedures.
All questions as to the form and validity, including the time of receipt, of
any notice of withdrawal will be determined by us, in our sole discretion,
which determination will be final and binding on all parties. Neither we nor
the Dealer Manager, the Depositary, the Information Agent or any other person
will be obligated to give notice of any defects or irregularities in any notice
of withdrawal, nor will any of them incur liability for failure to give any
notice.
Participants in our Employee Stock Purchase Plan who wish to withdraw their
shares must follow the instructions found in the "Letter to Participants in
Sylvan's Employee Stock Purchase Plan" sent to them separately.
Participants in our 401(k) Retirement Savings Plan who wish to withdraw
their shares must follow the instructions found in the "Letter to Participants
in Sylvan's 401(k) Retirement Savings Plan" sent to them separately.
Withdrawals may not be rescinded, and any shares properly withdrawn will be
deemed not properly tendered for purposes of the offer. However, withdrawn
shares may be re-tendered before the Expiration Date by again following one of
the procedures described in Section 3.
If we extend the offer, are delayed in our purchase of shares or are unable
to purchase shares pursuant to the offer for any reason, then, without
prejudice to our rights under the offer, the Depositary may, subject to
applicable law, retain tendered shares on our behalf, and the shares may not be
withdrawn except to the extent tendering shareholders are entitled to
withdrawal rights as described in this Section 4. Our reservation of the right
to delay payment for shares that we have accepted for payment is limited by
Rule 13e-4(f)(5) under the Exchange Act, which requires that we must pay the
consideration offered or return the shares tendered promptly after termination
or withdrawal of a tender offer.
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5. Purchase of Shares and Payment of Purchase Price.
As promptly as practicable following the Expiration Date, we (1) will
determine a single per share purchase price we will pay for the shares properly
tendered and not properly withdrawn before the Expiration Date, taking into
account the number of shares tendered and the prices specified by tendering
shareholders, and (2) will accept for payment and pay for (and thereby
purchase) up to 6,000,000 shares properly tendered at prices at or below the
purchase price and not properly withdrawn before the Expiration Date. For
purposes of the offer, we will be deemed to have accepted for payment (and
therefore purchased), subject to the "odd lot" priority, proration and
conditional tender provisions of this offer, shares that are properly tendered
at or below the purchase price selected by us and not properly withdrawn only
when, as and if we give oral or written notice to the Depositary of its
acceptance of the shares for payment pursuant to the offer.
We will accept for payment and pay the per share purchase price for all of
the shares accepted for payment pursuant to the offer as soon as practicable
after the Expiration Date. In all cases, payment for shares tendered and
accepted for payment pursuant to the offer will be made promptly, subject to
possible delay in the event of proration or conditional tender, but only after
timely receipt by the Depositary of certificates for shares, or of a timely
Book-Entry Confirmation of shares into the Depositary's account at the Book-
Entry Transfer Facility, and a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile of the Letter of Transmittal), an
Agent's Message in the case of a book-entry transfer or the specific
acknowledgement in the case of a tender through the Automated Tender Offer
Program of the Book-Entry Transfer Facility, and any other required documents.
We will pay for shares purchased pursuant to the offer by depositing the
aggregate purchase price for the shares with the Depositary, which will act as
agent for tendering shareholders for the purpose of receiving payment from us
and transmitting payment to the tendering shareholders.
In the event of proration, we will determine the proration factor and pay
for those tendered shares accepted for payment as soon as practicable after the
Expiration Date. However, we do not expect to be able to announce the final
results of any proration and commence payment for shares purchased until
approximately seven business days after the Expiration Date. Certificates for
all shares tendered and not purchased, including all shares tendered at prices
in excess of the purchase price and shares not purchased due to proration or
conditional tenders, will be returned or, in the case of shares tendered by
book-entry transfer, will be credited to the account maintained with the Book-
Entry Transfer Facility by the participant who delivered the shares, to the
tendering shareholder at our expense as promptly as practicable after the
Expiration Date or termination of the offer without expense to the tendering
shareholders. Under no circumstances will we pay interest on the purchase
price, including but not limited to, by reason of any delay in making payment.
In addition, if certain events occur, we may not be obligated to purchase
shares pursuant to the offer. See Section 7.
We will pay all stock transfer taxes, if any, payable on the transfer to us
of shares purchased pursuant to the offer. If, however, payment of the purchase
price is to be made to, or (in the circumstances permitted by the offer) if
unpurchased shares are to be registered in the name of, any person other than
the registered holder, or if tendered certificates are registered in the name
of any person other than the person signing the Letter of Transmittal, the
amount of all stock transfer taxes, if any (whether imposed on the registered
holder or the other person), payable on account of the transfer to the person
will be deducted from the purchase price unless satisfactory evidence of the
payment of the stock transfer taxes, or exemption from payment of the stock
transfer taxes, is submitted. See Instruction 7 of the Letter of Transmittal.
Any tendering shareholder or other payee who fails to complete fully, sign
and return to the Depositary the Substitute Form W-9 included with the Letter
of Transmittal may be subject to required United States federal income tax
backup withholding of 31% of the gross proceeds paid to the shareholder or
other payee pursuant to the offer. See Section 3. Also see Section 3 regarding
United States federal income tax consequences for Non-United States
shareholders.
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6. Conditional Tender of Shares.
Under certain circumstances and subject to the exceptions for Odd Lot
Holders described in Section 1, we may prorate the number of shares purchased
pursuant to the offer. As discussed in Section 14, the number of shares to be
purchased from a particular shareholder may affect the tax treatment of the
purchase to the shareholder and the shareholder's decision whether to tender.
The conditional tender alternative is made available so that a shareholder may
seek to structure the purchase of shares from the shareholder pursuant to the
offer in such a manner that it will be treated as a sale of such shares by the
shareholder, rather than the payment of a dividend to the shareholder, for
federal income tax purposes. Accordingly, a shareholder may tender shares
subject to the condition that a specified minimum number of the shareholder's
shares tendered pursuant to a Letter of Transmittal or Notice of Guaranteed
Delivery must be purchased if any shares tendered are purchased. Any
shareholder desiring to make a conditional tender must so indicate in the box
captioned "Conditional Tender" in the Letter of Transmittal or, if applicable,
the Notice of Guaranteed Delivery. Each shareholder is urged to consult with
his or her own tax advisor.
Any tendering shareholder wishing to make a conditional tender must
calculate and appropriately indicate the minimum number of shares that must be
purchased if any are purchased. If the effect of accepting tenders on a pro
rata basis would be to reduce the number of shares to be purchased from any
shareholder (tendered pursuant to a Letter of Transmittal or Notice of
Guaranteed Delivery) below the minimum number specified by that shareholder,
the conditional tender will automatically be regarded as withdrawn (except as
provided in the next paragraph). All shares tendered by a shareholder subject
to a conditional tender pursuant to the Letter of Transmittal or Notice of
Guaranteed Delivery and regarded as withdrawn as a result of proration will be
returned as promptly as practicable after the Expiration Date.
If conditional tenders would otherwise be regarded as withdrawn because of
proration and would cause the total number of shares to be purchased to fall
below 6,000,000, then to the extent feasible, we will select enough of the
conditional tenders that would otherwise have been deemed withdrawn to permit
us to purchase 6,000,000 shares. In selecting among the conditional tenders, we
will select by lot and will limit our purchase in each case to the designated
minimum of shares to be purchased.
7. Conditions of the Offer.
Notwithstanding any other provision of the offer, we may terminate or amend
the offer or may postpone the acceptance for payment of, or the purchase of and
the payment for shares tendered, subject to the rules under the Exchange Act,
if at any time on or after August 10, 2000 and before the Expiration Date any
of the following events have occurred (or have been determined by us to have
occurred) that, in our sole judgment and regardless of the circumstances giving
rise to the event or events (including any action or omission to act by us),
makes it inadvisable to proceed with the offer or with acceptance for payment:
. there has been threatened, instituted or pending any action, suit or
proceeding by any government or governmental, regulatory or
administrative agency, authority or tribunal or by any other person,
domestic, foreign or supranational, before any court, authority, agency
or other tribunal that directly or indirectly:
(1) challenges or seeks to make illegal, or to delay or otherwise
directly or indirectly to restrain, prohibit or otherwise affect the
making of the offer, the acquisition of some or all of the shares
pursuant to the offer or otherwise relates in any manner to the
offer; or
(2) in our reasonable judgment, could materially and adversely affect our
and our subsidiaries' business, condition (financial or otherwise),
income, operations or prospects, taken as a whole, or otherwise
materially impair in any way the contemplated future conduct of our
business or any of our subsidiaries' business or materially impair
the contemplated benefits of the offer to us;
. there has been any action threatened, instituted, pending or taken,
including any settlement, or any approval withheld, or any statute, rule,
regulation, judgment, order or injunction threatened, invoked,
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proposed, sought, promulgated, enacted, entered, amended, enforced or
deemed to be applicable to the offer or us or any of our subsidiaries,
including any settlement, by any court, government or governmental,
regulatory or administrative authority, agency or tribunal, domestic,
foreign or supranational, that, in our reasonable judgment, could directly
or indirectly:
(1) make the acceptance for payment of, or payment for, some or all of
the shares illegal or otherwise restrict or prohibit consummation of
the offer;
(2) delay or restrict our ability, or render us unable, to accept for
payment or pay for some or all of the shares;
(3) materially impair the contemplated benefits of the offer to us; or
(4) materially and adversely affect our and our subsidiaries' business,
condition (financial or otherwise), income, operations or prospects,
taken as a whole, or otherwise materially impair in any way the
contemplated future conduct of our or any of our subsidiaries'
business;
. there has occurred any of the following:
(1) any general suspension of trading in, or limitation on prices for,
securities on any United States national securities exchange or in
the over-the-counter market;
(2) the declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States, whether or not mandatory;
(3) the commencement of a war, armed hostilities or other international
or national calamity directly or indirectly involving the United
States;
(4) any limitation, whether or not mandatory, by any governmental,
regulatory or administrative agency or authority on, or any event
that, in our reasonable judgment, could materially affect, the
extension of credit by banks or other lending institutions in the
United States;
(5) any significant decrease in the market price of our common stock or
in the market prices of equity securities generally in the United
States or any changes in the general political, market, economic or
financial conditions in the United States or abroad that could have,
in our reasonable judgment, a material adverse effect on our and our
subsidiaries' business, condition (financial or otherwise), income,
operations or prospects, taken as a whole, or on the trading in the
shares of our common stock or on the benefits of the offer to us;
(6) in the case of any of the foregoing existing at the time of the
commencement of the offer, a material acceleration or worsening
thereof; or
(7) any decline in the Nasdaq Composite Index by an amount in excess of
10% measured from the close of business on August 9, 2000.
. a tender or exchange offer for any or all of our shares (other than this
offer), or any merger, acquisition proposal, business combination or
other similar transaction with or involving us or any subsidiary, has
been proposed, announced or made by any person or has been publicly
disclosed;
. We learn that:
(1) any entity, "group" (as that term is used in Section 13(d)(3) of the
Exchange Act) or person has acquired or proposes to acquire
beneficial ownership of more than 5% of our outstanding shares,
whether through the acquisition of stock, the formation of a group,
the grant of any option or right, or otherwise (other than as and to
the extent disclosed in a Schedule 13D or Schedule 13G filed with the
SEC on or before August 9, 2000); or
(2) any entity, group or person who has filed a Schedule 13D or Schedule
13G with the SEC on or before August 9, 2000 has acquired or proposes
to acquire, whether through the acquisition of stock, the formation
of a group, the grant of any option or right, or otherwise,
beneficial ownership of an additional 2% or more of our outstanding
shares.
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<PAGE>
. any person, entity or group has filed a Notification and Report Form
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, reflecting an intent to acquire us or any of our shares of
common stock, or has made a public announcement reflecting an intent to
acquire us or any of our subsidiaries or any of our respective assets or
securities; or
. any change or changes have occurred or are threatened in our or our
subsidiaries' business, condition (financial or otherwise), assets,
income, operations, prospects or stock ownership that, in our reasonable
judgment, is or may be material to us or our subsidiaries; or
. We determine that the consummation of the offer and the purchase of the
shares may cause our common stock to be delisted from The Nasdaq Stock
Market or to be eligible for deregistration under the Exchange Act.
The conditions referred to above are for our sole benefit and may be
asserted by us regardless of the circumstances (including any action or
omission to act by us) giving rise to any condition, and may be waived by us,
in whole or in part, at any time and from time to time in our sole discretion.
Our failure at any time to exercise any of the foregoing rights will not be
deemed a waiver of any right, and each such right will be deemed an ongoing
right that may be asserted at any time and from time to time. In certain
circumstances, if we waive any of the conditions described above, we may be
required to extend the Expiration Date. Any determination by us concerning the
events described above will be final and binding on all parties.
8. Price Range of Shares; Dividends; Our Rights Plan.
Our common stock is listed for trading on The Nasdaq Stock Market under the
symbol "SLVN". It began trading in December 1993 following our initial public
offering. The following table sets forth, for the fiscal quarters indicated,
the high and low sales prices per share as reported on The Nasdaq Stock Market.
We have never paid any cash dividends on our common stock and our revolving
credit facility prohibits the payment of cash dividends.
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
1998
First quarter.................................................. $31.63 $22.00
Second quarter................................................. 34.75 28.94
Third quarter.................................................. 36.88 21.38
Fourth quarter................................................. 31.00 18.25
1999
First quarter.................................................. 34.25 25.25
Second quarter................................................. 28.94 21.06
Third quarter.................................................. 27.97 15.88
Fourth quarter................................................. 18.53 11.19
2000
First quarter.................................................. 16.75 12.56
Second quarter................................................. 16.75 10.63
Third quarter (through August 9, 2000)......................... 14.69 10.94
</TABLE>
On August 9, 2000, the last full trading day before the announcement of the
offer, the last reported sale price of the shares as reported on The Nasdaq
Stock Market was $13.625. We urge shareholders to obtain current market
quotations for the shares.
Rights Plan. In 1996, our Board of Directors adopted a shareholder rights
plan, pursuant to which we declared a dividend of one preferred stock purchase
right for each share of our common stock outstanding. One right attaches to
each share of our common stock, and, when exercisable, each right will entitle
the registered holder to purchase from us one one-hundredth of a share of
Series A Junior Participating Preferred Stock,
22
<PAGE>
without par value per share, at a price of $157.00 per one one-hundredth of a
preferred share, subject to adjustment.
In general, the rights become exercisable or transferable only upon the
occurrence of certain events relating to the acquisition by any person or
group, other than us, of beneficial ownership of 15% or more of the aggregate
voting power represented by our outstanding securities or the commencement of a
tender offer to acquire such beneficial ownership. The rights will expire on
November 7, 2006, subject to our right to extend the date, unless earlier
redeemed or exchanged by us or terminated. The rights may be redeemed in whole,
but not in part, at a price of $.05 per right by the Board of Directors at any
time before the time a person crosses the beneficial ownership threshold.
On December 18, 1999, our Board of Directors amended our shareholder rights
plan. Effective October 1, 1999, several amendments were made to the Maryland
General Corporation Law. As a result, the Maryland General Corporation Law now
permits a provision in a shareholder rights plan that newly elected directors
may not vote to redeem rights for at least 180 days after their election. The
amendments to our plan incorporate this type of provision. In addition, we
appointed a new rights agent, First Union National Bank, which also now acts as
our transfer agent and is the Depositary.
The preferred stock purchase rights are not currently exercisable and trade
together with shares of our common stock. Absent circumstances causing the
rights to become exercisable or separately tradable prior to the Expiration
Date, the tender of any shares pursuant to the offer will include the tender of
the associated rights. No separate consideration will be paid for the rights.
Upon the purchase of shares by us pursuant to this offer, the sellers of the
shares purchased will no longer own the preferred stock purchase rights
associated with the purchased shares.
The foregoing description of the preferred stock purchase rights is
qualified in its entirety by reference to the form of the Amended and Restated
Rights Agreement, a copy of which has been filed as an exhibit to a Form 8-K
filed by us on December 17, 1999. This exhibit may be obtained from the SEC in
the manner provided in Section 10.
9. Source and Amount of Funds.
Assuming we purchase all shares pursuant to this offer at the maximum
specified purchase price of $15.00 per share, we expect the maximum aggregate
cost, including all fees and expenses applicable to the offer, will be
approximately $91 million. We will use a portion of the cash proceeds from the
sale of Prometric and the sale of our 5% Convertible Subordinated Debentures as
described in Section 2 to finance the offer.
10. Certain Information Concerning Us.
General. We are the leading provider of educational services to families,
schools and industry. Our Sylvan Learning Centers and education solutions
divisions provide personalized instruction services to K through 12 students
through direct consumer relationships and under contract to school systems. We
provide courses to students throughout the world in the areas of English
language, teacher training and accredited university offerings through the Wall
Street Institute, ASPECT, Canter and Sylvan international universities
subsidiaries. Through our affiliate, Caliber Learning Network, Inc., we also
have the ability to distribute world-class professional education and training
programs.
We are headquartered at 1000 Lancaster Street, Baltimore, Maryland 21202.
Our telephone number is (410) 843-8000.
Where You Can Find More Information. We are subject to the informational
filing requirements of the Exchange Act, and, accordingly, are obligated to
file reports, statements and other information with the SEC
23
<PAGE>
relating to our business, financial condition and other matters. Information,
as of particular dates, concerning our directors and officers, their
remuneration, options granted to them, the principal holders of our securities
and any material interest of these persons in transactions with us is required
to be disclosed in proxy statements distributed to our shareholders and filed
with the SEC. We also have filed an Issuer Tender Offer Statement on Schedule
TO with the SEC that includes additional information relating to the offer.
These reports, statements and other information can be inspected and copied at
the public reference facilities maintained by the SEC at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549; and at its regional offices located at
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of this material may also
be obtained by mail, upon payment of the SEC's customary charges, from the
Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The SEC also maintains a web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
Incorporation by Reference. The rules of the SEC allow us to "incorporate by
reference" information into this document, which means that we can disclose
important information to you by referring you to another document filed
separately with the SEC. These documents contain important information about
us.
<TABLE>
<CAPTION>
SEC Filings (File No. 0-22844) Period or Date Filed
------------------------------ --------------------
<S> <C>
Annual Report on Form 10-K (as
amended).......................... Year ended December 31, 1999
Quarterly Reports on Form 10-Q..... Quarter ended March 31, 2000
Quarter ended June 30, 2000
(to be filed on or before August 14, 2000)
Reports on Form 8-K................ Report filed December 17, 1999
Report filed February 2, 2000
Report filed March 21, 2000
</TABLE>
We incorporate by reference these documents and any additional documents
that we may file with the SEC between the date of this offer and the date of
expiration of withdrawal rights. Those documents include periodic reports, such
as annual reports on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K, as well as proxy statements.
You can obtain any of the documents incorporated by reference in this
document from us or from the SEC's web site at the address described above.
Documents incorporated by reference are available from us without charge,
excluding any exhibits to those documents. You can obtain documents
incorporated by reference in this Offer to Purchase by requesting them in
writing or by telephone from us at 1000 Lancaster Street, Baltimore, Maryland
21202, telephone: (410) 843-8000. Please be sure to include your complete name
and address in your request. If you request any incorporated documents, we will
mail them to you by first class mail, or another equally prompt means, within
one business day after we receive your request.
11. Interests of Directors and Executive Officers; Transactions and
Arrangements Concerning the Shares.
As of August 9, 2000, we had 41,927,220 issued and outstanding shares and
5,099,081 shares reserved for issuance upon exercise of all outstanding stock
options. The 6,000,000 shares that we are offering to purchase hereunder
represent approximately 14% of the shares outstanding on August 9, 2000.
As of August 9, 2000, our directors and executive officers as a group (10
persons) beneficially owned 8,889,639 shares (including 4,933,540 of shares
issuable upon exercise of options) or approximately 21% of the total
outstanding shares of our common stock on that date. Each of our executive
officers and directors has advised us that he or she does not intend to tender
any shares pursuant to our offer. If we purchase 6,000,000 shares pursuant to
the offer, and none of our executive officers or directors tender shares
pursuant to the offer, then after the purchase of shares pursuant to the offer,
our executive officers and directors as a group would beneficially own
approximately 25% of the total shares of our common stock outstanding
immediately after the
24
<PAGE>
offer. The business address of each of our directors and executive officers is
1000 Lancaster Street, Baltimore, Maryland 21202.
<TABLE>
<CAPTION>
Percent of
Outstanding
Name Position Number Shares %
---- -------- --------- -----------
<S> <C> <C> <C>
Douglas Becker(1)....... Chief Executive Officer and 2,316,508 5.27%
Chairman of the Board
Laurence Berg(2)........ Director 5,000 *
Donald V. Berlanti(3)... Director 68,125 *
Peter Cohen(4).......... President and Chief Operating Officer 263,750 *
Michael S. Gross(2)..... Director 5,000 *
R. Christopher Hoehn- Director 2,345,905 5.34%
Saric(1)...............
Rick Inatome(5)......... Director 17,500 *
B. Lee McGee(6)......... Executive Vice President and 570,509 1.34%
Chief Financial Officer
James H. McGuire(5)..... Director 17,500 *
R. William Pollock(2)... Director 3,279,842 7.82%
</TABLE>
---------------------
* Represents beneficial ownership of less than 1% of our outstanding common
stock.
(1) Includes 1,990,578 shares issuable upon exercise of options.
(2) Includes 5,000 shares issuable upon exercise of options.
(3) Includes 68,125 shares issuable upon exercise of options.
(4) Includes 263,750 shares issuable upon exercise of options.
(5) Includes 17,500 shares issuable upon exercise of options.
(6) Includes 570,509 shares issuable upon exercise of options.
Based on our records and on information provided to us by our directors,
executive officers, affiliates and subsidiaries, neither we nor any of our
affiliates or subsidiaries nor, to the best of our knowledge, any of our or our
subsidiaries' directors or executive officers, nor any associates or
subsidiaries of any of the foregoing, has effected any transactions involving
our shares of common stock during the 60 days prior to August 9, 2000, other
than exercises of previously granted stock options under our stock option
plans, and purchases for the accounts of executive officers under our Employee
Stock Purchase Plan or 401(k) Retirement Savings Plan. We expect that our
Employee Stock Purchase Plan and our 401(k) Retirement Savings Plan will, in
accordance with the terms of the plans, elections in effect and present
patterns of contribution, continue to purchase shares prior to the expiration
of the offer.
Except as otherwise described in this Offer to Purchase, neither we nor, to
the best of our knowledge, any of our affiliates, directors or executive
officers, is a party to any contract, arrangement, understanding or
relationship with any other person relating, directly or indirectly, to the
offer or with respect to any of our securities, including, but not limited to,
any contract, arrangement, understanding or relationship concerning the
transfer or the voting of the securities, joint ventures, loan or option
arrangements, puts or calls, guaranties of loans, guaranties against loss or
the giving or withholding of proxies, consents or authorizations. In connection
with their investment in our 5% Convertible Subordinated Debentures, we granted
Apollo Management, L.P. the right to designate two members of our board of
directors. Apollo Management designated Messrs. Berg and Gross.
12. Effects of the Offer on the Market for Shares; Registration Under the
Exchange Act.
Our purchase of shares pursuant to the offer will reduce the number of
shares that might otherwise trade publicly and is likely to reduce the number
of shareholders. Nonetheless, we anticipate that there will be a sufficient
number of shares outstanding and publicly traded following consummation of the
offer to ensure a continued trading market for the shares. Based upon published
guidelines of The Nasdaq Stock Market, we do not believe that our purchase of
shares pursuant to the offer will cause our remaining shares to be delisted
from The Nasdaq Stock Market.
25
<PAGE>
Our shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit to their customers using the shares as collateral. We believe
that, following the purchase of shares pursuant to the offer, the shares will
continue to be "margin securities" for purposes of the Federal Reserve Board's
margin regulations.
Our shares are registered under the Exchange Act, which requires, among
other things, that we furnish information to our shareholders and to the SEC
and comply with the SEC's proxy rules in connection with meetings of our
shareholders. We believe that our purchase of shares pursuant to the offer
will not result in the shares becoming eligible for deregistration under the
Exchange Act.
13. Certain Legal Matters; Regulatory Approvals.
We are not aware of any license or regulatory permit material to our
business that might be adversely affected by our acquisition of shares as
contemplated in this offer or of any approval or other action by any
government or governmental, administrative or regulatory authority or agency,
domestic, foreign or supranational, that would be required for our acquisition
or ownership of shares as contemplated by this offer. Should any approval or
other action be required, we currently contemplate that we will seek that
approval or other action. We cannot predict whether we will be required to
delay the acceptance for payment of or payment for shares tendered pursuant to
the offer pending the outcome of any such matter. There can be no assurance
that any approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that the failure to obtain the
approval or other action might not result in adverse consequences to our
business. Our obligations under the offer to accept for payment and pay for
shares are subject to conditions. See Section 7.
14. Certain United States Federal Income Tax Consequences.
The following summary describes the principal United States federal income
tax consequences to United States Holders (as defined below) of an exchange of
shares for cash pursuant to the offer. Those shareholders who do not
participate in the exchange should not incur any United States federal income
tax liability from the exchange. This summary is based upon the Internal
Revenue Code of 1986, as amended to the date of this offer (the "Code"),
existing and proposed United States Treasury Regulations promulgated under the
Code, published rulings, administrative pronouncements and judicial decisions,
changes to which could affect the tax consequences described in this offer
(possibly on a retroactive basis).
This summary addresses only shares held as capital assets. It does not
address all of the tax consequences that may be relevant to particular
shareholders because of their personal circumstances, or to other types of
shareholders (such as certain financial institutions, traders in securities
that elect mark to market, dealers or traders in securities or commodities,
insurance companies, "S" corporations, expatriates, tax-exempt organizations,
tax-qualified retirement plans, Non-United States Holders (as defined below),
persons who are subject to alternative minimum tax, or persons who hold shares
as a position in a "straddle" or as part of a "hedging" or "conversion"
transaction or that have a functional currency other than the United States
dollar). This summary may not be applicable with respect to shares acquired as
compensation (including shares acquired upon the exercise of stock options or
which were or are subject to forfeiture restrictions) or shares acquired under
a tax-qualified retirement plan. This summary also does not address the state,
local or foreign tax consequences of participating in the offer.
You should consult your tax advisor as to the particular consequences to
you of participating in this offer.
A "United States Holder" is a holder of shares that for United States
federal income tax purposes is:
. a citizen or resident of the United States;
. a corporation (or other entity taxable as a corporation) created or
organized in or under the laws of the United States or any State or the
District of Columbia;
26
<PAGE>
. unless otherwise provided by applicable Treasury Department regulations,
an entity taxable as a partnership that is created or organized in or
under the laws of the United States or any State or the District of
Columbia;
. an estate the income of which is subject to United States federal income
taxation regardless of its source; or
. a trust (a) the administration over which a United States court can
exercise primary supervision and (b) all of the substantial decisions of
which one or more United States persons have the authority to control and
certain other trusts considered United States Holders for federal income
tax purposes.
A "Non-United States Holder" is a holder of shares other than a United
States Holder.
An exchange of shares for cash pursuant to the offer will be a taxable
event. A United States Holder participating in the exchange will be treated
either as having sold shares or as having received a dividend distribution from
Sylvan. A United States Holder's exchange of shares for cash pursuant to the
offer will be treated as a dividend to the extent of Sylvan's current or
accumulated earnings and profits as determined under federal income tax
principles, unless the exchange:
. results in a "complete termination" of the holder's stock interest in
Sylvan under section 302(b)(3) of the Code;
. is a "substantially disproportionate" redemption with respect to the
holder under section 302(b)(2) of the Code; or
. is "not essentially equivalent to a dividend" with respect to the holder
under section 302(b)(1) of the Code.
In determining whether any of these tests have been met, a United States
Holder must take into account not only shares it actually owns, but also shares
it constructively owns within the meaning of section 318 of the Code.
A distribution to a shareholder is "not essentially equivalent to a
dividend" if it results in a "meaningful reduction" in the shareholder's stock
interest in Sylvan. If, as a result of an exchange of shares for cash pursuant
to the offer, a United States Holder of shares whose relative stock interest in
Sylvan is minimal and who exercises no control over corporate affairs suffers a
reduction in its proportionate interest in Sylvan (including any ownership of
preferred stock and any shares constructively owned), that United States Holder
should generally be regarded as having suffered a meaningful reduction in its
interest in Sylvan. Satisfaction of the "complete termination" and
"substantially disproportionate" exceptions is dependent upon compliance with
the respective objective tests set forth in section 302(b)(3) and section
302(b)(2) of the Code. A distribution to a shareholder will result in a
"complete termination" if either (1) all of the shares actually and
constructively owned by the shareholder are exchanged pursuant to the offer or
(2) all of the shares actually owned by the shareholder are exchanged pursuant
to the offer and the shareholder is eligible to waive, and effectively waives,
the attribution of shares constructively owned by the shareholder in accordance
with the procedures described in section 302(c)(2) of the Code. A distribution
to a shareholder will be "substantially disproportionate" if the percentage of
the outstanding shares actually and constructively owned by the shareholder
immediately following the exchange of shares pursuant to the offer (treating
shares exchanged pursuant to the offer as outstanding) is less than 80% of the
percentage of the outstanding shares actually and constructively owned by the
shareholder immediately before the exchange (treating shares exchanged pursuant
to the offer as outstanding).
Contemporaneous dispositions or acquisitions of shares by a shareholder or
related individuals or entities may be deemed to be part of a single integrated
transaction and may be taken into account in determining whether any of the
three tests under Section 302(b) of the Code has been satisfied. Each
shareholder should be aware that because proration may occur in the offer, even
if all the shares actually and constructively owned by
27
<PAGE>
a shareholder are tendered pursuant to the offer, fewer than all of such shares
may be purchased by us. Thus, proration may affect whether the surrender by a
shareholder pursuant to the offer will meet any of the three tests under
Section 302 of the Code.
If an exchange of shares for cash by a United States Holder pursuant to the
offer is not treated as a distribution taxable as a dividend, the holder will
recognize capital gain or loss equal to the difference between the amount of
cash received and the holder's adjusted tax basis in the shares and in the
associated preferred stock purchase rights, if any, tendered to Sylvan, except
to the extent that the amount of cash received includes dividends that have
been declared by the Board of Directors of Sylvan before the exchange. The gain
or loss would be long-term capital gain or loss if the holding period for the
shares exceeded one year. In the case of a United States Holder that is an
individual, trust or estate, the maximum rate of United States federal income
tax applicable to net capital gain on shares held for more than one year is
20%.
If the amount received by a United States Holder in the offer is treated as
a distribution that is taxable as a dividend (as opposed to consideration
received in a sale or exchange), the amount of the distribution will be the
amount of cash received by the holder. The amount will be treated as a
dividend, taxable as ordinary income to the United States Holder, to the extent
of Sylvan's current or accumulated earnings and profits as determined under
Federal income tax principles. To the extent that the amount of the
distribution exceeds Sylvan's current and accumulated earnings and profits, the
excess first will be treated as a return of capital that will reduce the
holder's tax basis in the shares exchanged in the offer. Any remaining amount
after the United States Holder's basis has been reduced to zero will be taxable
as capital gain. The United States Holder's adjusted tax basis in its shares
exchanged in the offer generally will be transferred to any of its remaining
stockholdings in Sylvan, subject to, in the case of corporate shareholders,
reduction of basis or possible gain recognition under section 1059 of the Code
in an amount equal to the non-taxed portion of the dividend. If the United
States Holder does not retain any actual stock ownership in Sylvan (having a
stock interest only constructively), the holder may lose the benefit of the
holder's adjusted tax basis in its shares. A dividend received by a corporate
United States Holder may be (1) eligible for a dividends-received deduction
(subject to applicable exceptions and limitations) and (2) subject to the
"extraordinary dividend" provisions of section 1059 of the Code. Corporate
shareholders should consult their own tax advisors regarding (1) whether a
dividends-received deduction will be available to them, and (2) the possible
application of section 1059 to the ownership and disposition of their shares.
See Section 3 with respect to the application of United States federal
income tax withholding to payments made to Non-United States Holders and the
backup withholding tax requirements.
The trust under the 401(k) Retirement Savings Plan maintained by Sylvan and
its affiliates is exempt from federal income taxation. Accordingly, such trust
will not be taxable upon the receipt of any cash proceeds pursuant to the
offer. The shares of our common stock allocated to participants' accounts under
our 401(k) Retirement Savings Plan are employer securities as defined in the
Code. If a distribution from the savings plan includes employer securities, the
participant has the option of deferring federal income tax after the
distribution of the common stock on the increase in value of the common stock
that occurred while it was held in the savings plan. In addition, the increase
in value of the common stock that occurred while it was held in the savings
plan may be taxed at long-term capital gains rates rather than ordinary income
tax rates.
The tax discussion set forth above is included for general information only.
You are urged to consult your tax advisor to determine the particular tax
consequences to you of the offer, including the applicability and effect of
state, local and foreign tax laws.
15. Extension of the Offer; Termination; Amendment.
We expressly reserve the right, in our sole discretion, at any time and from
time to time, and regardless of whether or not any of the events set forth in
Section 7 have occurred or are deemed by us to have occurred, to extend the
period of time the offer is open and delay acceptance for payment of, and
payment for, any shares by giving oral or written notice of the extension to
the Depositary and making a public announcement of the
28
<PAGE>
extension. We also expressly reserve the right, in our sole discretion, to
terminate the offer and reject for payment and not pay for any shares not
theretofore accepted for payment or paid for or, subject to applicable law, to
postpone payment for shares upon the occurrence of any of the conditions
specified in Section 7 by giving oral or written notice of the termination or
postponement to the Depositary and making a public announcement of the
termination or postponement. Our reservation of the right to delay payment for
shares that we have accepted for payment is limited by Rule 13e-4(f)(5) under
the Exchange Act, which requires that we must pay the consideration offered or
return the shares tendered promptly after termination or withdrawal of a tender
offer. Subject to compliance with applicable law, we further reserve the right,
in our sole discretion, and regardless of whether any of the events set forth
in Section 7 have occurred or are deemed by us to have occurred, to amend the
offer in any respect (including, without limitation, by decreasing or
increasing the consideration offered in the offer to holders of shares or by
decreasing or increasing the number of shares being sought in the offer).
Amendments to the offer may be made at any time and from time to time by public
announcement of the amendment. In the case of an extension, the amendment must
be issued no later than 9:00 a.m., Eastern time, on the first business day
after the last previously scheduled or announced Expiration Date. Any public
announcement made pursuant to the offer will be disseminated promptly to
shareholders in a manner reasonably designed to inform shareholders of the
change. Without limiting the manner in which we may choose to make a public
announcement, except as required by applicable law, we will have no obligation
to publish, advertise or otherwise communicate any public announcement other
than by issuing a press release to the Dow Jones News Service or comparable
service.
If we materially change the terms of the offer or the information concerning
the offer, or if we waive a material condition of the offer, we will extend the
offer to the extent required by Rules 13e-4(d)(2), 13e-4(e)(3) and 13e-4(f)(1)
promulgated under the Exchange Act. These rules provide that the minimum period
during which an offer must remain open following material changes in the terms
of the offer or information concerning the offer (other than a change in price
or a change in percentage of securities sought) will depend on the facts and
circumstances, including the relative materiality of the terms or information.
If:
(1) we increase or decrease the price to be paid for shares, materially
increase the Dealer Manager's fee or increase or decrease the number of
shares being sought in the offer and, in the event of an increase in
the number of shares being sought, the increase exceeds 2% of the
outstanding shares of our common stock, and
(2) the offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and
including, the date that notice of an increase or decrease is first
published, sent or given in the manner specified in this Section 15,
then, in each case, the offer will be extended until the expiration of a period
of ten business days. For purposes of the offer, a "business day" means any day
other than a Saturday, Sunday or Federal holiday and consists of the time
period from 12:01 am through 12:00 Midnight, Eastern time.
16. Fees and Expenses.
We have retained Credit Suisse First Boston to act as our financial advisor,
as well as the Dealer Manager, in connection with the offer. Credit Suisse
First Boston will receive, for their services as Dealer Manager, a customary
fee in connection with the offer. We also have agreed to reimburse Credit
Suisse First Boston for reasonable out-of-pocket expenses incurred in
connection with the offer, including reasonable fees and expenses of counsel,
and to indemnify Credit Suisse First Boston against liabilities in connection
with the offer, including liabilities under the federal securities laws.
We have retained D.F. King & Co., Inc. to act as Information Agent and First
Union National Bank to act as Depositary in connection with the offer. The
Information Agent may contact holders of shares by mail, telephone, telegraph
and personal interviews and may request brokers, dealers and other nominee
shareholders to forward materials relating to the offer to beneficial owners.
The Information Agent and the Depositary will
29
<PAGE>
each receive reasonable and customary compensation for their respective
services, will be reimbursed by us for reasonable out-of-pocket expenses and
will be indemnified against certain liabilities in connection with the offer,
including liabilities under the federal securities laws.
Salomon Smith Barney administers our Employee Stock Purchase Plan. Salomon
Smith Barney will receive reasonable and customary compensation for its
services as plan administrator in connection with the offer and will be
reimbursed for certain out-of-pocket costs.
Putnam Fiduciary Trust Company acts as Trustee of our 401(k) Retirement
Savings Plan. Putnam Fiduciary Trust Company will be reimbursed for certain
out-of-pocket costs in connection with the offer.
We will not pay any fees or commissions to brokers, dealers or other persons
(other than fees to the Dealer Manager and the Information Agent as described
above) for soliciting tenders of shares pursuant to the offer. Shareholders
holding shares through brokers or banks are urged to consult the brokers or
banks to determine whether transaction costs may apply if shareholders tender
shares through the brokers or banks and not directly to the Depositary. We
will, however, upon request, reimburse brokers, dealers and commercial banks
for customary mailing and handling expenses incurred by them in forwarding the
offer and related materials to the beneficial owners of shares held by them as
a nominee or in a fiduciary capacity. No broker, dealer, commercial bank or
trust company has been authorized to act as our agent or the agent of, the
Dealer Manager, the Information Agent or the Depositary for purposes of the
offer. We will pay or cause to be paid all stock transfer taxes, if any, on our
purchase of shares except as otherwise provided in Instruction 7 in the Letter
of Transmittal.
17. Miscellaneous.
We are not aware of any jurisdiction where the making of the offer is not in
compliance with applicable law. If we become aware of any jurisdiction where
the making of the offer or the acceptance of shares pursuant to the offer is
not in compliance with any valid applicable law, we will make a good faith
effort to comply with the applicable law. If, after a good faith effort, we
cannot comply with the applicable law, the offer will not be made to, nor will
tenders be accepted from or on behalf of, the holders of shares residing in
that jurisdiction. In any jurisdiction where the securities, blue sky or other
laws require the offer to be made by a licensed broker or dealer, the offer
will be deemed to be made on our behalf by the Dealer Manager or one or more
registered brokers or dealers licensed under the laws of the jurisdiction.
Pursuant to Rule 13e-4 promulgated under the Exchange Act, we have filed
with the SEC an Issuer Tender Offer Statement on Schedule TO, which contains
additional information relating to the offer. The Schedule TO, including the
exhibits and any amendments thereto, may be examined, and copies may be
obtained, at the same places and in the same manner set forth in Section 10
with respect to information concerning us.
Tendering shareholders should rely only on the information contained in this
document or to which we have referred them. We have not authorized anyone to
provide tendering shareholders with information or make any representation on
behalf of us in connection with this offer other than those contained in this
Offer to Purchase or in the related Letter of Transmittal. If given or made,
tendering shareholders should not rely on that information or representation as
having been authorized by us.
Sylvan Learning Systems, Inc.
August 10, 2000
30
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for shares and any other
required documents should be sent or delivered by each shareholder or such
shareholder's broker, dealer, commercial bank, trust company or other nominee
to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
First Union National Bank
By Mail:
By Overnight Delivery:
By Hand Delivery:
First Union National First Union National First Union National
Bank Bank Bank
1525 West W.T. Harris 1525 West W.T. Harris 1525 West W.T. Harris
Blvd Blvd Blvd
Charlotte, NC 28288- Charlotte, NC 28262- Building 3C3
1153 1153 Charlotte, NC 28262
Attn: Reorg Dept.
Attn: Reorg Dept. Attn: Reorg Dept.
Facsimile Transmission:
(704) 590-7628
Confirm Receipt of Facsimile by Telephone:
(704) 590-7408
------------
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or the Dealer Manager at their
respective telephone numbers and locations listed below. You may also contact
your broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street, 20th Floor
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 207-2014
The Dealer Manager for the Offer is:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Toll Free (800) 881-8320
