<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
LEARNING TREE INTERNATIONAL, INC.
................................................................................
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
.........................................................................
2) Aggregate number of securities to which transaction applies:
.........................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11
(Set forth the amount on which filing fee is calculated and state
how it was determined):
.........................................................................
4) Proposed maximum aggregate value of transaction:
.........................................................................
5) Total fee paid:
.........................................................................
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing:
1) Amount Previously Paid:__________________________________________________
2) Form Schedule or Registration Statement No.:_____________________________
3) Filing Party:____________________________________________________________
4) Date Filed: _____________________________________________________________
<PAGE>
LEARNING TREE INTERNATIONAL, INC.
6053 WEST CENTURY BOULEVARD
LOS ANGELES, CALIFORNIA 90045
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, MARCH 6, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Learning Tree International, Inc. (The "Company") will be
held at the Sheraton Gateway Hotel, 6101 West Century Boulevard, Los Angeles,
California 90045 on Friday, March 6, 1998 at 10:00 a.m. Pacific Standard Time
for the following purposes as more fully described in the accompanying Proxy
Statement:
1. To elect two Class III directors for a term of three years;
2. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on January 15,
1998 as the record date for determining the stockholders entitled to notice of
and to vote at the Annual Meeting or at any adjournment thereof. Only
stockholders at the close of business on the record date are entitled to vote at
the Annual Meeting.
Accompanying this Notice are a Proxy and Proxy Statement. IF YOU WILL
NOT BE ABLE TO ATTEND THE ANNUAL MEETING TO VOTE IN PERSON, PLEASE COMPLETE,
SIGN AND DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PAID ENVELOPE. The Proxy may be revoked at any time prior to its
exercise at the Annual Meeting.
By Order of the Board of Directors,
David C. Collins, Ph.D.
Chairman of the Board and Chief Executive Officer
January 28, 1998
<PAGE>
LEARNING TREE INTERNATIONAL, INC.
6053 WEST CENTURY BOULEVARD
LOS ANGELES, CALIFORNIA 90045
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished to the stockholders of Learning Tree
International, Inc., a Delaware corporation (the "Company"), in connection with
the solicitation of proxies by and on behalf of the Board of Directors of the
Company. The proxies solicited hereby are to be voted at the Annual Meeting of
the Stockholders of the Company to be held at the Sheraton Gateway Hotel, 6101
West Century Boulevard, Los Angeles, California 90045 on March 6, 1998 at 10:00
a.m. Pacific Standard Time and at any and all adjournments thereof (the "Annual
Meeting").
At the Annual Meeting, stockholders will be asked to consider and vote
upon the following proposals:
1. To elect two Class III directors for a term of three years.
2. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
A form of proxy is enclosed for your use. The shares represented by
each properly executed unrevoked proxy will be voted as directed by the
stockholder executing the proxy. If no direction is made, the shares
represented by each properly executed unrevoked proxy will be voted "FOR" the
election of management's nominees for the Board of Directors. With respect to
any other item of business that may come before the Annual Meeting, the proxy
holders will vote the proxy in accordance with their best judgment.
Any proxy given may be revoked at any time prior to its exercise by
filing with Gary R. Wright, Secretary of the Company, an instrument revoking
such proxy or by the filing of a duly executed proxy bearing a later date. Any
stockholder present at the meeting who has given a proxy may withdraw it and
vote his or her shares in person if such stockholder so desires.
It is contemplated that the solicitation of proxies will be made
primarily by mail. Should it, however, appear desirable to do so in order to
ensure adequate representation of shares at the Annual Meeting, officers, agents
and employees of the Company may communicate with stockholders, banks, brokerage
houses and others by telephone, in person or otherwise to request that proxies
be furnished. All expenses incurred in connection with this solicitation will
be borne by the Company. In following-up the original solicitation of proxies
by mail, the Company may make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy material to the
beneficial owners of the shares eligible to vote at the Annual Meeting and will
reimburse them for their expenses in so doing. The Company has no present plans
to hire special employees or paid solicitors to assist in obtaining proxies, but
reserves the option of doing so if it should appear that a quorum otherwise
might not be obtained. This Proxy Statement and the accompanying form of proxy
are first being mailed to stockholders on or about January 29, 1998.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
OUTSTANDING SHARES; RECORD DATE
Only holders of record of the Company's voting securities at the close
of business on January 15, 1998 (the "Record Date") are entitled to notice of
and to vote at the Annual Meeting and any adjournments thereof. As of the
Record Date, the Company had issued and outstanding 21,994,507 shares of the
Company's
1
<PAGE>
Common Stock, the holders of which are entitled to vote at the Annual Meeting.
Each share of Common Stock that was issued and outstanding as of the Record Date
is entitled to one vote at the Annual Meeting.
The presence, in person or by proxy, of stockholders entitled to cast
at least a majority of the votes entitled to be cast by all stockholders will
constitute a quorum for the transaction of business at the Annual Meeting.
QUORUM; VOTE REQUIRED
Directors will be elected by a plurality of the votes cast. Only
votes cast for a nominee will be counted, except that each properly executed
unrevoked proxy will be voted for two management nominees for the Board of
Directors in the absence of instructions to the contrary. Abstentions, broker
non-votes and instructions on a proxy to withhold authority to vote for one or
more of such nominees will result in the respective nominees receiving fewer
votes.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Common
Stock of the Company as of January 15, 1998 by (i) each person or entity known
by the Company to own beneficially more than 5% of the outstanding Common Stock,
(ii) each of the Company's directors, (iii) each of the persons named in the
Summary Compensation Table and (iv) all directors and executive officers as a
group. Except as otherwise noted, the persons or entities named have sole
voting and investment power with respect to all shares shown as beneficially
owned by them.
<TABLE>
<CAPTION>
COMMON STOCK /(1)/
---------------------------
NUMBER OF PERCENT OF
NAME AND ADDRESS OF OWNER SHARES CLASS
------------------------- --------- -----------
<S> <C> <C>
David C. Collins/(1)(3)(4)(5)/............ 5,784,860 26.3%
Eric R. Garen/(3)(6)/..................... 5,249,650 23.9
Baron Capital Group, Inc./(7)/
767 Fifth Avenue, 24/th/ Floor
New York, NY 10153.................. 3,192,300 14.5
Massachusetts Financial Services
500 Boylston Street
Boston, MA 02116.................... 1,574,150 7.2
Pilgrim Baxter & Associates/(8)/
1255 Drummers Lane, Suite 300
Wayne, PA 19087..................... 1,120,600 5.1
Max S. Shevitz/(1)(2)/.................... 202,050 *
Gary R. Wright/(1)(2)/.................... 276,750 1.3
Alan B. Salisbury/(1)/.................... 203,865 *
W. Matthew Juechter....................... 121,760 *
Michael W. Kane/(2)/...................... 34,836 *
All directors and executive officers as a
group (8)............................... 11,873,771 54.0
</TABLE>
- ----------
* Less than 1%
(1) For purposes of this table, a person or group of persons is deemed to
have "beneficial ownership" of any shares that such person or group has the
right to acquire within 60 days after the date as of which information in
this table is provided; and for purposes of computing the percentage of
outstanding shares held by each person or group on that date, such shares
are deemed to be outstanding, but are not deemed to be outstanding for the
2
<PAGE>
purpose of computing the percentage ownership of any other person. The
number of shares in this table includes 2,250 shares each for Ms. Adams,
Mr. Shevitz, Mr. Wright and Dr. Salisbury which are issuable upon the
exercise of vested options that they hold.
(2) With respect to the following individuals, a certain number of shares
are subject to repurchase agreements allowing the Company to repurchase the
shares at specified prices and conditions, including termination of
employment of the stockholder: Mr. Wright (54,900 shares), Dr. Kane (27,450
shares), Mr. Shevitz (65,880 shares).
(3) Dr. Collins is the Chairman of the Board of Directors and Chief
Executive Officer of the Company and Mr. Garen is the President and a
director of the Company. The address of these individuals is Learning Tree
International, Inc., 6053 West Century Boulevard, Los Angeles, California
90045-0028.
(4) Includes 197,640 shares owned by Mary C. Adams, the Company's Vice
President, Administration and Investor Relations. David C. Collins and
Mary C. Adams are married but disclaim beneficial ownership of each other's
shares.
(5) Includes 223,320 shares owned by the Collins Family Foundation. The
trustees of the Collins Family Foundation are David C. Collins and Mary C.
Adams; however, they disclaim beneficial ownership of these shares.
(6) Includes 125,000 shares owned by the Garen Family Foundation. Mr.
Garen is a trustee of the Garen Family Foundation; however, he disclaims
beneficial ownership of these shares.
(7) Based upon information contained in the Schedule 13G filed by Baron
Capital Group, Inc. ("BCG"), BCG has shared voting power with respect to
the 3,192,300 shares and shared dispositive power. BAMCO, Inc. ("BAMCO")
has shared voting power with respect to 2,647,000 of the shares and shared
dispositive power. Baron Capital Management, Inc. ("BCM") has shared
voting power with respect to 545,300 of the shares and shared dispositive
power. Baron Asset Fund ("BAF") has shared voting power with respect to
2,285,000 of the shares and shared dispositive power. Ronald Baron has
shared voting power with respect to the 3,192,300 shares and shared
dispositive power. Ronald Baron owns a controlling interest in BCG and
Ronald Baron and BCG disclaim beneficial ownership of the shares held by
their controlled entities (and investment advisory clients thereof) to the
extent the shares are held by persons other than Ronald Baron and BCG.
BAMCO and BCM are subsidiaries of BCG and they disclaim beneficial
ownership of shares held by their investment advisory clients to the extent
the shares are held by persons other than BAMCO and BCM. BAF is an
investment advisory client of BAMCO.
(8) Based upon information contained in the Schedule 13G filed by Pilgrim
Baxter & Associates ("Pilgrim"), Pilgrim has shared voting power with
respect to the 1,120,600 shares and sole dispositive power.
3
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's Board of Directors has six members and is divided into
three classes, Class I, Class II and Class III. The current terms of the Class
III directors expire at the Annual Meeting to be held this year; the terms of
the Class I directors will expire at the annual meeting of stockholders to be
held in 1999; and the terms of the Class II directors will expire at the annual
meeting of stockholders to be held in 2000. The Class III directors are to be
elected at the Annual Meeting for a three-year term expiring in 2001. At each
subsequent annual meeting of the stockholders, directors will be elected for a
full three-year term to succeed the directors whose terms are then to expire.
INFORMATION CONCERNING NOMINEES AND OTHER DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
CLASS I DIRECTORS - Present Term Expires
in 1999.
W. Mathew Juechter......................... 64 Director
Alan B. Salisbury.......................... 60 Director and President and General Manager,
Learning Tree International USA, Inc.
CLASS II DIRECTORS - Present Term Expires
in 2000.
Michael W. Kane............................ 46 Director
Max S. Shevitz............................. 42 Executive Vice President and Director
CLASS III DIRECTORS - Nominees for Election
to Term Expiring in 2001.
David C. Collins........................... 57 Chairman of the Board of Directors and
Chief Executive Officer
Eric R. Garen.............................. 50 President and Director
</TABLE>
Mr. Juechter has been a director of the Company since June 1987. Since
1991, he has been the Chief Executive Officer of ARC International Ltd., a
management consulting and training company. From 1986 to 1991, Mr. Juechter was
Managing Director of IRA, Inc. in St. Paul, Minnesota, a management consulting
company. Mr. Juechter was President and Chief Executive Officer of Wilson
Learning Corp., a multi-national training organization, from 1977 to 1986. From
1989 to 1997, Mr. Juechter served as Chairman of the Council of Governors of the
American Society for Training and Development (ASTD). Mr. Juechter has a
Bachelor's of Science degree in Engineering from Boston University and a
Master's degree in Business Administration from Harvard University.
Dr. Salisbury has been President and General Manager of Learning Tree
International USA, Inc., the Company's operating subsidiary in the United
States, since April 1993. From 1991 until he joined the Company in 1993, Dr.
Salisbury was Chief Operating Officer of Microelectronics and Computer
Technology Corporation (MCC), an organization involved in the research and
development of IT products located in Austin, Texas; and from 1987 to 1991, he
was President of the Contel Technology Center, the research and development
group of an independent telephone company located in Chantilly, Virginia. Dr.
Salisbury is a director of Sybase, Inc., a database software developer; Template
Software, a vertical applications software provider; and Telepad Corporation, a
computer manufacturer. The author of numerous books and articles related to
information technology and training, Dr. Salisbury served in the United States
Army from 1958 to 1987, when he retired as Commanding General of the U.S. Army
Information Systems Engineering
4
<PAGE>
Command. He holds a Bachelor of Science degree (with distinction) from the U.S.
Military Academy, and Masters and Ph.D. degrees in Electrical Engineering and
Computer Science from Stanford University.
Dr. Kane has served as a director of the Company since February 1995.
Since 1991, he has been President and Chief Executive Officer of M. Kane &
Company, Inc., an investment banking firm focusing primarily on technology
companies. From 1987 to 1988, he was an investment banker with L.F. Rothschild &
Co., Inc. and from 1988 to 1991 was an investment banker with Oppenheimer & Co.,
Inc. From 1984 to 1987, he practiced primarily corporate and securities law with
the law firm of Irell & Manella, and prior to that he was a Project Leader in
the Systems Sciences Department of The Rand Corporation and was an independent
consultant to the satellite telecommunications industry. Dr. Kane has a Bachelor
of Arts degree in Political Science from the University of Wisconsin--Madison
and a Master's degree in International Relations, a Ph.D. degree in Political
Science and a J.D. degree from the University of California, Los Angeles.
Mr. Shevitz has been Executive Vice President of the Company since
July 1994, and was General Manager of Learning Tree International USA, Inc., a
subsidiary of the Company, from September 1988 to December 1993. From January to
July 1994, Mr. Shevitz was Executive Vice President at Sigma International,
Inc., a customer service training company. From 1986 to 1988, Mr. Shevitz was
the founder and President of MD Technology, Inc., a medical diagnostic equipment
company. Mr. Shevitz holds a Master's degree in Business Administration with
honors from the University of Virginia.
Dr. Collins, a co-founder of the Company, has been Chairman of the
Board and Chief Executive Officer since the Company's business began in 1974
(under the name Integrated Computer Systems Publishing Co., Inc.). Dr. Collins
has a Bachelor of Science degree (with distinction) in Electrical Engineering
from Stanford University, and Masters and Ph.D. degrees in Electrical
Engineering from the University of Southern California.
Mr. Garen, a co-founder of the Company, has served first as Executive
Vice President and then as President of the Company since the Company's business
began in 1974. Mr. Garen holds a Bachelors degree in Electrical Engineering from
the California Institute of Technology and a Masters degree in Computer Science
from the University of Southern California, both with honors.
The shares of each properly executed unrevoked proxy will be voted FOR
the election of all of the above named nominees unless the stockholder executing
such proxy indicates that the proxy shall not be voted for all or any one of the
nominees. All of the nominees have indicated a willingness to serve as
directors, but if any of them should decline or be unable to act as a director,
the proxy holders will vote for the election of another person or persons as the
Board of Directors recommends.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held three meetings during the fiscal year
ended September 30, 1997. The Board of Directors has three standing committees:
the Audit Committee, the Compensation Committee and the Stock Option Committee.
Each incumbent director attended at least 75% of the aggregate of the number of
meetings of the Board and meetings of committees of the Board on which he served
during the 1997 fiscal year.
The Audit Committee comprises Dr. Collins, Dr. Kane and Mr. Juechter.
The principal functions of the Audit Committee are to review with the Company's
independent auditors and management the plan and results of the Company's
independent audit, to review the Company's systems of internal control and to
recommend the engagement or the discharging of the Company's independent
auditors. The Audit Committee met four times during the 1997 fiscal year.
5
<PAGE>
The Compensation Committee comprises Dr. Collins, Dr. Kane and Mr.
Juechter. The principal functions of the Compensation Committee are to (a)
review and make recommendations to the Company's Board of Directors with respect
to the direct and indirect compensation and employee benefits of the Chairman,
President and other elected officers of the Company, (b) review, administer and
make recommendations to the Company's Board of Directors with respect to any
incentive plans and bonus plans that include elected officers and (c) review the
Company's policies relating to the compensation of senior management and other
employees. In addition, the Committee reviews management's long-range planning
for executive development and succession, establishes and periodically reviews
policies on perquisites and performs certain other review functions relating to
management compensation and employee relations policies. The Compensation
Committee met once during the 1997 fiscal year.
The Stock Option Committee comprises Dr. Collins and Mr. Garen. The
functions of the Stock Option committee include addressing matters relating to
the Company's stock option plan and making grants and recommendations to the
Board of Directors as to grants of stock options. The Stock Option Committee
held four meetings during the 1997 fiscal year.
The Board of Directors does not have a nominating committee.
COMPENSATION OF DIRECTORS
No director who is an employee of the Company is compensated for
service as a member of the Board of Directors or for service on any committee of
the Board of Directors. Compensation for non-employee directors (other than
committee chairpersons) consists of a monthly retainer of $1,000. Compensation
for non-employee chairpersons of committees consists of an annual retainer of
$3,000. Compensation for all non-employee directors also consists of a $500 fee
for each Board meeting and a $250 fee for each Committee meeting attended.
Directors are reimbursed for travel and out-of-pocket expenses incurred on
behalf of the Company.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
compensation for the Company's Chief Executive Officer and the four most highly
compensated executive officers of the Company with annual compensation in excess
of $100,000 during the fiscal years ended September 30, 1997, 1996, and 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION /(1)/ LONG TERM
FISCAL ------------------------- COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION/(2)/
- --------------------------- ---- -------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
David C. Collins 1997 $310,000 $103,038 -- $8,124
Chairman of the 1996 $300,000 $173,554 -- $3,633
Board of 1995 $300,000 $215,115 -- $4,560
Directors and
Chief Executive
Officer
Eric R. Garen 1997 $310,000 $103,038 -- $6,930
President and 1996 $300,000 $173,554 -- $3,983
Director 1995 $300,000 $215,115 -- $4,560
Max S. Shevitz 1997 $188,006 $182,458 9,000 $7,526
Executive Vice 1996 $182,000 $101,982 -- $4,336
President and 1995 $100,000 $323,222 -- $4,518
Director
Gary R. Wright 1997 $170,000 $ 33,862 9,000 $7,974
Vice President-- 1996 $160,000 $ 22,165 -- $2,250
Finance and Chief 1995 $140,000 $ 42,138 -- $2,165
Financial Officer
and Secretary
Alan B. Salisbury 1997 $180,816 $110,492 9,000 $5,077
President and 1996 $180,816 $ 76,039 -- $4,291
General Manager, 1995 $174,695 $180,717 -- $4,749
Learning Tree
International
USA, Inc. and
Director
</TABLE>
- ----------
(1) Certain of the Company's executive officers receive personal benefits
in addition to salary and cash bonuses, including car allowances. The
aggregate amount of such personal benefits, however, does not exceed the
lesser of $50,000 or 10% of the total of the annual salary and bonus
reported for the named executive officers.
(2) These amounts represent contributions made by the Company to a defined
contribution plan.
STOCK OPTION PLAN
In September 1995, the Company adopted the 1995 Stock Option Plan (the
"Stock Option Plan"), which provides for the issuance of incentive stock options
within the meaning of Section 422 of the Code and non-qualified stock options to
purchase an aggregate of up to 2,250,000 shares of the Common Stock of the
Company. The Stock Option Plan permits the grant of options to officers,
employees, directors and consultants of the Company.
The Stock Option Plan is administered by a committee of the Board of
Directors (the "Committee") composed of Dr. Collins and Mr. Garen, who are not
eligible to participate in the Plan. Each option is evidenced by written
agreement in a form approved by the Committee. No options granted under the
Stock Option Plan are transferable by the optionee other than by will or by the
laws of descent and distribution, and each option is exercisable, during the
lifetime of the optionee, only by the optionee.
7
<PAGE>
Under the Stock Option Plan, the exercise price of an incentive stock
option must be at least equal to 100% of the fair market value of the Common
Stock on the date of grant (110% of the fair market value in the case of options
granted to employees who hold more than ten percent of the voting power of
Company's capital stock on the date of grant). The exercise price of a non-
qualified stock option must be not less than 75% of the fair market value of the
Common Stock on the date of grant. For both incentive stock options and non-
qualified stock options, the exercise price must not be less than the par value
of a share of the Common Stock on the date of grant. The term of an incentive or
non-qualified stock option is not to exceed ten years (five years in the case of
an incentive stock option granted to a ten percent holder). The Committee has
the discretion to determine the vesting schedule and the period required for
full exercisability of stock options; however, in no event can the Committee
shorten such period to less than six months. Upon exercise of any option granted
under the Stock Option Plan, the exercise price may be paid in cash, and/or such
other form of payment as may be permitted under the applicable option agreement,
including, without limitation, previously owned shares of Common Stock.
Option Grants During Fiscal 1997
- --------------------------------
The following table sets forth certain information concerning options
granted during fiscal 1997 to the executive officers named above:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO PRICE OPTION TERM /(1)/
OPTIONS EMPLOYEES PER EXPIRATION -------------------------
NAME GRANTED IN 1997 SHARE/(2)/ DATE 5% 10%
- --------------------- ---------- ----------- ---------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
David C. Collins/(3)/ -- --% $ -- -- $-- $ --
Eric R. Garen/(3)/ -- -- -- -- -- --
Max S. Shevitz 9,000 1.0 24.67 10/1/01 61,335 135,533
Gary R. Wright 9,000 1.0 24.67 10/1/01 61,335 135,533
Alan B. Salisbury 9,000 1.0 24.67 10/1/01 61,335 135,533
</TABLE>
- ----------
(1) The potential realizable value illustrates the value that would be
realized upon exercise of the options immediately prior to the expiration
of their terms, assuming the specified compounded rates of appreciation on
the Company's Common Stock over the term of the options. The assumed
annual rates of appreciation are specified in the rules of the Securities
and Exchange Commission and do not represent the Company's estimate or
projection of future share prices.
(2) The exercise price was equal to the fair market value of the Common
Stock on the date of the grant.
(3) Not eligible for option grants.
8
<PAGE>
Aggregated Option Exercises in Fiscal 1997 and Fiscal Year End Option Values
- ----------------------------------------------------------------------------
During fiscal 1997, none of the options granted under the Stock Option
Plan were exercisable. Accordingly, the following table presents the number and
value of unexercisable options held by the executive officers named above, as of
September 30, 1997:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
NAME YEAR END YEAR END
- ------------------------ ---------------------- --------------------
<S> <C> <C>
David C. Collins/(1)/ -- $ --
Eric R. Garen/(1)/ -- --
Max S. Shevitz 9,000 35,625
Gary R. Wright 9,000 35,625
Alan B. Salisbury 9,000 35,625
</TABLE>
- ----------
(1) Not eligible for option grants.
OTHER EMPLOYEE BENEFIT PLANS
The Company has adopted the Learning Tree International, Inc. Profit-
Sharing and Deferred Savings Plan (the "401(k) Plan"), which is intended to
qualify under Section 401(k) of the Internal Revenue Code of 1986, as amended
(the "Code"). Under Section 401(k) of the Code, contributions by employees or by
the Company to the 401(k) Plan, and income earned on plan contributions, are not
taxable to employees until withdrawn from the 401(k) Plan, and contributions by
the Company will be deductible by the Company when made.
All employees of the Company and its U.S. subsidiary who have attained
18 years of age and have met the plan's service requirements are eligible to
participate in the 401(k) Plan. Each eligible employee may contribute to the
401(k) Plan, through payroll deductions, up to 15% of his or her salary, subject
to statutory limitations. For fiscal 1997, for each $1.00 invested by an
employee, the Company contributed $0.75 up to four and one-half percent of such
employee's salary. For fiscal 1996 and prior years, for each $1.00 invested by
an employee, the Company contributed $0.25 up to one and one-half percent of
such employee's salary. In addition, for fiscal 1996 and prior years, the
Company made qualified nonelective contributions to the 401(k) Plan on an annual
basis that were equivalent to one and one half percent of the annual
compensation of the participant. Qualified, nonelective contributions are no
longer made to the plan. The 401(k) Plan permits, but does not require,
additional contributions to the 401(k) Plan by the Company.
EMPLOYMENT AGREEMENTS
Pursuant to an employment agreement dated as of October 1, 1995 (the
"Collins Agreement"), David C. Collins is employed as Chairman of the Board and
Chief Executive Officer of the Company. Pursuant to the Collins Agreement, Dr.
Collins received an annual base salary and additional incentive compensation
based upon the achievement of certain performance targets. In addition, Dr.
Collins is entitled to reimbursement of reasonable travel and business
entertainment expenses authorized by the Company, as well as certain fringe
benefits. In the event of the termination of Dr. Collins' employment with the
Company, Dr. Collins has agreed, for a period of one year after the termination,
not to offer any service or product in competition with the Company, whether
directly or indirectly, in any area served by the Company at the date of
termination. The Collins Agreement has a term of three years and is renewable,
at Dr. Collins' option, for additional three year periods.
9
<PAGE>
Pursuant to an employment agreement dated as of October 1, 1995 (the
"Garen Agreement"), Eric R. Garen is employed as President of the Company.
Pursuant to the Garen Agreement, Mr. Garen received an annual base salary and
additional incentive compensation based upon the achievement of certain
performance targets. In addition, Mr. Garen is entitled to reimbursement of
reasonable travel and business entertainment expenses authorized by the Company,
as well as certain fringe benefits. In the event of the termination of Mr.
Garen's employment with the Company, Mr. Garen has agreed, for a period of one
year after the termination, not to offer any service or product in competition
with the Company, whether directly or indirectly, in any area served by the
Company at the date of termination. The Garen Agreement has a term of three
years and is renewable, at Mr. Garen's option, for additional three year
periods.
Pursuant to an employment agreement dated as of July 18, 1994, as
amended (the "Shevitz Agreement"), Max S. Shevitz is employed as Executive Vice
President of the Company. Pursuant to the Shevitz Agreement, Mr. Shevitz
received an annual base salary, as well as incentive compensation. In addition,
Mr. Shevitz has agreed, for a period of two years following the termination of
the Shevitz Agreement, not to (i) solicit any of the Company's customers with
whom he did business or was acquainted during the term of the Shevitz Agreement
and (ii) disclose any information pertaining to the Company's customers or the
contents of any mailing list prepared or used by the Company during or prior to
the term of the Shevitz Agreement. The Shevitz Agreement is terminable by either
party at any time.
Pursuant to an employment agreement dated as of January 8, 1990, as
amended (the "Wright Agreement"), Gary R. Wright is employed as Vice President-
Finance and Chief Financial Officer of the Company. Pursuant to the Wright
Agreement, Mr. Wright received an annual base salary, as well as incentive
compensation. Upon termination of employment by the Company, Mr. Wright will
receive severance compensation equal to three months' base salary plus one
month's base salary per year of employment subsequent to January 16, 1995, not
to exceed eight months' base salary in the aggregate. In addition, Mr. Wright
has agreed, for a period of two years following the termination of the Wright
Agreement, not to (i) solicit any of the Company's customers with whom he did
business or was acquainted during the term of the Wright Agreement and (ii)
disclose any information pertaining to the Company's customers or the contents
of any mailing list prepared or used by the Company during or prior to the term
of the Wright Agreement. The Wright Agreement is terminable by either party at
any time.
Pursuant to an employment agreement dated as of April 19, 1993 (the
"Salisbury Agreement"), Alan B. Salisbury is employed as President and General
Manager of Learning Tree International USA, Inc. (the "U.S. Subsidiary").
Pursuant to the Salisbury Agreement, Dr. Salisbury received an annual base
salary, as well as incentive compensation. Upon termination of employment with
the U.S. Subsidiary, Dr. Salisbury will receive one month's salary per year of
employment, with a minimum of at least three months salary, and the pro rata
portion of the incentive compensation described above. In addition, Dr.
Salisbury has agreed, for a period of two years following the termination of the
Salisbury Agreement, not to (i) solicit any of the U.S. Subsidiary's customers
with whom he did business or was acquainted during the term of the Salisbury
Agreement and (ii) disclose any information pertaining to the U.S. Subsidiary's
customers or the contents of any mailing list prepared or used by the U.S.
Subsidiary during or prior to the term of the Salisbury Agreement. The Salisbury
Agreement is terminable by either party at any time.
STOCKHOLDERS AGREEMENT
Dr. Collins and Mr. Garen have entered into a Stockholders Agreement
dated as of October 1, 1995 (the "Stockholders Agreement"). The Stockholders
Agreement provides that (i) the non-transferring stockholder shall have a right
of first refusal with respect to any transfer that is not made to certain
affiliates or pursuant to either an underwritten public offering or Rule 144 of
the Securities Act (a "Restricted Transfer");
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<PAGE>
and (ii) in addition to the foregoing restriction, no Restricted Transfer to any
person or group involving more than five percent of the then outstanding Common
Stock may be effected without the prior consent of the non-transferring
stockholder.
CERTAIN TRANSACTIONS
Prior to the 1996 fiscal year, the Company had, from time to time,
sold shares of its Common Stock to its employees, including certain of its
executive officers and directors. The shares issued in fiscal 1995 and certain
of the shares issued in fiscal 1994 are subject to repurchase options, in the
event of termination of employment, at the sole discretion of the Company. Such
repurchase options expire over a four-year period at a rate of 25% per year.
(See "Security Ownership of Certain Beneficial Owners and Management".)
In 1995, Mr. Wright executed a promissory note in favor of the Company
with interest at an annual rate of 7% in partial payment for the shares of
Common Stock he purchased in fiscal 1995. The maximum outstanding amount of such
promissory note during fiscal 1997 was $97,683. The promissory note was
initially secured by the shares of Common Stock purchased in 1995. In January
1997, Mr. Wright exchanged 10,000 shares of unencumbered stock to release the
shares purchased in 1995. The balance of the promissory note was paid in full
during the year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Collins, who serves as Chairman of the Board and Chief Executive
Officer of the Company, is a member of the Compensation Committee.
REPORT OF THE COMPENSATION COMMITTEE
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the
"Committee"), which is composed of the Company's Chairman and Chief Executive
Officer and two independent outside directors, is responsible for overseeing
and, as appropriate, making recommendations to the Board regarding, the annual
salaries and other compensation of the officers of the Company, providing
assistance and recommendations with respect to the compensation policies and
practices of the Company and assisting with the administration of the Company's
compensation plans. Stock option grants are made by the Stock Option Committee,
but are considered by the Compensation Committee in its compensation review.
Compensation Policy for Executive Officers
- ------------------------------------------
In order to attract and retain well-qualified executives, which the
Compensation Committee believes is crucial to the Company's success, the
Compensation Committee's general approach to compensating executives is to pay
cash salaries which are commensurate with the executives' experience and
expertise and, where relevant, are comparable with the salaries paid to
executives in competitive businesses. Consequently, except as described below
as to Dr. Collins (and except in the case of Eric Garen, the Company's
President, whose salary is determined under an employment contract identical to
Dr. Collins' contract), base salaries for the Company's executives have been
determined as part of the total compensation package by reference to such
factors as salary history, competitive factors in the market, and relative
merit. The Company has not employed any formal process for evaluating its base
salaries, believing that the benefits would not be justified by the costs.
11
<PAGE>
Fiscal 1997 Salary and Incentive Compensation of Chief Executive Officer and
- ----------------------------------------------------------------------------
Other Officers
- --------------
In fiscal 1997, Dr. David Collins, the Company's Chief Executive
Officer and Chairman of the Board of the Directors, received compensation under
the terms of an Employment Agreement between the Company and Dr. Collins dated
as of October 1, 1995 (the "Collins Agreement"). The Collins Agreement provides
that Dr. Collins shall receive a base salary of at least $300,000 and also
entitles Dr. Collins to participate in an incentive plan each year, whereby he
may receive an "on-target" incentive payment of at least $155,000 if certain
specified performance criteria are met. As contemplated by the Collins
Agreement, Dr. Collins received a base salary of $310,000 and the "on-target"
incentive payment was set in fiscal 1997 at $181,567. The Compensation
Committee evaluated the base salary and the "on-target" incentive payment and
concurred, without the participation of Dr. Collins, in the formula for the
incentive payment. The actual incentive compensation earned by Dr. Collins was
$103,038. These amounts reflect the terms of the Collins Agreement.
The basic format for the incentive compensation of Dr. Collins and
other line executives has been in place for several years. The regular
incentive ("Regular Incentive") pays a specified portion of the participant's
salary based on the results for the year in three areas: (1) the "operating
income component" (weighted 40%), which provides a portion of the Regular
Incentive based on the Company achieving a specified operating income (as
defined by the plan), (2) the "revenue growth component" (weighted 30%), which
provides a portion of the Regular Incentive based upon the Company achieving a
specified growth in revenues over the prior year (as defined by the plan) and
(3) the "quality component" (weighted 30%), which provides a portion of the
Regular Incentive based upon the average rating of the Company's courses based
upon reviews completed by course attendees (the target rating being based upon a
desired improvement over the prior year's average rating). An executive can
earn in excess of the targeted amount for any of these components if the
applicable performance factor exceeds the budgeted or targeted level or no
Regular Incentive if certain minimum standards are not met. Further, if the
Company does not achieve 100% of the operating income target, the revenue growth
component which would have otherwise been payable will be reduced by multiplying
this amount by the percentage of the operating income target actually achieved.
For fiscal 1997, the plan was modified to incorporate the operating income
component into the Regular Incentive portion of the plan rather than treating it
as a separate component and the revenue growth component replaced a gross profit
component.
For officers whose responsibilities are limited to particular business
units of the Company, the criteria used relate directly to the units for which
they are responsible. Non-line officers generally do not have any portion of
their bonus determined by a "quality component", as they have no, or very
attenuated, influence over course quality. At or around the beginning of each
fiscal year, the budget for each area, and the targeted range of salary to be
paid, are set for each individual. In addition, adjustments may be made in the
case of any individual as warranted.
The Committee has reviewed this plan and believes that it adequately
focuses the officers of the Company on the Company's growth and profitability.
For fiscal 1998, the Committee has reviewed the basic structure of the plan and
used it, with certain modifications, as the basis for the 1998 compensation
plan.
Equity Incentives
- -----------------
The Compensation Committee also believes that equity ownership by key
executives provides a valuable incentive and further aligns executives' and
stockholders' interests. The Company previously adopted the 1995 Stock Option
Plan (the "Option Plan"), pursuant to which the Company may grant stock options
to executives (as well as other employees, directors and consultants) to
purchase an aggregate of up to 2,250,000 shares of Common Stock. In October
1996, Mr. Shevitz, Mr. Wright and Dr. Salisbury each received grants of options
to purchase 9,000 shares at an exercise price of approximately $24.67 per share.
The exercise price
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<PAGE>
was the market value of the Common Stock on the date of the grant. These grants,
which were the initial grants to the executives under the Option Plan, vest at
the rate of 25% per year from 1998 to 2001, inclusive. The Option Plan is
administered by the stock Option Committee consisting of Messrs. Collins and
Garen.
Messrs. Collins and Garen are not eligible to receive grants under the
Option Plan. The Committee believes that grants of options for additional
equity would not have a measurable effect on the incentives provided to these
officers in light of their significant current holdings of Common Stock (26.3%
and 23.9%, respectively, of the total shares outstanding as of January 15,
1998). The Compensation Committee did not consider alternatives for equity
based compensation.
Deductibility of Executive Compensation
- ---------------------------------------
Section 162(m) of the Internal Revenue Code, as amended, could under
certain circumstances result in limits on the Company's ability to deduct
compensation of $1,000,000 paid to certain executive officers. Exceptions to
this deductibility limit may be made for various forms of performance-based
compensation. Based on the 1997 compensation levels, no such limits on the
deductibility of compensation applied for any officer of the Company. While the
Company has not adopted a policy specifically prohibiting compensation at a
level that would limit deductions, the Compensation Committee does not currently
anticipate any restrictions on the future deductibility of compensation for the
Company's officers. However, the Committee will not necessarily limit executive
compensation to that deductible under Section 162(m) of the Code.
January 28, 1998 COMPENSATION COMMITTEE
Michael W. Kane
W. Mathew Juechter
David C. Collins
COMPANY STOCK PERFORMANCE
The stock price performance graph below is required by the SEC and
shall not be deemed to be incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act, or under the Exchange Act, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed soliciting material or filed under such acts.
The following graph compares the cumulative total stockholder return
on the Common Stock of the Company from the date of the Company's initial public
offering (December 6, 1995) to September 30, 1997 with the cumulative total
return on the NASDAQ Stock Market Composite Index and an appropriate "peer
group" index (assuming the investment of $100 in the Company's Common Stock and
in each of the indexes on the date of the Company's initial public offering, and
reinvestment of all dividends).
13
<PAGE>
[PERFORMANCE CHART APPEARS HERE]
<TABLE>
<CAPTION>
12/06/95 09/30/96 09/30/97
--------- --------- ---------
<S> <C> <C> <C>
Learning Tree International,Inc. Common Stock $ 100 $ 308 $ 358
Peer Group Index/(1)/ 100 191 271
NASDAQ Stock Exchange Composite Index 100 116 159
</TABLE>
- ----------
(1) Peer Group Index includes: Apollo Group, Inc.; CBT Group PLC;
Computer Learning Centers, Inc.; DeVry Inc.; ITT Educational Services,
Inc.; and Wave Technologies International, Inc.. The Peer Group Index has
been restated to exclude National Education Corp. as it was acquired during
1997 and is no longer publicly traded. The returns for each issuer within
the Peer Group Index have been weighted according to such issuer's
respective stock market capitalization at the beginning of the period
presented.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, as well as persons who own more than
ten percent of the Company's Common Stock, to file with the Securities and
Exchange Commission (the "SEC") initial reports of beneficial ownership and
reports of changes in beneficial ownership of the Company's Common Stock.
Directors, executive officers and greater-than-ten-percent stockholders are
required by the SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on a review of copies of reports filed with the SEC and
submitted to the Company and on written representations by certain directors and
executive officers of the Company, the Company believes that all of the
Company's directors and executive officers filed all required reports on a
timely basis during the
14
<PAGE>
past fiscal year, except that a Form 4 for each of Dr. Collins, Mr. Garen and
Ms. Adams respectively, covering 2, 1, and 1 transactions each, and a Form 5
each for Ms. Adams, Mr. Shevitz, Mr. Wright and Dr. Salisbury were filed after
the required dates.
INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended September
30, 1997 were Arthur Andersen, L.L.P. The Board of Directors of the Company has
not yet considered the selection of an auditor for the current fiscal year. It
is anticipated that the Board will consider the selection and make a decision by
June 30, 1998. A representative of Arthur Andersen will be available at the
Annual Meeting to respond to appropriate questions or make any other statements
such representative deems appropriate.
STOCKHOLDERS' PROPOSALS FOR 1999 ANNUAL MEETING
Pursuant to the Rule 14a-8 of the Securities and Exchange Commission,
proposals by eligible stockholders which are intended to be presented at the
Company's Annual Meeting of Stockholders in 1999 must be received by the Company
by November 5, 1998 in order to be considered for inclusion in the Company's
proxy materials.
OTHER MATTERS
The Board of Directors is not aware of any matter to be acted upon at
the Annual Meeting other than described in this Proxy Statement. Unless
otherwise directed, all shares represented by the persons named in the
accompanying proxy will be voted in favor of the proposals described in this
Proxy Statement. If any other matter properly comes before the meeting, however,
the proxy holders will vote thereon in accordance with their best judgments.
EXPENSES
The entire cost of soliciting proxies will be borne by the Company.
Solicitation may be made by mail. The Company will request brokerage houses,
nominees, custodians, fiduciaries and other like parties to forward soliciting
material to the beneficial owners of the Company's Common Stock held of record
by them and will reimburse such persons for their reasonable charges and
expenses in connection therewith.
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report for the year ended September 30, 1997 is
being mailed to Shareholders along with this Proxy Statement. Item 7 -
"Management's Discussion and Analysis of Financial Condition"; Item 8 -
"Financial Statements and Supplementary Data"; and Item 9 - "Changes In and
Disagreements With Accountants on Accounting and Financial Disclosures of the
Annual Report" are incorporated by reference herein. The Annual Report is not
to be considered part of the soliciting material except as incorporated by
reference herein.
By Order of the Board of Directors,
David C. Collins, Ph.D.
Chairman of the Board and Chief Executive Officer
January 28, 1998
15
<PAGE>
1. Election of Two (2) Class III Directors:
NOMINEES: David C. Collins and Eric R. Garen
FOR AGAINST ABSTAIN
[X] Please mark [ ] [ ] [ ]
your vote as this
Instruction: To WITHHOLD authority to vote for any individual nominee, write
that nominee's name in the space provided below:
_____________________________________________________________
In their discretion, the proxies are authorized to vote "FOR" the election of
such substitute nominee(s) for directors as the Board of Directors of the
Company shall select and upon such other matters as may come before the Annual
Meeting.
Dated: _________________________________, 1998
_____________________________________________________________
(Signature)
_____________________________________________________________
(Title)
_____________________________________________________________
(Signature if held jointly)
Note: Please date and sign exactly as your name(s) appear on this proxy card. If
shares are registered in more than one name, all such persons should sign. A
corporation should sign in its full corporate name by a duly authorized officer,
stating his title. When signing as attorney, executor, administrator, trustee or
guardian, please sign in your official capacity and give your full title as
such. If a partnership, please sign in the partnership name by an authorized
person.
<PAGE>
PROXY
LEARNING TREE INTERNATIONAL, INC.
Proxy for Annual Meeting of Stockholders to be held March 6, 1998
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Learning Tree International, Inc. ("Learning Tree")
dated January 28, 1998 and the accompanying Proxy Statement relating to the
above-referenced Annual Meeting, and hereby appoints David C. Collins or Eric R.
Garen, with full power of substitution in each, as attorneys and proxies of the
undersigned.
Said proxies are hereby given authority to vote all shares of Common
Stock, $.0001 par value, of Learning Tree which the undersigned may be entitled
to vote at the Annual Meeting of Stockholders of Learning Tree, to be held at
10:00 a.m., local time, on Friday, March 6, 1998, at the Sheraton Gateway Hotel,
6101 West Century Boulevard, Los Angeles, California 90045, and at any and all
adjournments or postponements thereof (the "Annual Meeting") on behalf of the
undersigned on the matters set forth on the reverse side hereof and in the
manner designated thereon.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF LEARNING TREE,
AND WHEN PROPERLY EXECUTED, THE SHARES REPRESENTED HEREBY WILL BE VOTED IN
ACCORDANCE WITH THE INSTRUCTIONS IN THIS PROXY. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES NAMED AS DIRECTORS OF
LEARNING TREE ON THE REVERSE SIDE HEREOF.
PLEASE DATE AND SIGN ON THE REVERSE SIDE AND RETURN THIS PROXY CARD PROMPTLY IN
THE ENCLOSED ENVELOPE.
