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:
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[_] 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: ___________________________________________________________
Learning Tree International, Inc.
6053 W. Century Boulevard
Los Angeles, California 90045
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Monday, March 4, 2002
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Learning Tree International, Inc. will be held at the Sheraton
Gateway Hotel, 6101 West Century Boulevard, Los Angeles, California 90045 on
Monday, March 4, 2002, at 10:00 a.m. local time for the following purposes as
more fully described in the accompanying Proxy Statement:
1. To elect two Class I directors for a term of three years.
2. To approve the amendment of the 1999 Stock Option Plan.
3. 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 18, 2002
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, you may vote your shares
by completing and returning the accompanying proxy card or by voting
electronically via the Internet or by telephone. To vote by mail, 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,
/s/ DAVID C. COLLINS
David C. Collins, Ph.D.
Chairman of the Board and Chief Executive Officer
January 25, 2002
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 ("Learning Tree") in connection with
the solicitation of proxies on behalf of the Board of Directors of Learning
Tree. The proxies solicited hereby are to be voted at the Annual Meeting of the
Stockholders of Learning Tree to be held at the Sheraton Gateway Hotel, 6101
West Century Boulevard, Los Angeles, California 90045 on March 4, 2002 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 I directors for a term of three years.
2. To approve the amendment of the 1999 Stock Option Plan to increase the
number of shares available under that plan.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
A form of proxy is enclosed. The shares represented by each properly
executed unrevoked proxy will be voted as directed by the stockholder executing
the proxy. The Learning Tree Board of Directors recommends that stockholders
vote "FOR" the election of the nominees for the Board of Directors named below
and "FOR" the amendment of the 1999 Stock Option Plan. Unless a proxy directs
otherwise, the shares represented by each properly executed unrevoked proxy will
be voted in accordance with these recommendations. 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 the Secretary of Learning Tree, 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.
This Proxy Statement and the accompanying form of proxy are first being
mailed to stockholders on or about January 25, 2002. Learning Tree intends to
solicit proxies primarily by mail. However, directors, officers, agents and
employees of Learning Tree may communicate with stockholders, banks, brokerage
houses and others by telephone, email, in person or otherwise to solicit
proxies. Additionally, Learning Tree intends to post this Proxy Statement on
its website for public review. Learning Tree has no present plans to hire
special employees or paid solicitors to assist in obtaining proxies, but
reserves the option to do so.
All expenses incurred in connection with this solicitation will be borne by
Learning Tree. Learning Tree requests that brokerage houses, nominees,
custodians, fiduciaries and other like parties forward the soliciting materials
to the underlying beneficial owners of Learning Tree's Common Stock. Learning
Tree will reimburse reasonable charges and expenses in doing so.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
Outstanding Shares; Record Date
Only holders of record of Learning Tree's voting securities at the close of
business on January 18, 2002, (the "Record Date") are entitled to notice of and
to vote at the Annual Meeting and any adjournments thereof. As of the Record
Date, 18,984,329 shares of Learning Tree's Common Stock were issued and
outstanding. Holders are entitled to one vote at the Annual Meeting for each
share of Common Stock held which was issued and outstanding as of the Record
Date.
The presence, in person or by proxy, of stockholders holding at least a
majority of the outstanding Common Stock will constitute a quorum for the
transaction of business at the Annual Meeting.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the beneficial ownership of the Common Stock
of Learning Tree as of January 2, 2002 by (i) each person or entity known by
Learning Tree to own beneficially more than 5% of the outstanding Common Stock,
(ii) each of Learning Tree'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.
Common Stock/(1)/
----------------------------------------------
Number of Percent of
Name and Address of Owner Shares Class
------------------------- ------ -----
David C. Collins/(1)(2)(3)(4)/.................................... 4,313,110 24.0%
Eric R. Garen/(2)(5)/............................................. 3,910,030 20.6%
Gary R. Wright/(1)/............................................... 252,900 1.3%
Mary C. Adams/(1)(3)(4)/.......................................... 4,313,110 24.0%
James E. Furlan/(1)/.............................................. 154,166 *
Matthew Juechter/(1)/............................................. 31,426 *
Michael W. Kane/(1)/.............................................. 9,934 *
Howard A. Bain III................................................ -- *
Theodore E. Guth/(1)(6)/.......................................... 1,212,730 6.4%
Franklin Fund/(8)/
777 Mariners Island Blvd.
San Mateo, CA 94404........................................... 1,873,395 9.9%
All directors and executive officers as a group(8)/(1)(7)/......... 8,456,566 44.2%
_________________
* Less than 1%
Note: Based upon review of 13G filings, there were no other 5% or more holders
of Learning Tree Common Stock as of January 2, 2002.
(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 January 2, 2002. These shares are
deemed to be outstanding for purposes of computing the percentage of
outstanding shares held by each person or group on that date, but are not
deemed to be outstanding for the purpose of computing the percentage
ownership of any other person. The number of shares in this table includes
the following number of shares issuable upon vested options: 3,400 shares
for Mr. Wright, 27,000 shares for Ms. Adams, 119,166 shares for Mr. Furlan,
1,666 shares each for Mr. Juechter, Mr. Kane and Mr. Guth, and 154,564
shares for all directors and executive officers as a group.
(2) Dr. Collins is the Chairman of the Board of Directors and Chief Executive
Officer of Learning Tree and Mr. Garen is the President and a director of
Learning Tree. The address of these individuals is Learning Tree
International, Inc., 6053 West Century Boulevard, Los Angeles, California
90045-0028.
(3) Dr. Collins and Ms. Adams are married. Accordingly the shares listed for
Dr. Collins include 224,640 shares and options beneficially owned by Ms.
Adams, and those listed for Ms. Adams shares include 1,475,150 shares
beneficially owned by Dr. Collins, although each disclaims beneficial
ownership of the other's shares.
(4) The shares listed for Dr. Collins and Ms. Adams both include (i) 198,320
shares owned by the Collins Family Foundation, the directors of which are
Dr. Collins and Ms. Adams, but as to which they disclaim beneficial
ownership; (ii) 215,000 shares owned by The Pegasus Foundation, of which
Dr. Collins and Ms. Adams are a minority of the trustees and as to which
they disclaim beneficial ownership; (iii) 2,168,788
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shares owned by DCMA Holdings LP, of which Dr. Collins and Ms. Adams are
general partners, but as to which they disclaim beneficial ownership; (iv)
252 shares owned by the Collins Trust 99-1, an irrevocable defective trust
for the benefit of their child, of which Dr. Collins and Ms. Adams are the
trustees but as to which they disclaim beneficial ownership; and (v) 30,960
shares owned by the Collins Family Trust, of which David C. Collins and
Mary C. Adams are the trustees.
(5) The shares listed for Mr. Garen includes (i) 270,380 shares owned by the
Garen Family Foundation, of which Mr. Garen is a trustee, but as to which
he disclaims beneficial ownership; (ii) 215,000 shares owned by The Pegasus
Foundation, of which Mr. Garen is a trustee and as to which he disclaims
beneficial ownership; and (iii) 1,048,064 shares held by the Garen
Children's Trust and 163,000 shares held by the Garen Dynasty Trust, as to
which Mr. Garen lacks voting and disposition power and as to which he
disclaims beneficial ownership. See footnote 6.
(6) Mr. Guth has sole voting and disposition power, as Trustee, of (i)
1,048,064 shares held by the Garen Children's Trust and (ii) 163,000 shares
held by the Garen Dynasty Trust, but as to which he disclaims beneficial
ownership. Mr. Guth also holds, in his own name and not as Trustee,
options to purchase 5,000 shares of Common Stock from Learning Tree, of
which 1,666 shares are vested. Mr. Guth's address is Guth|Christopher LLP,
10866 Wilshire Boulevard, Suite 1250, Los Angeles, California 90024.
(7) As described in Footnotes 3, 4, 5 and 6, certain of the shares have been
listed for more than one of the named individuals. This total reflects the
total number of shares owned by the director and officer group as a whole,
eliminating the shares attributed to more than one individual.
(8) Based upon information contained in the Schedule 13G filed by Franklin
Resources, Inc., Franklin Advisors, Inc. has sole disposition and voting
powers with respect to 1,770,000 shares and Franklin Management, Inc. has
sole disposition and voting powers with respect to 103,395 shares.
3
PROPOSAL 1: ELECTION OF DIRECTORS
Learning Tree's Board of Directors has eight members and is divided into
three classes, Class I, Class II and Class III. The current terms of the Class
I directors expire at the Annual Meeting to be held this year; the terms of the
Class II directors will expire at the annual meeting of stockholders to be held
in 2003; and the terms of the Class III directors will expire at the annual
meeting of stockholders to be held in 2004. The Class I directors are to be
elected at the Annual Meeting for three-year terms expiring in 2005. 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
Name Age Position with Learning Tree
------------------------------------------------------- -------- ----------------------------------------
Class I Directors - Nominees for Election to
Terms Expiring in 2005.
W. Mathew Juechter.................................. 68 Director
Howard A. Bain III.................................. 55 Director
Class II Directors - Present Term Expires in
2003.
Michael W. Kane.................................... 50 Director
Mary C. Adams...................................... 46 Vice President Administration and Investor
Relations, Assistant Secretary, and
Director
James E. Furlan.................................... 51 Chief Operating Officer and Director
Class III Directors - Present Term Expires in
2004.
David C. Collins................................... 61 Chairman of the Board of Directors
and Chief Executive Officer
Eric R. Garen...................................... 54 President and Director
Gary R. Wright..................................... 44 Chief Financial Officer, Secretary,
and Director
Mr. Juechter has been a director of Learning Tree since June 1987. He is
President and Chief Executive Officer of IRA, Inc., a management consulting
company that works primarily in the areas of strategy, structure and executive
development. From 1991 to 1999, he was 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.
Mr. Juechter served as President and Chief Executive Officer of Wilson Learning
Corp., a multi-national training organization, from 1977 to 1986. From 1989 to
1997, he was President of the Board of Governors of the American Society for
Training and Development (ASTD). Mr. Juechter is a graduate of Boston
University and Harvard Business School.
Mr. Bain has served as a director of Learning Tree since June 2001. He is
currently Chief Financial Officer of Portal Software (NASDAQ: PRSF), a developer
of customer management and billing software for communications and content
service providers, since August 2001. Prior to joining Portal, Mr. Bain was the
Chief Financial Officer at Vicinity Corporation (NASDAQ: VCNT) from March 2000
to October 2000. Mr. Bain served as Chief Financial Officer of Informix from
January 1999 to March 2000. From 1991 to 1998, Mr. Bain was the Chief Financial
Officer of Symantec Corporation. He has additional experience in various
technology companies in the areas of semiconductor manufacturing equipment;
semiconductor BiCMOS SRAMs; laser-based large screen projection systems; and
disk drives. He has also held senior financial and accounting management
positions with Fairchild Camera and Instrument Corporation and as a consultant
with Arthur Andersen & Company. Mr. Bain is a CPA and holds a B.S. in Business
from California Polytechnic University.
Dr. Kane has served as a director of Learning Tree 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
&
4
Co., Inc. and from 1988 to 1991 he was an investment banker with Oppenheimer &
Co., Inc. From 1984 to 1987, Dr. Kane practiced primarily corporate and
securities law with the law firm of Irell & Manella LLP and, prior to that, he
was a Project Leader in the Systems Sciences Department of The Rand Corporation
and 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.
Ms. Adams has served as Vice President, Administration and Investor
Relations since September 1995. She began her association with Learning Tree in
September 1975 and has held a variety of key positions in Learning Tree. Ms.
Adams is also the President of Advanced Technology Marketing, Inc., a wholly
owned subsidiary of Learning Tree. Ms. Adams became a Director of Learning Tree
in December 1999.
Mr. Furlan joined Learning Tree in February 1999 as Chief Operating
Officer. Prior to joining Learning Tree, Mr. Furlan was employed by the Xerox
Corporation from July 1974 to February 1999. From 1991 to 1999, Mr. Furlan was
Vice President, General Manager of various Xerox business units, the most recent
being Distributed Printing and Publishing Systems. Prior to these positions, he
held a series of senior management positions in sales, marketing, finance and
strategic planning in Xerox's printer and copier divisions. Mr. Furlan holds a
Bachelor of Science degree in engineering and a Master of Business
Administration from the University of Illinois. Mr. Furlan became a Director of
Learning Tree in August 1999.
Dr. Collins, a co-founder of Learning Tree, has been Chairman of the Board
and Chief Executive Officer since Learning Tree's business began in 1974. 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 Learning Tree, has served as Executive Vice
President and as President of Learning Tree since Learning Tree's business began
in 1974. Mr. Garen holds a Bachelor of Science degree in Electrical Engineering
from the California Institute of Technology and a Masters degree in Computer
Science from the University of Southern California, earning both degrees with
honors.
Mr. Wright has been Chief Financial Officer of Learning Tree since January
1995, and from January 1990 to that time he was Corporate Controller of Learning
Tree. From April 1983 to January 1990, Mr. Wright was employed by The Flying
Tiger Line Inc. and its parent company, Tiger International, Inc., a publicly-
held transportation company, where he held a variety of financial executive
positions, including Assistant Controller and Director of Financial Reporting.
Prior to April 1983, Mr. Wright worked at the public accounting firm of Arthur
Andersen LLP. Mr. Wright is a certified public accountant. Mr. Wright became a
Director of Learning Tree in December 1999.
David C. Collins and Mary C. Adams are married. There are no other family
relationships among any of the directors or executive officers of Learning Tree.
5
Board Meetings and Committees
The Board of Directors held four meetings during fiscal 2001. The Board of
Directors has three standing committees: the Audit Committee, the Compensation
Committee and the Options 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 fiscal 2001.
The Audit Committee currently comprises Mr. Bain, Dr. Kane and Mr.
Juechter. The principal functions of the Audit Committee are to review the plan
and results of Learning Tree's independent audit with Learning Tree's
independent auditors and management, to review Learning Tree's systems of
internal control, and to recommend the engagement or the discharge of Learning
Tree's independent auditors. During November 2001, Learning Tree's Board of
Directors adopted an amended charter for the Audit Committee, a copy of which is
attached as Exhibit B. The Audit Committee met two times during fiscal 2001.
Although Mr. Bain and Mr. Juechter meet the standards for director
"independence" adopted by the NASD, Dr. Kane may not qualify because of services
he has provided to Learning Tree as an investment banker in past fiscal years.
However, the Board believes that his continued membership on the Audit Committee
is required by the best interests of Learning Tree and its shareholders, based
on the need for continuity and the desire to take the time required to find an
appropriate replacement. The material in this paragraph 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 of 1933 or under
the Securities Exchange Act of 1934, except to the extent that Learning Tree
specifically incorporates this information by reference, and shall not otherwise
be deemed soliciting material or filed under such acts.
The Compensation Committee comprises Dr. Kane and Mr. Juechter. The
principal functions of the Compensation Committee are to (a) review and make
recommendations to Learning Tree's Board of Directors with respect to the direct
and indirect compensation and employee benefits of the Chairman, President and
other elected officers of Learning Tree, (b) review, administer and make
recommendations to Learning Tree's Board of Directors with respect to any
incentive plans and bonus plans that include elected officers and (c) review
Learning Tree's policies relating to the compensation of senior management and
other employees. In addition, the Compensation 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 one time during fiscal 2001.
The Options Committee is comprised of Dr. Collins and Mr. Garen. The
functions of the Options Committee include addressing matters relating to
Learning Tree's stock option plans and making grants and recommendations to the
Board of Directors as to grants of stock options. The Options Committee held
three meetings during fiscal 2001.
The Board of Directors does not have a standing Nominating Committee.
However, the Board has appointed a special Nominating Committee consisting of
Dr. Collins and Mr. Garen to consider the composition of the Board in connection
with the NASD independence requirements, which became effective in 2001. The
special Nominating Committee will consider nominees recommended by securities
holders, and names may be submitted in writing to the Secretary of Learning
Tree.
Compensation of Directors
No director who is an employee of Learning Tree is compensated for service
as a member of the Board of Directors or for service on any committee of the
Board of Directors. Directors that are not employees of Learning Tree currently
receive a monthly retainer of $2,000. Non-employee directors that serve as a
chairperson of a committee also receive an annual retainer of $5,000. All non-
employee directors also receive a $1,500 fee for each Board or Committee meeting
attended in person and $1,000 if attended telephonically. In addition, non-
employee directors are also granted 2,500 stock options annually that are vested
over a 3-year period. Directors are reimbursed for travel and out-of-pocket
expenses incurred on behalf of Learning Tree.
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Quorum; Vote Required
Nominees will be elected as directors by a plurality of the votes cast.
The shares of each properly executed unrevoked proxy will be voted FOR the
election of all of the nominees recommended by the Board of Directors unless the
proxy otherwise directs. 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.
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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE ABOVE-NAMED
NOMINEES.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
compensation for (a) Learning Tree's Chief Executive Officer and (b) its four
most highly compensated executive officers as of September 30, 2001:
Summary Compensation Table
Long-Term
Fiscal Annual Compensation/(1)/ Compensation All Other
-------------------------------
Name and Principal Position Year Salary Incentive/(2)/ Options Compensation/(3)/
- --------------------------------------- ----------- ------------ ---------------- -------------- ---------------------
David C. Collins 2001 $413,942 $ 46,266 -- $ 7,875
Chairman of the Board of Directors and 2000 $400,000 $ 794,239 -- $ 7,244
Chief Executive Officer 1999 $310,000 $ 223,657 -- $ 6,162
Eric R. Garen/(4)/ 2001 $313,584 $ 37,013 -- $ 7,875
President and Director 2000 $325,000 $ 425,000 -- $ 7,829
1999 $310,000 $ 223,657 -- $ 7,310
Gary R. Wright 2001 $220,500 $ 10,238 133,600 $ 7,560
Chief Financial Officer, Secretary and 2000 $210,000 $ 204,796 -- $ 8,058
Director 1999 $200,000 $ 60,841 -- $ 8,567
Mary C. Adams 2001 $193,326 $ 9,253 12,000 $ 7,791
Vice President--Administration and 2000 $200,000 $ 158,848 -- $ 7,626
Investor Relations, Assistant 1999 $188,000 $ 57,895 -- $ 7,743
Secretary and Director
James E. Furlan 2001 $268,716 $ 18,936 -- $ 7,281
Chief Operating Officer and Director 2000 $255,800 $ 325,055 -- $10,250
1999 $145,833 $ 71,856 275,000 $ 3,750
____________
(1) Certain of Learning Tree's executive officers receive personal benefits in
addition to salary and cash bonuses. 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) The basic format for the incentive compensation has been in place for
several years. The increases in fiscal 2000 were due to the significant
improvement in Learning Tree's performance as compared to fiscal 1999. The
declines in fiscal 2001 reflect the decline in profitability.
(3) These amounts represent contributions made by Learning Tree to a defined
contribution plan.
(4) For fiscal 2000, Mr. Garen voluntarily limited the amount of incentive
compensation which would have otherwise been payable under his compensation
plan to $425,000.
7
Stock Option Plans
1995 Stock Option Plan
- ----------------------
In September 1995, Learning Tree adopted the 1995 Stock Option Plan (the
"1995 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 Learning
Tree. The 1995 Plan permitted the grant of options to officers, employees and
directors of Learning Tree. If Proposal 2 is approved, Learning Tree will not
be granting additional options under the 1995 Plan in the future.
1999 Stock Option Plan
- ----------------------
In March 1999, Learning Tree adopted the 1999 Stock Option Plan (the "1999
Stock Option Plan" and together with the 1995 Plan, the "Stock Option Plans"),
which provides for the issuance of incentive and non-qualified stock options to
purchase an aggregate of up to 1,500,000 shares of the Common Stock of Learning
Tree. The 1999 Stock Option Plan permits the grant of options to officers,
employees and directors of Learning Tree.
At January 1, 2002, the 1999 Stock Option Plan has slightly more than
36,000 shares of Common Stock remaining for future grants. The Board of
Directors of Learning Tree has approved an amendment to the 1999 Stock Option
Plan to authorize Learning Tree to issue up to approximately 2,464,000
additional shares of Common Stock. The Proposal would not otherwise change the
1999 Stock Option Plan. See "Proposal 2: Approval of the Amendment of the 1999
Stock Option Plan."
Administration of the Stock Option Plans
- ----------------------------------------
The Stock Option Plans are administered by a committee of the Board of
Directors (the "Options Committee") composed of Dr. Collins and Mr. Garen, who
are not eligible to participate in the Stock Option Plans. Each option is
evidenced by written agreement in a form approved by the Options Committee. No
options granted under either of the Stock Option Plans 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.
Under the Stock Option Plans, 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 Options
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
Options Committee shorten such period to less than six months. Upon exercise of
any option granted under either of the Stock Option Plans, 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.
Federal Income Tax Consequences
- -------------------------------
Nonqualified Stock Options. Under current Federal income tax law, the grant
of a nonqualified stock option has no tax effect on Learning Tree or the option
holder. If the shares received on exercise of an option are not subject to
restrictions on transfer or risk of forfeiture imposed by the Options Committee,
the exercise of a nonqualified stock option will result in ordinary income to
the option holder equal to the excess of the fair market value of the shares at
the time of exercise over the option price. The amount taxed to the option
holder as ordinary income is treated as earned income. The option holder's tax
basis in the shares will be equal to the
8
aggregate exercise price paid by the option holder plus the amount of taxable
income recognized upon the exercise of the option. Upon any subsequent
disposition of the shares, any further gain or loss recognized by the option
holder will be treated as capital gain or loss. Any capital gain will be long-
term capital gain if the shares are held for more than one year after exercise
and short-term capital gain if the shares are held for one year or less after
exercise. Capital losses will be long-term if the holding period is more than
one year and short-term otherwise. Learning Tree will normally be allowed to
take a deduction for Federal income tax purposes in an amount equal to the
ordinary income recognized by the option holder upon exercise of the option.
Incentive Stock Options. The Federal income tax consequences associated
with incentive stock options are generally more favorable to the optionee and
less favorable to the employer than those associated with nonqualified stock
options. Under current Federal income tax law, the grant of an incentive stock
option does not result in income to the optionee or in a deduction for Learning
Tree at the time of the grant. The exercise of an incentive stock option will
not result in income for the option holder if the option holder (i) does not
dispose of the shares within two years after the date of grant nor within one
year after exercise and (ii) is an employee of Learning Tree or any of its
Affiliates from the date of grant until three months before the exercise date.
If these requirements were met, the basis of the shares upon later disposition
would be the option price. Any gain will be taxed to the option holder as long-
term capital gain if the holding period for the stock is more than one year.
Learning Tree will not be entitled to a deduction. The excess of the market
value on the exercise date over the option price is an item of tax preference,
potentially subject to the alternative minimum tax. If the option holder
disposes of the shares prior to the expiration of either of the holding periods
described above, the option holder would have compensation taxable as ordinary
income, and Learning Tree would be entitled to a deduction equal to the lesser
of the fair market value of the shares on the exercise date minus the option
price or the amount realized on disposition minus the option price. If the
price realized in any such premature sale of the shares exceeds the fair market
value of the shares on the exercise date, the excess will be treated as long-
term or short-term capital gain depending on the option holder's holding period
for the shares.
Option Grants During Fiscal 2001
- --------------------------------
The following table, sets forth certain information concerning options
granted during fiscal 2001 to the executive officers named above:
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 2001 Share/(2)/ Date 5% 10%
- --------------------- ------------ ------------ ----------- ------------ ------------- -------------
David C. Collins/(3)/ -- --% $ -- -- $ -- $ --
Eric R. Garen/(3)/ -- -- -- -- -- --
Gary R. Wright 13,600 1.4 30.25 10/1/05 113,662 662,564
120,000 12.0 23.08 4/1/06 765,189 4,460,468
Mary C. Adams 12,000 1.2 30.25 10/1/05 100,290 584,615
James E. Furlan -- -- -- -- -- --
______________________
(1) The potential realizable value illustrates the value that would be realized
if the options were exercised immediately prior to the expiration of their
terms, assuming the specified compounded rates of appreciation of Learning
Tree'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 Learning Tree'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.
9
Aggregated Option Exercises in Fiscal 2001 and Fiscal Year-End Option Values
- ----------------------------------------------------------------------------
The following table presents the number and value of options exercised
during fiscal 2001 and of exercisable and unexercisable options held as of
September 30, 2001 by the executive officers named above:
Number of Securities Value of Unexercised In-the-
Shares Value Underlying Unexercised Money Options at
acquired on Realized Options at September 30, 2001 September 30, 2001/(2)/
Name exercise ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- --- ----------- ------------- ----------- -------------
David C. Collins/(1)/ -- $ -- -- -- $ -- $ --
Eric R. Garen/(1)/ -- -- -- -- -- --
Gary R. Wright -- -- 3,400 130,200 -- --
Mary C. Adams -- -- 27,000 9,000 -- --
James E. Furlan 35,000 330,225 119,166 120,834 1,629,595 1,652,405
___________________
(1) Not eligible for option grants.
(2) The amount by which the closing price for the Common Stock on September 30,
2001 exceeded the exercise price of any then unexercised options, without
including any options whose exercise price exceeded the closing price.
Other Employee Benefit Plans
Learning Tree has adopted the Learning Tree International 401(k) 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 Learning Tree 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 Learning Tree are
deductible by Learning Tree when made.
All employees of Learning Tree 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 up to 15% of his or her salary, through payroll deductions, subject
to statutory limitations. For fiscal 1999 through 2001, for each $1.00 invested
by an employee, Learning Tree contributed $0.75 up to four and one-half percent
of such employee's salary. The 401(k) Plan permits, but does not require,
additional contributions to the 401(k) Plan by Learning Tree.
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 Learning Tree. Pursuant to the Collins Agreement,
Dr. Collins receives 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 Learning Tree, as well as certain fringe
benefits. In the event of the termination of Dr. Collins' employment with
Learning Tree, Dr. Collins has agreed, for a period of one year after the
termination, not to offer any service or product in competition with Learning
Tree, whether directly or indirectly, in any area served by Learning Tree at the
date of termination. On September 30, 1999, the Collins Agreement was renewed
through September 30, 2002.
Pursuant to an employment agreement dated as of October 1, 2001 (the "Garen
Agreement"), Eric R. Garen is employed as President of Learning Tree. Pursuant
to the Garen Agreement, Mr. Garen receives 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 Learning Tree, as well
as certain fringe benefits. In the event of the termination of Mr. Garen's
employment with Learning Tree, Mr. Garen has agreed, for a period of one year
after the termination, not to offer any service or product in competition with
Learning Tree, whether directly or indirectly, in any area served by Learning
Tree at the date of termination. The Garen Agreement currently expires on
September 30, 2002.
10
Pursuant to an employment agreement dated as of January 8, 1990, as amended
(the "Wright Agreement"), Gary R. Wright is employed as Chief Financial Officer
of Learning Tree. Pursuant to the Wright Agreement, Mr. Wright receives an
annual base salary, as well as incentive compensation. Upon termination of
employment by Learning Tree, Mr. Wright would receive severance compensation
equal to eight months' base salary. 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 Learning Tree's customers with whom he did business or was
acquainted during the term of the Wright Agreement and (ii) disclose any
information pertaining to Learning Tree's customers or the contents of any
mailing list prepared or used by Learning Tree 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 February 9, 1978, as
amended (the "Adams Agreement"), Mary C. Adams is employed as Vice President
Administration and Investor Relations of Learning Tree. Pursuant to the Adams
Agreement, Ms. Adams receives an annual base salary, as well as incentive
compensation. Upon termination of employment by Learning Tree, Ms. Adams would
receive severance compensation equal to eight months' base salary. In addition,
Ms. Adams has agreed, for a period of two years following the termination of the
Adams Agreement, not to (i) solicit any of Learning Tree's customers with whom
she did business or was acquainted during the term of the Adams Agreement and
(ii) disclose any information pertaining to Learning Tree's customers or the
contents of any mailing list prepared or used by Learning Tree during or prior
to the term of the Adams Agreement. The Adams Agreement is terminable by either
party at any time.
Pursuant to an employment agreement dated as of February 25, 1999 (the
"Furlan Agreement"), James E. Furlan is employed as Chief Operating Officer of
Learning Tree for a period of three years. Pursuant to the Furlan Agreement,
Mr. Furlan receives an annual base salary, as well as incentive compensation.
If Learning Tree terminates his employment during the term of the Furlan
Agreement, without Good Reason, Mr. Furlan would receive severance compensation.
The severance compensation would be equal to one month's base salary plus $8,333
for each month remaining in the term of the Furlan Agreement, not to exceed
twelve months nor be less than six months in the aggregate. In addition, Mr.
Furlan has agreed, for a period of two years following the termination of the
Furlan Agreement, not to (i) solicit any of Learning Tree's customers with whom
he did business or was acquainted during the term of the Furlan Agreement and
(ii) disclose any information pertaining to Learning Tree's customers or the
contents of any mailing list prepared or used by Learning Tree during or prior
to the term of the Furlan Agreement. The Furlan Agreement is subject to
extension upon mutual agreement with Learning Tree and 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 and amended as of October 23, 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 of 1933 (a "Restricted
Transfer"); 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
During fiscal 2001, Learning Tree paid $170,000 for legal services
performed by Guth|Christopher LLP, a law firm in which a former director of
Learning Tree is a partner.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee comprises Dr. Kane and Mr. Juechter, and for the
first part of fiscal 2001 also included Dr. Collins, Learning Tree's Chairman of
the Board and Chief Executive Officer.
11
REPORT OF THE COMPENSATION COMMITTEE
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is responsible for overseeing and, as appropriate, making
recommendations to the Board regarding, the annual salaries and other
compensation of the officers of Learning Tree, providing assistance and
recommendations with respect to the compensation policies and practices of
Learning Tree and assisting with the administration of Learning Tree's
compensation plans. The Compensation Committee comprises Dr. Kane and Mr.
Juechter, and for the first part of fiscal 2001 also included Dr. Collins,
Learning Tree's Chairman of the Board and Chief Executive Officer. Stock option
grants are made by the Options 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 Learning Tree'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, Learning Tree's
President, whose salary has been determined in a manner similar to that of Dr.
Collins), base salaries for Learning Tree'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. Learning Tree
has not employed any formal process for evaluating its base salaries, believing
that the benefits would not be justified by the costs.
Fiscal 2001 Salary and Incentive Compensation of Chief Executive Officer and
- ----------------------------------------------------------------------------
Other Officers
- --------------
In fiscal 2001, Dr. David Collins, Learning Tree's Chief Executive Officer
and Chairman of the Board of the Directors, received compensation under the
terms of an Employment Agreement between Learning Tree and Dr. Collins dated as
of October 1, 1995 ("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 $420,000, and the "on-target"
incentive payment was set at $262,500. 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 $46,266. These amounts
reflect the terms of the Collins Agreement.
The basic format for the incentive compensation of Dr. Collins and other
line executives used in fiscal 2001 has been in place for several years, with
variations from year to year on the particular incentive components and their
relative weights. The Regular Incentive pays a specified portion of the
participant's salary based on the results for the year in three areas: (1) the
"net income component" (weighted 60%), which provides a portion of the Regular
Incentive based on Learning Tree achieving a specified operating income (as
defined by the plan), (2) the "revenue growth component" (weighted 25%), which
provides a portion of the Regular Incentive based upon Learning Tree achieving a
specified growth in revenues over the prior year (as defined by the plan) and
(3) the "quality component" (weighted 15%), which provides a portion of the
Regular Incentive based upon the average rating of Learning Tree'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
Learning Tree does not achieve 100% of the net 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 officers whose responsibilities are limited to particular business
units of Learning Tree, the criteria used relate directly to the financial and
quality parameters attained by the units for which they are
12
responsible. Non-line officers generally do not have any portion of their bonus
determined by a "quality component", based on their limited 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 Compensation Committee believes that this plan adequately focuses the
officers of Learning Tree on its growth, profitability and quality assurance.
However, the Compensation Committee has modified the basic structure of the
fiscal 2001 plan for fiscal 2002. The Compensation Committee felt that
determining an amount of revenue that would merit a bonus in fiscal 2002 would
be difficult, given the uncertainty about the timing and extent of any economic
recovery. Accordingly, the revenue growth component of the plan has been
eliminated for fiscal 2002 and the weight of the net income component has been
increased to 85%, while the remaining 15% will continue to be based on the
"quality component."
Equity Incentives
- -----------------
The Compensation Committee also believes that equity ownership by key
executives provides a valuable incentive and further aligns executives' and
stockholders' interests. Learning Tree previously adopted the Stock Option
Plans, pursuant to which Learning Tree was authorized to grant stock options to
executives (as well as other employees and directors) to purchase an aggregate
of up to 3,750,000 shares of Common Stock. At January 1, 2002, the 1999 Stock
Option Plan has slightly more than 36,000 shares of Common Stock remaining for
future grants, which could have been increased to the extent that options
currently outstanding under the 1999 Stock Option Plan are terminated without
being exercised. Learning Tree proposes to amend the 1999 Stock Option Plan to
increase the currently authorized maximum number of shares covered to 2,500,000
shares of Common Stock. This number would continued to be increased to the
extent that options outstanding under the 1999 Stock Option Plan are terminated
without being exercised. See "Proposal 2: Approval of the Amendment of the 1999
Stock Option Plan."
In October 2000, Mr. Wright and Ms. Adams received grants of options to
purchase 13,600 shares and 12,000 shares, respectively. These grants had an
exercise price of $30.25 per share. In addition, in April 2001 Mr. Wright
received a grant of options to purchase an additional 120,000 shares at an
exercise price of $23.08 per share. The Stock Option Plans are administered by
the Stock Option Committee, which consists of Messrs. Collins and Garen.
Messrs. Collins and Garen are not eligible to receive grants under the 1995
Option Plan or the 1999 Option Plan. The Compensation 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. 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 Learning Tree'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 fiscal 2001 compensation levels and the terms of the
incentive compensation plans, no such limits on the deductibility of
compensation applied for any officer of Learning Tree. While Learning Tree 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 Learning Tree's
officers. However, the Compensation Committee will not necessarily limit
executive compensation to that deductible under Section 162(m) of the Code.
January 18, 2002 COMPENSATION COMMITTEE
Michael W. Kane, Chairman
W. Mathew Juechter
13
REPORT OF THE AUDIT COMMITTEE
The material in this report 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 of 1933 or under the Securities Exchange Act
of 1934, except to the extent that Learning Tree specifically incorporates this
information by reference, and shall not otherwise be deemed soliciting material
or filed under such acts.
The Audit Committee oversees Learning Tree's financial reporting process on
behalf of the Board of Directors. The Audit Committee's activities are governed
by a written charter adopted by the Board of Directors, which was amended in
fiscal 2001 to respond to certain changes in applicable regulations and other
matters. A copy of the current charter is attached to this Proxy Statement as
Exhibit B.
Management has the primary responsibility for Learning Tree's financial
statements and the reporting process, including the system of internal controls.
The independent auditors audit the annual financial statements prepared by
management and express an opinion on the conformity of those financial
statements with accounting principles generally accepted in the United States.
In this context, the Audit Committee met and held discussions with
management and the independent auditors. Management represented to the Audit
Committee that Learning Tree's financial statements were prepared in accordance
with accounting principles generally accepted in the United States. The Audit
Committee reviewed and discussed the audited financial statements with
management and the independent auditors, including a discussion of the quality,
not just the acceptability, of the accounting principles, the reasonableness of
specific judgments and the clarity of disclosures in the financial statements.
In addition, the Audit Committee discussed with the independent auditors the
matters required to be discussed by Statements on Auditing Standards No. 61,
"Communication With Audit Committees".
The Audit Committee has also received the written disclosures and the
letter from the independent accountants required by Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees." The Audit
Committee discussed with the independent auditors the auditors' independence
from Learning Tree and its management and considered the compatibility of non-
audit services with the auditors' independence.
Prior to the commencement of the audit, the Audit Committee discussed with
Learning Tree's financial management and independent auditors the overall scope
and plans for the audit. The Audit Committee subsequently met with the
independent auditors, with and without management present, to discuss the
results of the examinations, their evaluation of Learning Tree's internal
controls and the overall quality of the Learning Tree's financial reporting. In
addition, the Audit Committee considered other areas of its oversight relating
to the financial reporting process that it determined appropriate.
Based upon the reviews and discussions referred to in the foregoing
paragraphs, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in Learning Tree's Annual Report on
Form 10-K for the fiscal year ended September 30, 2001 filed with the Securities
and Exchange Commission.
January 18, 2002 AUDIT COMMITTEE
Howard A. Bain III, Chairman
Michael W. Kane
W. Mathew Juechter
14
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 of 1933
or under the Securities Exchange Act of 1934, except to the extent that Learning
Tree 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 Learning Tree from September 30, 1996 to September 30, 2001 with
the cumulative total return on the NASDAQ Stock Market Composite Index and an
appropriate "peer group" index (assuming the investment of $100 in Learning
Tree's Common Stock and in each of the indexes on September 30, 1996).
[LEARNING TREE INTERNATIONAL, INC.]
STOCK PERFORMANCE GRAPH
[GRAPH APPEARS HERE]
Nasdaq Stock Learning Tree
Exchange International,
Composite Peer Group Inc. Common
Index Index Stock
----- ----- -----
09/30/96 100 100 100
12/31/96 105 116 120
03/31/97 100 95 114
06/30/97 118 126 180
09/30/97 137 147 116
12/31/97 128 158 117
03/31/98 150 172 90
06/30/98 154 188 82
09/30/98 138 144 52
12/31/98 179 175 37
03/31/99 201 160 41
06/30/99 219 138 44
09/30/99 224 122 67
12/31/99 332 121 114
03/31/00 373 173 144
06/30/00 323 170 248
09/30/00 299 221 193
12/31/00 201 236 201
03/31/01 150 171 84
06/30/01 176 227 93
09/30/01 122 202 82
For the fiscal years ended September 30,
----------------------------------------
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
Learning Tree International, Inc. Common Stock 100 116 52 114 193 82
Peer Group Index/(1)/ 100 147 144 121 221 202
NASDAQ Stock Exchange Composite Index 100 137 138 332 299 122
(1) Peer Group index includes: Apollo Group, Inc.; SmartForce PLC; DeVry, Inc.;
ITT Educational Services, Inc; New Horizons Worldwide, Inc. The Peer Group
Index has been restated to exclude Computer Learning Centers, Inc. since it
is no longer a publicly traded company and to include New Horizons
Worldwide, Inc. in the Peer Group Index. The returns of 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.
15
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires Learning
Tree's directors and executive officers, as well as persons who own more than
ten percent of Learning Tree'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 Learning Tree's Common Stock.
Directors, executive officers and greater-than-ten-percent stockholders are
required by the SEC regulations to furnish Learning Tree 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 Learning Tree and on written representations by certain directors
and executive officers of Learning Tree, Learning Tree believes that all of
Learning Tree's directors and executive officers filed all required reports on a
timely basis during fiscal 2001, except Mr. Garen did not include any reference
to his status as a trustee of The Pegasus Foundation and the shares that it owns
(as to which he disclaims beneficial ownership) due to an oversight.
PROPOSAL 2: APPROVAL OF THE AMENDMENT OF THE 1999 STOCK OPTION PLAN
Learning Tree believes that officers and other key employees should have a
significant stake in Learning Tree's stock price performance under programs that
link compensation to shareholder return. As a result, stock option grants are
an integral part of Learning Tree's compensation program. As discussed above,
Learning Tree currently relies on the 1999 Stock Option Plan, as well as options
previously granted under the 1995 Plan (Learning Tree will no longer be granting
options under the 1995 Plan if approval of Proposal 2 passes). Although the
1999 Stock Option Plan originally covered a total of 1,500,000 shares, there are
currently slightly more than 36,000 shares remaining available for further grant
under it. (This number would be increased to the extent that any of the
currently outstanding options expire without having been exercised.) The Board
of Directors has determined that it is prudent to amend the 1999 Stock Option
Plan to increase the aggregate number of shares available on January 1, 2002 to
2,500,000 (which would, as in the past, be increased to the extent that options
currently outstanding or granted in the future expire without having been
exercised.)
The only change being made to the 1999 Stock Option Plan by the amendment
is to replace the first sentence of Section 2 (which previously read "Subject to
the provisions of Section 10, options covering no more than one million five
hundred thousand (1,500,000) Shares of Common Stock may be granted under the
Plan") with the following:
"Subject to the provisions of Section 10, options covering no more than two
million five hundred thousand (2,500,000) Shares of Common Stock may be
granted under the Plan effective after January 1, 2002. This limitation
does not apply to options granted under the Plan effective prior to that
date, and the two million five hundred thousand share limitation will be
increased to the extent that any of those previously granted options
terminates or is surrendered pursuant to an Option Exchange Program without
having been exercised."
The full text of the Amended and Restated 1999 Plan is attached as Exhibit
A to this Proxy Statement. For a summary of certain of its terms, please see
"Executive Compensation--Stock Option Plans."
16
Vote Required
Under Delaware law and Learning Tree's Bylaws, the amendment of the 1999
Stock Option Plan must be approved by the shareholders holding (i) a majority of
shares present, or represented, and voting at the Annual Meeting, and (ii) a
majority of the required quorum. For this purpose, abstentions and broker non-
votes will have no effect on the outcome of the vote unless such shares are
necessary to satisfy the quorum requirement, in which case abstentions and
broker non-votes will have the effect of a vote against the proposal. A majority
of the shares entitled to vote, represented in person or by proxy, constitutes a
quorum. Learning Tree believes that shareholder approval in accordance with its
Bylaws will also satisfy the shareholder approval requirement of the Section
162(m) Regulations.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE
1999 STOCK OPTION PLAN.
INDEPENDENT AUDITORS
For fiscal 2001, Learning Tree's independent auditors were Arthur Andersen
LLP. Fees for services rendered by Arthur Andersen LLP in fiscal 2001 were as
follows:
Audit Fees $220,139
Financial Information Systems Design and Implementation Fees 915,017
All Other Fees, including taxes 96,478
The Board of Directors of Learning Tree has not yet considered the
selection of an auditor for fiscal 2002. It is anticipated that the Board will
consider the selection and make a decision by September 15, 2002.
A representative of Arthur Andersen LLP will be available at the Annual
Meeting to respond to appropriate questions or make any other statements such
representative deems appropriate.
STOCKHOLDERS' PROPOSALS FOR 2002 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
Learning Tree's Annual Meeting of Stockholders in 2003, must be received by
Learning Tree by September 27, 2002 in order to be considered for inclusion in
Learning Tree'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 as described in this Proxy Statement. If any other
matter properly comes before the meeting, however, the proxy holders are
authorized to vote on that matter or matters in accordance with their best
judgments.
ANNUAL REPORT TO SHAREHOLDERS
Learning Tree's Annual Report for the fiscal year ended September 30, 2001
is being mailed to Shareholders along with this Proxy Statement. Learning
Tree's Annual Report is not to be incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933 or under the Securities Exchange Act of 1934, except
to the extent that Learning Tree specifically incorporates this information by
reference, and shall not otherwise be deemed soliciting material or filed under
such acts.
By Order of the Board of Directors,
/s/ DAVID C. COLLINS
David C. Collins, Ph.D.
January 24, 2002 Chairman of the Board and Chief Executive Officer
17
EXHIBIT A
AMENDED AND RESTATED
LEARNING TREE INTERNATIONAL, INC.
1999 STOCK OPTION PLAN
This 1999 Stock Option Plan is hereby adopted by the Company (capitalized
terms not otherwise defined are defined in the final section of this Plan).
1. Purposes of the Plan. The purposes of this Plan are:
--------------------
. to attract and retain the best available personnel,
. to provide additional incentive to Employees, Directors and Consultants,
and
. to promote the success of the Company's business.
2. Stock Subject to the Plan. Subject to the provisions of Section 10, options
-------------------------
covering no more than two million five hundred thousand (2,500,000) Shares of
Common Stock may be granted under the Plan effective after January 1, 2002.
This limitation does not apply to options granted under the Plan effective prior
to that date, and the two million five hundred thousand share limitation will be
increased to the extent that any of those previously granted options terminates
or is surrendered pursuant to an Option Exchange Program without having been
exercised. The Shares may be authorized, but unissued, or reacquired Common
Stock. Any unpurchased Shares subject to an Option which terminates or is
surrendered pursuant to an Option Exchange Program shall become available for
future Option grants unless the Plan has terminated. However, any Shares which
the Company re-acquires after issuance pursuant to the exercise of an Option
will not be available for future grant under the Plan.
3. Type of Options; Eligibility. Options granted under the Plan may be either
----------------------------
Incentive Stock Options or Nonstatutory Stock Options, as determined by the
Administrator at the time of grant. Nonstatutory Options may be granted to
Directors, Employees and Consultants; Incentive Stock Options may be granted
only to Employees unless otherwise permitted under the Code. At the time of
grant, the Administrator shall designate whether the Option is an Incentive
Stock Option or a Nonstatutory Stock Option. In the absence of a written
designation, an Option shall be a Nonstatutory Stock Option. In addition,
despite any such designation, any Options which cause the aggregate Fair Market
Value of Shares under incentive stock options granted by the Company, or any
Parent or Subsidiary to a single Optionee (under all plans of the Company and of
any Parent or Subsidiary) to exceed $100,000 will be deemed Nonstatutory Stock
Options. For purposes of this Section 3, the Fair Market Value of the Shares
shall be determined as of the time of grant. Optionees may be granted more than
one Option.
4. Option Exercise Price and Consideration. When any Option is granted, the
---------------------------------------
Administrator shall determine:
4.1. Number of Shares. The number of Shares subject to the Option, except
----------------
that no Officer shall be granted Options to purchase more than 250,000 Shares in
any fiscal year of the Company unless permitted by the requirements for
"performance-based compensation" within the meaning of Section 162(m).
4.2. Exercise Price. The per share exercise price for the Optioned
--------------
Shares, which may be more or less than the Fair Market Value, except no
Incentive Stock Option may be granted with an exercise price per share less than
100% (110% in the case of an Option granted to a Significant Owner) of Fair
Market Value, and no Nonstatutory Stock Option may be granted with an exercise
price per share less than 75% of Fair Market Value.
4.3. Waiting Period and Exercise Dates. The period within which the
---------------------------------
Option may be exercised and any conditions which must be satisfied before the
Option may be exercised. No Option may have an exercise period which extends
more than ten years (five years in the case of any Incentive Stock Option
granted to a Significant Owner) from the date of grant.
18
4.4. Other Terms and Conditions. Other terms and conditions including,
--------------------------
but are not limited to, performance criteria, any vesting acceleration or waiver
of forfeiture restrictions, and any restriction or limitation regarding any
Option or the Shares. The Shares received on exercise of any Option may be made
subject to a shareholder's agreement or other restriction or option.
5. Exercise of Option.
------------------
5.1. Procedure for Exercise. An Option shall be deemed exercised when the
----------------------
Company receives all of the following (which may be waived by the Administrator
as permitted by Applicable Laws): (i) written notice of exercise (in accordance
with the Option Agreement) from the person entitled to exercise the Option, (ii)
full payment for the Shares with respect to which the Option is exercised, and
(iii) payment of any required withholding taxes.
5.2. No Fractional Shares. An Option may not be exercised for a fraction
--------------------
of a Share.
5.3. Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration and method of payment for exercise of an
Option. (In the case of an Incentive Stock Option, the Administrator must
determine the acceptable form of consideration at the time of grant.) To the
extent permitted by the Administrator, consideration may consist of:
. cash;
. a promissory note made by the Optionee in favor of the Company;
. other Shares which (A) in the case of Shares acquired upon exercise of
an option, have been owned by the Optionee for more than six months on
the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
. any combination of the foregoing methods of payment; or
. such other consideration to the extent permitted by Applicable Laws.
5.4. Effect on Option. Exercise of an Option in any manner shall decrease
----------------
the number of Shares thereafter available by the number of Shares as to which
the Option is exercised, both for purposes of the Plan and for sale under the
Option.
6. Issuance of Shares.
------------------
6.1. Name for Registration. Shares issued upon exercise of an Option
---------------------
shall be issued in the name of the Optionee or, if requested by the Optionee, in
the name of the Optionee and his or her spouse.
6.2. Legal Compliance. The Company is not obligated to issue any Shares
----------------
pursuant to the exercise of an Option unless counsel for the Company is
satisfied that the exercise of such Option and the issuance and delivery of such
Shares complies with all relevant provisions of Applicable Law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, the requirements of any stock
exchange or quotation system upon which the Shares may then be listed or quoted,
and any other requirements of law or of any regulatory bodies having
jurisdiction over such issuance and delivery. The inability of the Company to
obtain authority from any regulatory body deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares.
6.3. Investment Representations. As a condition to the exercise of an
--------------------------
Option, the Company may require that the person exercising such Option represent
and warrant that the Shares are being purchased only for investment and without
any present intention to sell, transfer or distribute such Shares.
6.4. Rights as Stockholder. Until the stock certificate evidencing Shares
---------------------
is actually issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), the Optionee
will have no right to vote or receive dividends or any other rights as a
shareholder
19
with respect to the Optioned Stock, despite any exercise of the Option. Subject
to this Section 6, the Company shall issue (or cause to be issued) such stock
certificate promptly after an Option is exercised. Except as provided in Section
10, no adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is actually issued.
7. Withholding Taxes. Upon (i) the disposition by an Optionee of Shares
-----------------
acquired pursuant to the exercise of an Incentive Stock Option within two years
of the granting of such Incentive Stock Option or within one year after exercise
of such Incentive Stock Option, or (ii) the exercise of a Nonstatutory Stock
Option, the Company shall have the right to require the Optionee to pay the
Company the amount of any taxes (whether of the United States, any foreign
jurisdictions or any subdivision thereof) which the Company may be required to
withhold with respect to such Shares.
8. Non-Transferability of Options.
------------------------------
8.1. No Transfer. No Option may be sold, pledged, assigned, hypothecated,
-----------
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution or may be exercised, during the lifetime of the
Optionee, by anyone except the Optionee, except that the Administrator may, if
it wishes to do so, allow the spouse of the Optionee to hold and/or exercise the
Option pursuant to a qualified domestic relations order as defined by the Code
or Title I of ERISA.
8.2. Designation of Beneficiary. An Optionee may file a written
--------------------------
designation of a beneficiary who is to receive any Options that remain
unexercised in the event of the Optionee's death. If an Optionee is married and
the designated beneficiary is not his or her spouse, spousal consent shall be
required for such designation to be effective. The Optionee may change such
designation of beneficiary at any time by written notice, subject to the above
spousal consent conditions.
8.3. Effect of No Designation. If an Optionee dies and there is no living
------------------------
beneficiary validly designated under the Plan, the Option may be exercised on
behalf of the Optionee to the extent permitted hereunder (i) by the executor or
administrator of the estate of the Optionee, or (ii) if the Company does not
know that an executor or administrator has been appointed, by the spouse or to
any one or more dependents or relatives of the participant as determined by the
Company, or (iii) if no spouse, dependent or relative is known to the Company,
then by such other person as the Company may designate.
9. Accelerated Termination of Option Term.
--------------------------------------
9.1. Termination For Cause. Notwithstanding anything to the contrary
---------------------
contained in the Plan, no Optionee may exercise any Option (whether otherwise
vested or not) at any time following a Termination Event with respect to such
Optionee.
9.2. Termination Without Cause. If an Optionee's Continuous Relationship
-------------------------
terminates (other than as a result of a Termination Event), his or her Option
may be exercised only to the extent that the Optionee was entitled to exercise
it on the date of termination, and only within such period of time as is
determined by the Administrator, and in no event later than the expiration of
the term of such Option as set forth in the Option Agreement. In the case of an
Incentive Stock Option, the Administrator shall determine such period of time
(in no event to exceed ninety (90) days from the date of termination, except
where the termination occurs as a result of death or disability, where the
maximum period shall be twelve months) at the time that the Option is granted.
20
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset
------------------------------------------------------------------------
Sale.
-----
10.1. Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, if the outstanding shares of Common Stock are
increased, decreased, changed into or exchanged for a different number or kind
of shares of securities of the Company through reorganization, recapitalization,
reclassification, stock combination, stock dividend, stock split, reverse stock
split or other similar transaction, an appropriate and proportionate adjustment
shall be made in the maximum number and kind of shares as to which Options may
be granted under this Plan. A corresponding adjustment changing the number or
kind of shares allocated to unexercised Options which have been granted prior to
any such change, shall likewise be made. Any such adjustment in the outstanding
Options shall be made without change in the aggregate purchase price applicable
to the unexercised portion of the Options but with a corresponding adjustment in
the price for each share or other unit of any security covered by the Option.
Such adjustment shall be made by the Administrator, whose determination in that
respect shall be final, binding and conclusive.
10.2. Dissolution or Liquidation. Any Option to the extent not previously
--------------------------
exercised will terminate immediately prior to the consummation of any
dissolution or liquidation of the Company. The Administrator may, in the
exercise of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Administrator and give each Optionee the
right to exercise his or her Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable.
10.3. Merger or Asset Sale. In the event of a merger of the Company with or
--------------------
into another corporation, or the sale of substantially all of the assets of the
Company, the Administrator, may, in its discretion, do one or more of the
following: (i) shorten the period during which Options are exercisable (provided
they remain exercisable for at least 30 days after the date the notice is
given); (ii) accelerate any vesting schedule to which an Option is subject;
(iii) arrange to have the surviving or successor entity grant replacement
options with appropriate adjustments in the number and kind of securities and
option prices; or (iv) cancel any Option upon payment to the Optionee of cash
equal to the excess of the Fair Market Value of the number of Shares as to which
the Option is then exercisable (at the effective time of the merger,
reorganization, sale of other event including to the extent the exercise has
been accelerated as contemplated in clause (ii) above) over the aggregate
exercise price with respect to such Shares. The Administrator may also provide
for one or more of the foregoing alternatives in any particular Option
Agreement.
11. Shareholder Approval. This Plan is subject to approval by the shareholders
--------------------
of the Company in compliance with Applicable Law within twelve (12) months after
the date the Plan is adopted by the Board. Options may be granted but not
exercised prior to shareholder approval of the Plan. If stockholder approval is
not obtained within the applicable period, any Options granted shall terminate
retroactively as of the date they were granted.
12. Administration of the Plan.
--------------------------
12.1. Procedure.
---------
12.1.1. Administrator. The Plan shall be administered by (A) the
-------------
Board or (B) a committee designated by the Board which is constituted to satisfy
Applicable Laws. To the extent it is involved in such matters, any Committee
must comply with any applicable requirements (i) of Rule 16b-3 for exempt
acquisitions with respect to Option grants to Officers or Directors and (ii) for
the Options to qualify as "performance-based compensation" under Section 162(m)
with respect to Option grants "covered employees" within the meaning of Section
162(m). If permitted by the applicable rules, the Administrator may be different
bodies with respect to Directors, Officers who are not Directors, and Employees
who are neither Directors nor Officers.
21
12.1.2 Regulation of Committee. Once appointed, any Committee shall
-----------------------
serve in its designated capacity until otherwise directed by the Board. The
Board may increase the size of the Committee and appoint additional members,
remove members (with or without cause) and substitute new members, fill
vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by
Applicable Laws, and to the extent relevant, the rules for qualification as
"performance-based compensation" under Section 162(m) and/or exempt acquisitions
under Rule 16b-3.
12.2. Powers of the Administrator. Subject to the provisions of the Plan
---------------------------
and, in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority in its
discretion to take any action provided in this Plan, including without
limitation:
. to determine the Optionee, exercise price, number of shares of Common
Stock to be covered by, and terms and conditions of each Option granted
hereunder;
. to approve forms of Option Agreement;
. to modify or amend any Option (subject to Section 13), including reducing
the exercise price of any Option to the then current Fair Market Value if
the Fair Market Value of the Common Stock covered by such Option shall
have declined since the date the Option was granted;
. to authorize any person to execute any instrument required to effect the
grant of an Option on behalf of the Company;
. to institute an Option Exchange Program;
. to construe and interpret the terms of the Plan;
. to prescribe, amend and rescind rules and regulations relating to the
Plan; and
. to make all other determinations deemed necessary or advisable for
administering the Plan.
12.3. Effect of Administrator's Decision. The Administrator's decisions,
----------------------------------
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options.
13. Amendment and Termination of the Plan.
-------------------------------------
13.1. Amendment and Termination. This Plan shall become effective upon its
-------------------------
adoption by the Board and continue in effect for a term of ten (10) years,
except that the Board may at any time amend, alter or suspend or terminate the
Plan.
13.2. Shareholder Approval. The Company shall be required to obtain
--------------------
shareholder approval of any Plan amendment only to the extent necessary and
desirable to comply with Rule 16b-3, with Section 422 or 162(m) of the Code or
with any Applicable Laws, including the requirements of any exchange or
quotation system on which the Common Stock is listed or quoted. Such
shareholder approval, if required, shall be obtained in such a manner and to
such a degree as is required by Applicable Law. If the Company purports to
grant Options covering more than the number of Shares which may be issued under
the Plan without additional shareholder approval, such Option shall be void (and
the Optionee will have no right against the Company) with respect to such excess
Optioned Stock, unless shareholder approval of an amendment sufficiently
increasing the number of Shares subject to the Plan is timely obtained in
accordance with this Section 13.2.
13.3. Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of an Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator. Any
such agreement must be in writing and signed by the Optionee and the Company.
22
14. Rights of Participants and Beneficiaries. The Company shall pay all amounts
----------------------------------------
payable hereunder only to the Optionee or beneficiaries entitled thereto
pursuant to the Plan. The Company shall not be liable for the debts, contracts
or engagements of any Optionee or his or her beneficiaries, and rights to Shares
or cash payments under the Plan may not be taken in execution by attachment or
garnishment, or by any other legal or equitable proceeding, while in the hands
of the Company.
15. Reservation of Shares. During the term of this Plan, the Company will
---------------------
reserve a sufficient number of Shares to satisfy the requirements of the Plan.
16. No Right to Continued Employment. Neither the Plan nor any Option shall
--------------------------------
confer upon an Optionee any right with respect to continuing the Optionee's
employment or consulting relationship with the Company, nor shall they interfere
in any way with the Optionee's right or the Company's right to terminate such
employment or consulting relationship at any time, with or without cause.
17. Governing Law. The Plan shall be governed by, and construed in accordance
-------------
with the laws of the State of Delaware (without giving effect to conflicts of
law principles).
18. Definitions. As used herein, the following definitions shall apply:
-----------
"Administrator" means the Board or any Committee administering the Plan in
accordance with Section 12.
"Applicable Laws" means the legal requirements relating to the administration of
stock option plans under state corporate and securities laws and the Code.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986 and related regulations, as
amended.
"Committee" means any Committee appointed by the Board in accordance with
Section 12.
"Common Stock" means the Common Stock, $.0001 par value, of the Company.
"Company" means Learning Tree International, Inc.
"Consultant" means any person, including an advisor, engaged by the Company, a
Parent or Subsidiary to render services and who is compensated for such
services.
"Continuous Relationship" means that the employment or consulting relationship
or directorship is not interrupted or terminated by the Company, any Parent
or Subsidiary. Continuous Relationship shall not be considered interrupted
in the case of: (i) any leave of absence approved by the Board, including
sick leave, military leave, or any other personal leave; provided, however,
that for purposes of Incentive Stock Options, any such leave may not exceed
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract (including certain Company polices) or statute; or
(ii) transfers between locations of the Company or between the Company, its
Parent, its Subsidiaries or its successor. In the case of a consultant,
the manner of determining the duration of the "Continuous Relationship" may
be set out in the Option Agreement, which will then control.
"Director" means a member of the Board.
"Disability" means total and permanent disability as defined in Section 22(e)(3)
of the Code.
"Employee" means any person, including Officers and Directors, employed by the
Company or any Parent or Subsidiary. Neither service as a Director nor
payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
23
"Fair Market Value" means, as of any date, the value of Common Stock determined
as follows:
(i) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation, the National Market
of the National Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System, the Fair Market Value of a Share of Common Stock shall
be the closing sales price for such stock (or the closing bid, if no sales
are reported) as quoted on such system or exchange (or the exchange with
the greatest volume of trading in Common Stock) on the last market trading
day prior to the day of determination, as reported in the Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not on the National
Market thereof) or is regularly quoted by recognized securities dealers but
selling prices are not reported, the Fair Market Value of a Share of Common
Stock shall be the mean between the high bid and low asked prices for the
Common Stock on the last market trading day prior to the day of
determination, as reported in the Wall Street journal or such other source
as the Administrator deems reliable;
In the absence of any established market for the Common Stock, the Fair Market
Value shall be determined in good faith by the Administrator.
"Incentive Stock Option" means an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code.
"Nonstatutory Stock Option" means an Option not intended to qualify as an
---
Incentive Stock Option.
"Officer" means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.
"Option" means a stock option granted pursuant to the Plan.
"Option Agreement" means a written agreement between the Company and an Optionee
evidencing the terms and conditions of an individual Option grant. Every
Option Agreement is subject to the terms and conditions of the Plan.
"Option Exchange Program" means a plan under which outstanding options are
surrendered in exchange for options with a lower exercise price.
"Optioned Stock" means the Common Stock subject to an Option.
"Optionee" means an Employee, Director or Consultant who holds an outstanding
Option.
"Parent" means a "parent corporation" of the Company, whether now or hereafter
existing, as defined in Section 424(e) of the Code.
"Plan" means this 1999 Stock Option Plan.
"Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-
3, as in effect when discretion is being exercised with respect to the
Plan.
"Section 162(m)" means Section 162(m) of the Code.
"Share" means a share of the Common Stock, as adjusted in accordance with
Section 10 of the Plan.
"Significant Owner" means an Employee who, at the time an Incentive Stock Option
is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or
Subsidiary.
24
"Subsidiary" means a "subsidiary corporation" of the Company, whether now or
hereafter existing, as defined in Section 424(f) of the Code.
"Termination Event" means the determination of the Company that either of the
following has occurred: (i) any use or disclosure by an Optionee of
confidential information or trade secrets of the Company or any Parent or
Subsidiary in violation of any confidentiality, non-competition or
nondisclosure agreement by which the Optionee is bound, or (ii) the
termination of Optionee's Continuous Relationship for cause as defined
pursuant to applicable law, as a result of a breach of Optionee's
employment or consulting agreement, theft, fraud or embezzlement, or any
disclosure or use of confidential information or trade secrets described in
part (i) of this paragraph.
25
EXHIBIT B
Learning Tree International, Inc.
Audit Committee Charter
November 6, 2001
Statement of Policy
- -------------------
The Audit Committee of the Board of Directors shall assist the directors in
fulfilling their financial oversight responsibilities. Its primary function
shall be to review the financial reporting process, the system of internal
controls, the audit process and the Company's process for monitoring compliance
with laws and regulations.
To assure the appropriate division of labor in corporate governance, the Audit
Committee must draw a line between its oversight role and management's role in
managing the affairs of the Company. The Audit Committee is intended to
oversee, but not replace, management's own efforts. Accordingly, the Audit
Committee will initiate reviews of the Company's financial reporting processes
and systems, but it is the responsibility of management and the outside auditors
to bring to the attention of the Audit Committee any failures, irregularities,
or other problems within those processes and systems that may arise from time to
time.
In performing its duties, the Audit Committee will seek to maintain free and
open communication between the directors, the independent auditors, the internal
auditors and the financial management of the Company. The Audit Committee is
intended to provide an independent and, if necessary, confidential forum in
which interested parties can freely discuss information and concerns.
Organization and Meetings
- -------------------------
The Audit Committee shall be comprised of at least three directors. If at any
time there are fewer than three directors, such lesser number will constitute
the Audit Committee until the Board of Directors appoints a successor or
successors. The members of the Audit Committee shall designate a Chair by
majority vote of the full Committee membership.
Except as specifically determined by the Board for good reason, each director
shall be an independent director, and free from any relationship that, in the
opinion of the Board, would interfere with the exercise of his or her
independent judgment as a member of the Audit committee. The term "independent"
shall have the meaning contained in Rule 4200(a)(13) of the NASD Manual and
Notices to Members. For purposes of convenience only, a copy of the rule as it
exists on the date hereof is attached to this document.
All Audit Committee members will have the ability to read and understand
financial statements and at least one member will have or have had prior
experience in accounting or related financial management.
The Audit Committee will meet at least two times a year, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management and the independent
auditors in separate
26
sessions to discuss any matters that the Audit Committee or either of these
groups believe should be discussed privately.
Responsibilities
- ----------------
In carrying out its responsibilities, the Audit Committee believes its policies
and procedures should remain flexible in order to be able to best react to
changing conditions, and to help ensure that the corporate accounting and
reporting practices of the Company meet or exceed all applicable legal and
business standards.
In carrying out these responsibilities, the Audit Committee will:
. Obtain the approval of the full Board of Directors of this Charter, and
review this charter at least annually or as conditions dictate.
. Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the Company and its divisions
and subsidiaries, considering independence and effectiveness and approve
the fees and other compensation to be paid to the independent accountants.
. On an annual basis, obtain from the independent auditors a written
communication delineating all their relationships and professional
services, as required by Independence Standards Board Standard No. 1,
Independence Discussion with Audit Committees. In addition, review with the
independent auditors the nature and scope of any disclosed relationships or
professional services and take, or recommend that the Board of Directors
take, appropriate action to ensure the continuing independence of the
auditors.
. Consider whether the provision of non-audit services, if any, by the
independent auditors is compatible with maintaining the independent
auditors' independence. In making a business judgment about particular
non-audit services, the Audit Committee will consider the guidelines
contained in Appendix A to this document.
. Require pre-approval by the full Audit Committee for non-audit services,
the fees for which are estimated by the independent auditors to equal or
exceed $50,000. Management will notify at least the chairperson of the
Audit Committee of any proposed non-audit services which are estimated by
the independent auditors to cost less than $50,000. The chairperson will
then make a business judgment, using the guidelines contained in Appendix
A, as to whether the independent auditors' provision of the non-audit
service would be compatible with maintaining their independence. The
chairperson may, in his or her discretion, also bring the question to the
full Audit Committee for determination.
. Have a clear understanding with the independent auditors that they are
ultimately accountable to the Board of Directors and the Audit Committee,
as the shareholders' representatives, and that the Board of Directors and
the Audit Committee have the ultimate authority in deciding to engage,
evaluate and, if appropriate, terminate their services.
. Meet with the independent auditors and financial management of the Company
to review the scope of the proposed audit, including the timing of the
audit, the
27
procedures to be utilized and the adequacy of the independent auditors'
compensation. At the conclusion of the audit process, review findings with
the independent auditors.
. Review the performance of the Company's financial and accounting personnel
with the independent auditors, as well as the adequacy and effectiveness of
the accounting and financial controls of the Company. Elicit any
recommendations for the improvement of such internal controls or particular
areas where new or more detailed controls or procedures are desirable.
. Review communications received by the Company from regulators and other
legal and regulatory matters that may have a material effect on the
financial statements or on the Company's compliance policies, as provided
by management of the Company.
. Inquire of management and the independent auditors about significant areas
of risk or exposure and assess the steps management of the Company has
taken to minimize such risks.
. Review with financial management and the independent auditors (i) the
financial statements contained in the annual report to shareholders to
determine that the independent auditors are satisfied with the disclosure
and content of the financial statements to be presented to the
shareholders; (ii) significant financial reporting issues and practices,
including changes in or adoptions of accounting principles and disclosure
practices, review significant period-end adjustments and any other matters
required to be communicated to the Audit Committee by the auditors; and
(iii) the quality, not just acceptability, of accounting principles and the
clarity of the financial disclosure practices used or proposed to be used
and particularly, the degree of aggressiveness or conservatism of the
Company's accounting principles and underlying estimates and other
significant decisions made in preparing the financial statements.
. Management of the Company and the independent auditors will review with the
Audit Committee Chair the interim financial reports before they are filed
with the Securities and Exchange Commission or other regulators.
. Provide an opportunity, at least annually, for the independent auditors and
management of the Company to meet separately with the Audit Committee
without members of the other group present. Among the items to be discussed
in these meetings are the independent auditors' evaluation of the Company's
financial accounting and auditing personnel and the cooperation that the
independent auditors received during the course of the audit.
. Review accounting and financial human resources and succession planning
within the Company.
. Report the results of the annual audit to the Board of Directors and, if
requested by the Board, invite the independent auditors to attend the full
Board of Directors' meeting to assist in reporting the results of the
annual audit or to answer the directors' questions.
. Submit the minutes of all meetings of the Audit Committee to, or discuss
the matters discussed at each committee meeting with, the Board of
Directors.
28
. Investigate any matter brought to its attention within the scope of its
duties with the power to retain outside counsel, accountants, or others for
this purpose to assist it in its investigation.
. Confirm in writing to the NASD annually or with respect to any changes on
the Audit Committee regarding independence, financial capabilities and the
annual review and reassessment of the Audit Committee Charter.
. Affirm in the Company's Proxy Statement that the Committee has fulfilled
its responsibilities during the year in compliance with the Charter. The
Audit Committee Charter will be included in the Proxy Statement every three
years or when significant amendments are made to it.
. Consider such other matters in relation to the financial affairs of the
Company and its accounts, and in relation to the external audit of the
Company, as the Audit Committee may, in its discretion, determine to be
advisable.
Approved by the Board of Directors and the Audit Committee as of November 6,
2001.
_______________________________ __________________________________
Chairman, Audit Committee Chairman of the Board of Directors
29
APPENDIX A
To Audit Committee Charter
Some factors which may be considered by the Audit Committee include:
1. Whether the service facilitates the performance of the audit, improves
the Company's financial reporting process, or is otherwise in the interest of
the Company and its shareholders.
2. Whether the service is being performed principally for the Audit
Committee.
3. The effects of the service, if any, on audit effectiveness or on the
quality and timeliness of the Company's financial reporting process.
4. Whether the service would be performed by specialists who ordinarily
also provide recurring audit support.
5. Whether the service would be performed by audit personnel and, if so,
whether it will enhance their knowledge of the Company's business and
operations.
6. Whether the role of those performing the service would be inconsistent
with the auditor's role.
7. Whether the audit firm's personnel would be assuming a management role
or creating a mutuality of interest with management.
8. Whether the auditors, in effect, would be auditing their own numbers.
9. Whether the project must be started and completed very quickly.
10. The size of the fee(s) for the non-audit service(s).
PROXY
LEARNING TREE INTERNATIONAL, INC.
Proxy for Annual Meeting of Stockholders to be held March 4, 2002
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders of Learning Tree International, Inc. ("Learning Tree") dated
January 25, 2002, 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 Monday, March 4, 2002, 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.
The Board of Directors of Learning Tree solicits this proxy, 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.
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
LEARNING TREE INTERNATIONAL, INC.
(1)Vote on Directors
Election of Two (2) Class I Directors: For Withhold For All To Withhold Authority to vote for any
All All Except: nominee, mark "For All Except" and write
the nominee's number on the line below:
_________________________________________
NOMINEES: 01) W. Mathew Juechter
02) Howard A. Bain III
(2) Amendment of the 1999 Stock Option Plan: For Against
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.
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 other such matters as may come before the Annual
Meeting.
____________________________________ ________________________________________
Signature (PLEASE SIGN) Date Signature (Joint Owners) Date
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