SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. _______)
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 Section 240.14a-11(c) or
Section 240.14a-12
The American Education Corporation
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement
if Other Than the Registrant)
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:
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2) Aggregate number of securities to which transaction
applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid.
[ ] Fee paid previously with preliminary material.
[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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THE AMERICAN EDUCATION CORPORATION
7506 North Broadway Extension, Suite 505
Oklahoma City, Oklahoma 73116
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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To Be Held Friday, May 29, 1998
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To the Shareholders of The American Education Corporation:
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The 1998 Annual Meeting of Shareholders of The American
Education Corporation ("AEC" or the "Company") will be held on May
29, 1998 at 10 A.M. (Oklahoma City time), at the Waterford Hotel
located at 6300 Waterford Boulevard, Oklahoma City, Oklahoma, for the
following purposes:
1. To elect four directors to serve until their successors
are duly elected and qualified;
2. To amend the Company's Articles of Incorporation to
increase the Company's authorized common stock from 15,000,000
shares to 30,000,000 shares;
3. To ratify the selection of Steakley, Gilbert & Bozalis,
P.C. as the independent accountants for the Company for the fiscal
year ending December 31, 1998;
4. To approve the Company's Directors' Stock Option Plan;
5. To approve the Company's Stock Option Plan for employees;
and
6. To transact such other business as may properly come
before the meeting or any adjournment thereof.
The names of the nominees for director are set forth in the
accompanying Proxy Statement.
The close of business on April 20, 1998 (the "Record Date")
has been fixed by the Board of Directors as the record date for the
determination of the holders entitled to notice of and to vote at
the Annual Meeting. Only holders of record of the Company's common
stock as of the close of business on the Record Date will be
entitled to notice of and to vote at the Annual Meeting and any
adjournment thereof.
A complete list of shareholders of record entitled to vote at
the Annual Meeting will be open and available for examination by
any shareholder of the Company during ordinary business hours at
the Company's principal executive office at 7506 North Broadway
Extension, Suite 505, Oklahoma City, Oklahoma 73116, from April
24, 1998 to May 29, 1998 and at the time and place of the Annual
Meeting.
A copy of the Company's Annual Report for 1997, which contains
audited financial statements and other information of interest with
respect to the Company and its shareholders, is enclosed.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND
THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND
MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE TO ASSURE REPRESENTATION
OF YOUR SHARES. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED
STATES. SHOULD YOU ATTEND, YOU MAY, IF YOU WISH, WITHDRAW YOUR
PROXY AND VOTE YOUR SHARES IN PERSON. THE PROXY MUST BE SIGNED AND
RETURN IN ORDER TO BE COUNTED.
By Order of the Board of Directors
/s/Jeffrey E. Butler
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President and Chief Executive Officer
Oklahoma City, Oklahoma
April 20, 1998
THE AMERICAN EDUCATION CORPORATION
7506 North Broadway Extension, Suite 505
Oklahoma City, Oklahoma 73116
PROXY STATEMENT
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For Annual Meeting of Shareholders
To Be Held Friday, May 29, 1998
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Introduction
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This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of The American
Education Corporation ( "AEC" or the "Company") to be voted at the
1998 Annual Meeting of Shareholders of the Company on May 29, 1998,
at 10 A.M. (Oklahoma City time), which meeting will be held at the
Waterford Hotel located at 6300 Waterford Boulevard, Oklahoma City,
Oklahoma. Information in this Proxy Statement is as of April 20,
1998 unless otherwise stated. The approximate date on which the
Proxy Statement and enclosed form of proxy have been mailed to
shareholders is April 27, 1998.
The Company will bear the cost of the solicitation of proxies,
including the charges and expenses of forwarding solicitation
materials to beneficial owners of the Company's common stock. The
Company has arranged for American Securities Transfer & Trust to
serve as its agent to mail the proxy materials and coordinate and
oversee the return of proxy cards. The anticipated cost of the
services of American Securities Transfer & Trust total
approximately $9,000. In addition to soliciting proxies by mail,
directors, executive officers and employees of the Company, without
receiving extra compensation therefor, may solicit proxies by
telephone, by telegram, by telefacsimile or in person.
Voting Rights and Outstanding Shares
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Only holders of record of Common Stock at the close of
business on April 20, 1998 (the "Record Date") will be entitled to
vote at the Annual Meeting. On the Record Date, there were
12,399,079 shares of common stock, par value $0.025 per share (the
"Common Stock"), issued and outstanding. Each share of Common
Stock is entitled to one vote on all matters on which shareholders
may vote. There is no cumulative voting in the election of
directors. Shares of Common Stock are the only securities of the
Company entitled to vote at the Annual Meeting.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the inspectors of election appointed for the Annual
Meeting. The inspectors of election will determine whether or not
a quorum is present. The presence in person or by proxy of the
holders of one-third of the outstanding shares of Common Stock
entitled to vote will constitute a quorum for the transaction of
business at the Annual Meeting. As to each matter submitted to the
shareholders at the Annual Meeting, the inspectors of election will
treat abstentions as shares that are present and entitled to vote
for purposes of determining the presence of a quorum
Mr. Garber, who beneficially owns approximately 49% of the
shares of Common Stock of the Company, has advised the Company that
he intends to vote for each of the nominees named herein, as well
as for all of the other proposals described below.
Revocability of Proxies
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Any shareholder giving a proxy has the power to revoke the
proxy at any time before it is voted. It may be revoked by: (i)
filing with American Securities Transfer & Trust in its capacity as
transfer agent for the Company's Common Stock ("Transfer Agent")
before the Annual Meeting, a written notice of revocation bearing
a later date than the proxy; (ii) duly executing a subsequent proxy
relating to the same shares of Common Stock and delivering it to
the Transfer Agent before the Annual Meeting; or (iii) attending
the Annual Meeting and voting in person (although attendance at the
Annual Meeting will not in and of itself constitute a revocation of
a proxy). Any written notice revoking a proxy should be sent to
American Securities Transfer & Trust, Attention: Proxy Department
938 Quail Street, Suite 101, Lakewood, Colorado 80215-5513.
Summary of Proposals
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Shareholders will be asked to vote upon the following
proposals at the Annual Meeting:
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1. Election of the following four (4) persons to
the Board of Directors: Jeffrey E. Butler,
Monty C. McCurry, Newton Fink, and Stephen E.
Prust. General information concerning these
persons is found beginning on page 9 of this
Proxy Statement.
2. Approval of an increase of the Company's authorized
Common Stock from 15,000,000 shares to 30,000,000
shares. This proposal is described on page 10.
3. Ratification of the selection of Steakley, Gilbert
& Bozalis, P.C. as independent accountants for the
Company for 1998. This proposal is described on
page 12 of this Proxy Statement.
4. Approval of the Company's Directors' Stock Option
Plan. This proposal is described on pages 13
through 16 of this Proxy Statement.
5. Approval of the Company's Stock Option Plan for
employees. This proposal is described on pages 16
through 21 of this Proxy Statement.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
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The names, ages (as of April 1, 1998), positions with the
Company and business experience over the past five years of each of
the Board of Directors nominees is set forth below (the four
current directors of the Company are the same four persons
nominated to serve on the Board of Directors). Each director has
served continuously with the Company since his or her first
election as indicated below. There are no family relationships
among the directors, executive officers, and Board of Directors
nominees.
Name Age Current Position Director
with Company Since
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Jeffrey E. Butler 56 Chief Executive Officer, 1989
President, Chief Financial
Officer, and Chairman of
the Board of Directors
Monty C. McCurry 52 Director 1989
Newton Fink 61 Director 1991
Stephen E. Prust 53 Director 1992
Jeffrey E. Butler became a director of the Company in August
1989 and was elected Chief Executive Officer and President of the
Company in April 1990. From 1985 to 1990, Mr. Butler was a
management consultant to businesses in the biotechnology, computer
science, software, educational and entertainment video industries.
Mr. Butler served as a director of Video Professor Industries,
Inc., a publicly held corporation, from February 1, 1989 to October
31, 1990. Prior to establishing his management consulting
business, Mr. Butler was the Chief Executive Officer and President
of the Infomed Corporation, which provided computer diagnostic
equipment and management services to hospitals, corporations and
physicians. Prior to 1985, Mr. Butler was employed by Sandoz,
Ltd., Corning, Inc. and Becton Dickinson Corporation in middle and
senior management positions.
Monty C. McCurry was elected to the Board of Directors in
April 1989. Since 1985, Mr. McCurry has been the President of
Executive Resource Management, an executive search firm
headquartered in Aurora, Colorado. From 1969 to 1985, Mr. McCurry
was employed by Paul M. Riggins and Associates, an executive search
firm, where, until his resignation in 1985, he was associate
general manager.
Newton W. Fink, Ed.D. was elected to the Board of Directors in
January 1991. Since 1984, Dr. Fink has been the President of
Computer Instructional Services, Inc., a privately-held corporation
providing computer educational services to individuals, schools,
corporations and institutions. Prior to founding Computer
Instructional Services, Dr. Fink was the Superintendents of Schools
in Fort Lupton, Colorado and Hillside, Illinois. Additionally, he
has been employed as a teacher and a elementary/middle school
principal earlier in his career. Dr. Fink has also published and
lectured extensively on the use of computers in education.
Stephen E. Prust was elected to the Board of Directors in
April 1992. Mr. Prust owns a business that acts as a broker for
retail media products. From 1990 to 1992, Mr. Prust was the
President of AVID Home Entertainment, a division of LIVE
Entertainment, Inc. From 1981 to 1990, Mr. Prust was a consultant
to companies in the entertainment industry. In 1975, Mr. Prust
founded Dominion Music, Inc., a joint venture with K-Tel Records,
Inc. He served as President of Dominion Music until 1981.
Board of Directors Meetings And Committees
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During 1997, the Board of Directors held six meetings of which
four were held by conference call and two by written consent. All
directors attended at least 75% of the meetings of the Board of
Directors. The Board of Directors does not have standing audit,
nominating or compensation committees or committees performing
similar functions.
Director Compensation
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The Company's directors do not receive any cash or other
pecuniary compensation for service on the Board of Directors.
However, the three non-employee members of the Board of Directors
(namely, Monty C. McCurry, Newton Fink and Stephen E. Prust) were
each granted in January 1998 (i) 1,000 shares of Common Stock and
(ii) 10,000 stock options. The options were granted at an exercise
price of $0.75 per share and were fully vested on the date of the
grant. The options were granted pursuant to the Company's
Nonqualified Director Stock Option Plan. No options were granted
to the Company's directors in 1997. The Company will terminate its
Nonqualified Director Stock Option Plan if the Directors' Stock
Option Plan that is being submitted to the shareholders for
approval at the Annual Meeting is approved.
Directors may be reimbursed for certain out-of-pocket expenses
incurred in connection with attendance at Board of Directors
meetings.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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As of the Record Date, there were 12,399,079 shares of Common
Stock issued and outstanding. The following table sets forth
certain information regarding the Company's Common Stock owned by
(i) each shareholder of the Company who is known by the Company to
beneficially own more than 5% of the Company's outstanding voting
securities; (ii) each of the Company's four directors; (iii) the
one executive officer of the Company named in the Summary
Compensation Table; and (iv) all directors and executive officers
of the Company as a group, as of March 31, 1998:
Name and Address of Number of Shares and
Beneficial Owner Nature of Beneficial Percent of
Ownership (1) Common Stock
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John D. and
Clare C. Garber
78-252 Bonanza Drive
Palm Desert, CA 92211 6,205,461(2) 48.6%
Robert M. Schoolfield
5 Pleasant Cove
Austin, Texas 78746 1,536,517(3) 12.4%
Jeffrey E. Butler
4217 Old Farm Road
Oklahoma City, Oklahoma 73120 991,904(4) 7.8%
Monty C. McCurry
2134 South Eagle Court
Aurora, Colorado 80014 119,400(5) 1.0%
Newton Fink
1502 East US 136
Table Grove, Illinois 61482 87,400(6) 0.7%
Stephen E. Prust
9025 East Kenyon
Denver, Colorado 80237 431,768(7) 3.4%
Frederick C. Weiss
Rural Route 2
Box 118
Careyville, Florida 32427 662,897 5.3%
All directors and executive
officers as a group 2,429,055 18.0%
(1) All shares of Common Stock are held directly unless indicated
otherwise.
(2) Includes 5,428,288 shares of Common Stock held by John D.
Garber and Clare C. Garber as trustees of the John D. Garber and
Clare C. Garber Trust (the "Trust") for which Mr. Garber is the
beneficiary; 400,000 shares of Common Stock held by John D. Garber
and Clare C. Garber, as trustees of the John D. Garber and Clare C.
Garber defined benefit plan; 5,702 shares of Common Stock owned
individually; and options for 371,471 shares of Common Stock
exercisable at $0.1346 per share within sixty (60) days of the
Record Date by the Trust upon conversion of long-term debt.
(3) Includes 737,528 shares of Common Stock owned by the
Schoolfield 1994 Charitable Unitrust for which Mr. Schoolfield is
the trustee; 614,607 shares of Common Stock owned by Mr.
Schoolfield individually; and 184,382 shares of Common Stock owned
by the Schoolfield Grandchildren's Trust for which Mr. Schoolfield
is the trustee.
(4) Includes 639,904 shares of Common Stock owned by Mr. Butler
individually and options for 352,000 shares of Common Stock
exercisable at $0.50 per share within sixty (60) days of the Record
Date. Exclusive of 263,919 shares of Common Stock beneficially
owned by Mr. Butler's son, Jeffrey E. Butler, Jr.
(5) Includes options for 80,000 shares of Common Stock, 40,000 of
which are exercisable at $0.20 per share, 30,000 of which are
exercisable at $0.50 per share, and 10,000 of which are exercisable
at $0.75 per share, all within 60 days of the Record Date.
(6) Includes options for 80,000 shares of Common Stock, 70,000 of
which are exercisable at $0.50 per share, and 10,000 of which are
exercisable at $0.75 per share, all within 60 days of the Record
Date.
(7) Includes options for 130,000 shares of Common Stock, 120,000
of which are exercisable at $0.50 per share and 10,000 of which are
exercisable at $0.75 per share, all within 60 days of the Record
Date.
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION
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A biographical description of the Company's Chief Executive
Officer, Jeffrey E. Butler, including age and business experience
during each of the past five years, is set forth above under the
heading "Information Concerning Directors and Nominees." There are
no other executive officers of the Company whose total annual
salary and bonus compensation exceeded $100,000 in 1997. Set forth
below is the applicable table prescribed by the proxy rules of the
Securities and Exchange Commission which present compensation for
the Company's Chief Executive Officer, Jeffrey E. Butler.
Summary Compensation Table
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Annual Compensation Long-Term
Compensation
Awards
Name All
and Other Stock Other
Principal Annual Options Compensation
Position Year Salary Bonus Compensation (Shares)
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Jeffrey E. 1997 $83,878 $0 (1) 0 $0
Butler 1996 $60,570 $0 (1) 0 $0
Chairman 1995 $94,349 $0 (1) 0 $0
of the
Board,
Chief
Executive
Officer,
Chief
Financial
Officer,
and
President
(1) Mr. Butler did not receive any perquisites or other benefits, the
aggregate amount of which exceeded the lesser of $50,000 or 10% of the
total of Mr. Butler's annual salary and bonus.
There were no options or stock appreciation rights (SARs) granted
to Mr. Butler in 1997. Mr. Butler did not exercise any options in
1997.
Employment Agreement
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On or about January 3, 1991, the Company entered into an
Employment Agreement with Jeffrey E. Butler. The Employment Agreement
is automatically renewed annually unless it is terminated by either Mr.
Butler or the Company. The Employment Agreement provides for the
employment of Mr. Butler as President and Chief Executive Officer at
a base salary of not less than $72,000.00 per year. Mr. Butler is also
entitled to a cash bonus of 2.5% of the Company's net pre-tax earnings.
As of July 1, 1997, Mr. Butler's salary was increased to $84,000.00
per year. Mr. Butler is also eligible to participate in such programs
for incentive and/or bonus compensation as may be approved by the Board
of Directors from time to time based on financial objectives set by the
Board of Directors, which include, but are not limited to, increases
from one fiscal year to the next in net revenues, net earnings and
shareholder value. The Employment Agreement contains a provision which
provides that, if Mr. Butler is terminated for any reason other than
a willful act of fraud or the failure to devote the necessary time and
attention in the performance of his duties, he shall receive a
severance payment equal to 50% of his annual salary.
Due to the uncertain financial condition of the Company, Mr.
Butler did not receive his full compensation as established by the
Board of Directors for the years 1991 through 1996. At June 30, 1996,
Mr. Butler was owed deferred compensation of $63,881.00. At June 30,
1996, Mr. Butler converted all the accrued and unpaid compensation owed
to him in the amount of $63,881.00 into 127,762 shares of Common Stock.
As of July 1, 1997, Mr. Butler voluntarily terminated the profit
sharing bonus component of his employment agreement to provide adequate
and reasonable bonuses for all of the employees of the Company. From
January 1, 1997 through June 30, 1997, Mr. Butler accrued $18,019.00
of unpaid compensation, which amount remains due and owing from the
Company.
PROPOSAL 1
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Election of Directors
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The Bylaws of the Company provide that the Board of Directors
shall consist of not less than three persons and, subject to such
limitation, that the number of directors be fixed by resolution of the
Board of Directors. The current number of directors is four (each
director is serving until his successor is duly elected and qualified).
Four directors, constituting the entire Board of Directors of the
Company, are to be elected at the Annual Meeting. Management will
present as nominees and recommend to the shareholders that Jeffrey E.
Butler, Monty C. McCurry, Newton Fink, and Stephen E. Prust, who are
the current directors of the Company, be re-elected to serve on the
Board of Directors until their successors are duly elected and
qualified. Shares represented by the Company proxy will be voted for
the election of Messrs. Butler, McCurry, Fink, and Prust, unless
otherwise indicated on the proxy.
Each holder of Common Stock has the right to vote all of that
shareholder's shares for as many persons as there are directors to be
elected. The nominees receiving the most votes cast will be elected,
so that, since there are four director slots to be filled, the four
nominees receiving the most votes will be elected, even if any one of
such persons did not receive a majority vote. Consequently, any shares
not voted (whether by abstention, broker non-vote or otherwise) have
no impact in the election of directors except to the extent the failure
to vote for an individual results in another individual receiving a
larger number of votes. "Broker non-votes" are proxies with respect
to shares held in record name by brokers or nominees, as to which (i)
instructions have not been received from the beneficial owners or
persons entitled to vote and (ii) the broker or nominee does not have
discretionary voting power under the instrument under which it serves
in such capacity.
Should any of these nominees become unable to serve for any
reason, which is not anticipated, the Board of Directors will designate
substitute nominees, in which event the person named in the enclosed
proxy will vote for the election of such substitute nominee or
nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE NOMINEES NAMED HEREIN.
PROPOSAL 2
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Amendment of the Company's Articles of
Incorporation to Increase Authorized Common Stock
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The Company's Articles of Incorporation, as currently in effect,
provide that the authorized stock shall consist of fifteen million
(15,000,000) shares of Common Stock, $0.025 par value, and 50,000,000
shares of preferred stock, $0.01 par value. On March 27, 1998, the
Company's Board of Directors approved an amendment to the Articles of
Incorporation to increase the number of shares of Common Stock
authorized for issuance by fifteen million (15,000,000) shares to a
total of thirty million (30,000,000) shares. The text of the amendment
to the Articles of Incorporation is set forth on Exhibit "A" attached
hereto. There will be no increase in the authorized shares of
preferred stock.
The proposal to increase the number of authorized shares of
Common Stock to thirty million (30,000,000) shares is being made to
enable the Board of Directors to issue additional shares from time to
time without further shareholder action (except as required by law).
Among the possible purposes for which these additional shares would
be available are the declaration and issuance of stock dividends,
issuance in connection with acquisitions of other companies or
properties, issuance under stock option plans that may be adopted in
the future (such as the Directors' Stock Option Plan and the Stock
Option Plan for employees discussed at Proposals 4 and 5 below),
issuance in public or private offerings to raise additional capital,
and issuance under convertible debenture offerings to raise additional
capital. The Board of Directors has no present intention to issue
shares of Common Stock, other than in connection with the Directors'
and employees stock option plans mentioned above.
The Board of Directors' ability to approve the issuance of the
increased number of authorized shares of Common Stock might discourage
a takeover attempt because the issuance of additional shares could
dilute the voting power of the Common Stock then outstanding. The
Company is not aware of any effort to accumulate Common Stock or to
obtain control of the Company by tender offer or proxy fight, and the
Company has no present intention to use the increased number of shares
of authorized Common Stock for anti-takeover purposes. However, the
Board of Directors retains the right to use the newly authorized shares
for such purpose, and there can be no assurance that the Board of
Directors will not do so. The Board of Directors will, however,
consider any proposal to acquire control of the Company that may arise
in the future in accordance with its fiduciary duties and its judgment
as to the best interests of the shareholders of the Company at that
time.
The affirmative vote of a majority of the outstanding shares of
Common Stock issued and outstanding at the Annual Meeting is required
to approve the amendment to the Articles of Incorporation to increase
the authorized shares of Common Stock. Abstentions and broker non-
votes will have the same effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO
THE ARTICLES OF INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF
COMMON STOCK.
PROPOSAL 3
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Ratification of Selection of Independent Public Accountants
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The independent public accounting firm utilized by the Company
during the years ended December 31, 1996 and 1997 was Steakley, Gilbert
& Bozalis, P.C. Management recommends that the accountants be retained
as the principal public accounting firm to be utilized by the Company
throughout the year ending December 31, 1998. The Company anticipates
that a representative of the accountants will attend the Annual Meeting
for the purpose of responding to appropriate questions. At the Annual
Meeting, a representative of the accountants will be afforded an
opportunity to make a statement if the accountants so desire.
Ratification of the selection of the accountants requires the
affirmative vote of a majority of the outstanding shares of Common
Stock, present in person or by proxy, and entitled to vote at the
Annual Meeting. An abstention will have the same effect as a negative
vote but, because shares of Common Stock held by brokers will not be
considered entitled to vote on matters as to which such brokers
withhold authority, a broker non-vote will not have the same effect as
a negative vote.
Shareholder ratification of the selection of Steakley, Gilbert &
Bozalis, P.C. is not required by the Company's bylaws or otherwise.
The Board of Directors, however, is submitting the selection of
Steakley, Gilbert & Bozalis, P.C. to the shareholders as a matter of
good corporate practice. If the shareholders fail to ratify the
selection, the Board of Directors will reconsider whether or not to
retain such firm. Even if the selection is ratified, the Board of
Directors, in their discretion, may direct the engagement of a
different independent public accounting firm at any time during the
year if it determines that such a change would be in the best interests
of the Company and its shareholders.
Beginning in March 1994 and continuing through November 1996, the
Company experienced a disagreement with its then independent auditing
firm, Lehman Butterwick & Company, P.C., regarding the cost and
timeliness of the Company's audits for the December 31, 1993 fiscal
year. That disagreement was resolved on or about October 31, 1996,
and, upon the withdrawal of Lehman Butterwick & Company, P.C. as the
Company's independent accounting firm, the Company retained Steakley,
Gilbert & Bozalis, P.C. Steakley, Gilbert & Bozalis, P.C. has audited
the Company's financial statements for the years ending December 31,
1994, 1995, 1996 and 1997. There are no disputes with the previous or
current independent accountants regarding matters of accounting or
reporting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
RATIFICATION OF THE SELECTION OF STEAKLEY, GILBERT & BOZALIS, P.C. AS
THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR 1998.
PROPOSAL 4
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Approval of the Directors' Stock Option Plan
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Background
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On March 27, 1998, the Board of Directors of the Company adopted,
subject to shareholder approval, the Directors' Stock Option Plan (the
"Director Plan"). The purpose of the Director Plan is to enable the
Company to attract, retain and motivate independent directors who are
not employees of the Company or its subsidiary ("Outside Directors"),
and to enable such directors to participate in the long-term growth of
the Company by providing for or increasing the propriety interests of
such persons in the Company, thereby assisting the Company in achieving
its long-range goals.
Summary of the Director Plan
- ----------------------------
A copy of the Director Plan is included in this Proxy Statement
as Exhibit "B", and the following description is qualified in its
entirety by reference to the Director Plan.
Administration
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The Director Plan will be administered by the entire Board of
Directors. Under the Director Plan, stock options for a maximum of
100,000 shares of the Company's Common Stock may be granted, such
number of shares being subject to adjustment in the event of a merger,
consolidation, stock dividend, split-up, combination, exchange of
shares, recapitalization, or a change in capitalization with respect
to the shares of Common Stock. The shares of stock issuable under the
Director Plan may consist in whole or in part of unissued shares or
reacquired shares. If a grant expires or is canceled, any shares which
were not issued or fully vested under the grant at the time of
expiration or cancellation will again be available for grant.
Eligibility
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Participation in the Director Plan is limited to directors of the
Company who are not, and were not during the preceding twelve (12)
months, employees of the Company.
During the term of the Director Plan, each Outside Director will
be granted the option to purchase 5,000 shares of Common Stock when he
or she is first elected or appointed to serve on the Board of
Directors. The Director Plan provides that, commencing with calendar
year 1999, and continuing for each calendar year thereafter while the
Director Plan is in effect, each Outside Director is automatically
granted an option to purchase 3,000 shares of Common Stock as of
January 1 of such calendar year (there are currently three Outside
Directors who would be eligible to receive options under the Director
Plan, commencing January 1, 1999).
Terms and Conditions
- --------------------
The exercise price for all stock options granted under the
Director Plan will not be less than 100% of the fair market value of
the underlying Common Stock on the date of the grant. All stock
options granted under the Director Plan will be fully exercisable on
the date of grant. However, no option may be exercisable more than
three (3) years after the date the stock option is granted or, if
earlier, thirty (30) days after the date the Outside Director ceases
to be a director of the Company. Further, if an Outside Director
ceases to be a director because he or she is removed as a director of
the Company for cause (as determined by the Board of Directors or the
shareholders at the time of such removal), then all options held by the
Outside Director will immediately lapse and will no longer be
exercisable.
Stock options granted under the Director Plan cannot be
transferred by an Outside Director. However, if the director dies, his
or her heirs can receive and exercise options for a period of one (1)
year after the director's death.
Except as provided otherwise by the Board of Directors, payment
for shares of Common Stock purchased upon exercise of an option granted
under the Director Plan must be made in full at the time of such
exercise, whether in cash, shares of the Company's Common Stock, the
relinquishment of options to purchase shares of Common Stock, or any
combination of cash, shares of stock, or options.
Amendment of the Director Plan
- ------------------------------
The Board of Directors may at any time amend, suspend or
terminate the Director Plan, subject to the following:
. No amendment may alter or impair the number of shares,
exercise price or duration of any option previously granted
to an Outside Director without the consent of the affected
Outside Director.
. No amendment may become effective without the prior approval
of the shareholders of the Company if such approval would be
required for continued compliance with Rule 16b-3 of the
Securities Exchange Act of 1934.
In addition, the Board of Directors may not, without further
approval of the shareholders of the Company, amend the Plan to:
. Materially increase the total number of shares of Common
Stock which may be made the subject of options to be
granted;
. change the manner of determination of the exercise price;
. extend the maximum period during which options may be
granted or exercised; or
. materially modify the requirements as to eligibility for
participation in the Director Plan.
Term of the Director Plan
- -------------------------
Stock options may not be granted under the Director Plan after
March 31, 2008, but then outstanding stock options may be exercised
beyond such date in accordance with their respective terms.
Federal Income Tax Consequences
- -------------------------------
All stock options granted under the Director Plan will be
"Nonstatutory Options" not entitled to special tax treatment under
Section 422 of the Internal Revenue Code of 1986 (the "Code") (which
is applicable only to "Incentive Stock Options" as defined in that
Section). An Outside Director will not recognize taxable income upon
the grant of a nonstatutory stock option. However, an Outside Director
who exercises a nonstatutory stock option generally will recognize
ordinary income in an amount equal to the excess of (i) the fair market
value of the Common Stock acquired ("Nonstatutory Option stock") on the
exercise date over (ii) the exercise price.
With respect to any Nonstatutory Option, an Outside Director will
have a tax basis equal to the exercise price plus any income recognized
upon the exercise of the option. Upon selling Nonstatutory Option
stock, an Outside Director generally will recognize capital gain or
loss in an amount equal to the excess of the sale price of the
Nonstatutory Option stock over that director's tax basis in such stock.
Whether the gain or loss will be a long-term gain or loss will depend
on how long the director has held the Nonstatutory Option stock after
the date of the exercise.
The grant of a stock option under the Director Plan will have no
tax consequences to the Company. However, the Company generally will
be entitled to a business-expense deduction with respect to any
ordinary income recognized by an Outside Director upon exercise of an
option granted under the Director Plan, provided that, among other
things, the income meets the test of reasonableness, is an ordinary and
necessary business expense, and is not an "excess parachute payment"
within the meaning of Section 280G of the Code.
Vote Required
- -------------
The affirmative vote of a majority of the outstanding shares of
Common Stock present, in person or by proxy, and entitled to vote at
the Annual Meeting, is required to approve the Directors' Stock Option
Plan. An abstention will have the same effect as a negative vote but,
because shares of Common Stock held by brokers will not be considered
entitled to vote on matters as to which such brokers withhold
authority, a broker non-vote will not have the same effect as a
negative vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF
THE DIRECTORS' STOCK OPTION PLAN.
PROPOSAL 5
- ----------
Approval of the Stock
Option Plan for Employees
- -------------------------
Background
- ----------
On March 27, 1998, the Board of Directors of the Company adopted,
subject to shareholder approval, the Stock Option Plan for employees
(the "Option Plan"). The purpose of the Option Plan is to enhance the
performance of key employees of the Company. By encouraging ownership
of the Common Stock of the Company among those employees who have
significant roles in the Company's success, the Option Plan more
closely aligns the interests of the Company's key employees with those
of its shareholders, which the Company believes benefits its
shareholders. Moreover, the Company believes that the Option Plan has
a positive effect on the Company's ability to attract, motivate and
retain employees of outstanding skill and ability.
Summary of the Option Plan
- --------------------------
A copy of the Option Plan is included in this Proxy Statement as
Exhibit "C", and the following description is qualified in its entirety
by reference to the Option Plan.
The Option Plan permits the granting of stock options, including
incentive stock options.
Administration
- --------------
The Option Plan will be administered by either a Committee (the
"Stock Option Committee") of the Board of Directors comprised of at
least two members of the Board of Directors or the entire Board of
Directors may serve as the committee. An aggregate of 750,000 shares
of Common Stock will be authorized for issuance pursuant to the Option
Plan, such number of shares being subject to adjustment in the event
of a merger, consolidation, stock dividend, split-up, combination,
exchange of shares, recapitalization, or change in capitalization with
respect to the shares of Common Stock. The shares of stock issuable
under the Option Plan may consist in whole or in part of unissued
shares or reacquired shares. If a grant expires or is canceled, any
shares which were not issued or fully vested under the grant at the
time of expiration or cancellation will again be available for grants.
The Stock Option Committee has the authority to:
. Make grants and determine their terms, subject to the
provisions of the Option Plan;
. interpret the provisions of the Option Plan;
. adopt any rules, procedures and forms necessary for the
operation and administration of the Option Plan; and
. determine all questions relating to the eligibility and
other rights of all persons under the Option Plan.
Eligibility
- -----------
All key employees of the Company are eligible to be participants
(there are currently approximately ten employees of the Company who
would be eligible to receive options under the Option Plan).
Types of Options
- ----------------
Options which are issuable under the Option Plan may be either
"Incentive Stock Options," as defined in Section 422 of the Code, or
options not intended to be so qualified ("Nonstatutory Options"). The
Stock Option Committee may grant more than one option to an employee
during the term of the Option Plan, and such option may be in addition
to an option or options previously granted; provided, however, that the
aggregate fair market value of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by such
employee during any calendar year (under all stock option plans of the
Company and any subsidiaries) may not exceed $100,000. All options
(both Incentive Stock Options and Nonstatutory Options) are exercisable
at not less than 100% of the fair market value of the underlying Common
Stock on the date of grant. However, the exercise price for an
Incentive Stock Options granted to an employee who owns more than 10%
of the total combined voting power of all classes of stock of the
Company, actually or constructively under Section 425(d) of the Code,
is at 110% of the fair market value of the Common Stock subject to the
option.
Terms and Conditions
- --------------------
The term during which each option may be exercised will be
determined by the Stock Option Committee, but in no event may an option
be exercisable after the expiration of ten years from the date such
option was granted (this period is reduced to five years in the case
of Incentive Stock Options granted to an employee owning more than 10%
of the combined voting power of all classes of stock of the Company).
In addition, if the person to whom options are granted under the Stock
Option Plan ceases to be an employee of the Company for any reason,
options which are not then exercisable shall terminate. Options that
are exercisable at the date of termination will generally be
exercisable for a period of 30 days following such termination, subject
to the following two exceptions:
1. If the termination is due to the death or disability of the
employee, the options then exercisable by the employee may
be exercised for a period of one year following the
employee's death or disability.
2. If the employee is terminated for "cause", all options will
immediately terminate and will not be exercisable.
For purposes of the Option Plan, "cause" means that the employee
has:
i. Committed an act of malfeasance or wrongdoing affecting the
Company or its subsidiaries;
ii. breached any covenant not to compete or employment contract
with the Company or a subsidiary; or
iii. engaged in any other conduct that would warrant the
employee's discharge for cause.
Like options granted under the Director Plan, options granted
under the Option Plan cannot be transferred by an optionee. However,
if the optionee dies, his or her heirs can receive and exercise options
for a period of one year after the optionee's death.
Except as provided otherwise by the Stock Option Committee,
payment for shares of Common Stock purchased upon exercise of an option
granted under the Option Plan must be made in full at the time of such
exercise, whether in cash, shares of the Company's Common Stock, the
relinquishment of options to purchase shares of Common Stock, or any
combination of cash, shares of stock, or options.
Amendment of the Option Plan
- ----------------------------
The Board of Directors may at any time amend, suspend or
terminate the Option Plan, subject to the following:
. No amendment may alter or impair any of the rights or
obligations under any option previously granted to an employee
under the Option Plan without the consent of the
affected employee; and
. no amendment may become effective without the prior approval
of the shareholders of the Company if such approval would be
required for continued compliance with Section 422 of the
Code.
In addition, the Board of Directors may not, without the further
approval of the shareholders of the Company, amend the Option Plan to:
. Materially increase the total number of shares of Common
Stock which may be made the subject of options to be granted
under the Option Plan; or
. materially modify the requirements as to eligibility for
participation in the Option Plan.
Term of the Option Plan
- -----------------------
Stock options may not be granted under the Option Plan after
March 31, 2008, but then outstanding stock options may be exercised
beyond such date in accordance with their respective terms.
Federal Income Tax Consequences
- -------------------------------
The following is a brief description of the federal income tax
treatment that will generally apply to options issued under the Option
Plan, based on federal income tax laws in effect on the date hereof.
The exact federal income tax treatment of an option will depend on the
specific nature of the option. Recipients of options should not rely
on this discussion for individual tax advice, as each recipient's
situation and tax consequences of any particular option will vary
depending upon the specific facts and circumstances involved. Each
recipient is advised to consult with his or her own tax advisor for
particular federal, as well as state and local, income and other tax
advice.
The granting of Incentive Stock Options or Nonstatutory Options
does not result in immediate taxable income to the optionee.
The exercise of a Nonstatutory Option will result in ordinary income
to the optionee in the amount by which the market price of the shares
acquired exceeds the exercise price. Income tax withholding may be met
either through cash payment at the time of exercise or through share
withholding. The Company will receive a tax deduction in an amount that
corresponds to the optionee's ordinary income.
The exercise of an Incentive Stock Option will not result in taxable
income to the optionee if the optionee does not dispose of the stock
acquired through such exercise within two years of the date the option
was granted or one year after the option is exercised. However, the
difference between the fair market value of the shares upon exercise
and the exercise price is an item of tax preference subject to the
possible application of the alternative minimum tax. If the exercise
and disposition requirements are met, any gain realized by the optionee
when such shares are sold will be taxed as capital gain. The Company
will not receive a tax deduction for the resulting gain. If these
holding periods are not met, the option will be treated generally as
a Nonstatutory Option for tax purposes.
Vote Required
- -------------
The affirmative vote of a majority of the outstanding shares of
Common Stock present, in person or by proxy, and entitled to vote at
the Annual Meeting, is required to approve the Incentive Stock Option
Plan for employees. An abstention will have the same effect as a
negative vote but, because shares of Common Stock held by brokers will
not be considered entitled to vote on matters as to which such brokers
withhold authority, a broker non-vote will not have the same effect as
a negative vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF
THE STOCK OPTION PLAN FOR EMPLOYEES.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ----------------------------------------------
In March 1995, the Company entered into an agreement with a
corporate affiliate of John D. Garber, who beneficially owns
approximately 49% of the Common Stock, to finance the Company's
accounts receivable. This financing was performed through a
corporation controlled by Mr. Garber, AmEd Financing Company. Under
the terms of this agreement, AmEd Financing Company made advances to
the Company during 1996 and 1997 (total interest expense and factoring
costs in 1997 were $5,000.00). Unpaid advances under this financing
arrangement were convertible into Common Stock of the Company, at the
option of the holder, at a conversion price of $.50 per share. All
tangible assets of the Company are pledged to AmEd Financing Company
as security for advances under the terms of this agreement. Effective
June 30, 1996, AmEd Financing Company converted unpaid advances made
to the Company by AmEd Financing Company in the amount of $290,000,
plus accrued interest of $34,481, into 648,962 shares of Common Stock.
There are currently no amounts owed by the Company to AmEd Financing
Company under the financing arrangement. However, the Company is
currently indebted to Mr. Garber in the principal amount, as of
December 31, 1997, of $58,000.00. This loan is convertible into Common
Stock of the Company at the option of Mr. Garber at a conversion rate
of $0.1346 per share. The Company has pledged all of its assets to
secure this loan.
The Company reimbursed Jeffrey E. Butler $11,551 for relocation
expenses in 1997.
The Company paid $1,733 to Executive Resource Management in 1997
for recruiting services rendered by that entity to the Company. Monty
C. McCurry, who is a director of the Company (and a director nominee),
is an executive officer of, and owns more than 10% of the equity
ownership interest in, Executive Resource Management.
In years prior to 1997, Stephen E. Prust, who is a director (and
a director nominee) of the Company, rendered consulting services to the
Company. Mr. Prust did not receive any remuneration from the Company
in 1997 in any capacity other than as a director.
DEADLINE FOR SHAREHOLDER PROPOSALS
- ----------------------------------
Proposals of shareholders for consideration at the 1999 Annual
Meeting of Shareholders must be received by the Company on or before
December 15, 1998 for inclusion in the proxy materials relating to that
meeting. Any such proposals must adhere to the requirements of the
Securities Exchange Act of 1934, as amended, and should be sent to
Jeffrey E. Butler, Chief Executive Officer, The American Education
Corporation, 7506 N. Broadway Extension, Suite 505, Oklahoma City,
Oklahoma 73116.
COMPLIANCE WITH SECTION 16(A)
- -----------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and holders of
more than 10% of the Common Stock to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes
in ownership of the Common Stock. Based solely upon a review of Forms
3, 4 and 5 furnished to the Company with respect to the year ended
December 31, 1997, to the best of the Company's knowledge, the
Company's directors, executive officers and holders of more than 10%
of its Common Stock timely filed the reports required by Section 16(a).
OTHER ITEMS
- -----------
The Board of Directors does not intend to present further items
of business at the Annual Meeting and knows of no such items which will
or may at presented by others. However, if any other matter properly
comes before the meeting, the persons named in the enclosed proxy form
will vote thereon in such manner as they may in their discretion
determine.
FORM 10-KSB AND ANNUAL REPORT TO SHAREHOLDERS
- ---------------------------------------------
A copy of the Company's Annual Report on Form 10-KSB for its
latest fiscal year is available without charge to any shareholder of
the Company who requests a copy in writing from Jeffrey E. Butler, The
American Education Corporation, 7506 North Broadway Extension, Suite
505, Oklahoma City, Oklahoma 73116.
The 1997 Annual Report of the Company, as filed with the
Commission, is being mailed to the shareholders with this Proxy
Statement. The 1997 Annual Report is not to be considered part of the
soliciting material.
By Order of the Board of Directors
/s/Jeffrey E. Butler
President and Chief Executive Officer
Oklahoma City, Oklahoma
April 20, 1998
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING POSTAGE-
PAID ENVELOPE.
EXHIBIT "A"
- -----------
Fourth: The aggregate number of shares of common stock, which the
Corporation shall have authority to issue is 30,000,000, each share to
have a par value of $0.025. The aggregate number of shares of preferred
stock, which the Corporation shall have authority to issue, is
50,000,000, each share to have a par value of $0.001. The Corporation
may issue the preferred shares in series. Shares of each such series
when issued shall be designated to distinguish them from shares of all
other series. The Board of Directors of the Corporation is hereby
expressly authorized, by resolution or by resolutions, to provide out
of the unissued preferred shares, for the issuance of one or more
series of preferred shares, and to fix the number of shares included
in any or all series of preferred shares and any and all of the
designations, relative rights, preferences, and limitations of any or
all such series.
Exhibit "B"
- -----------
THE AMERICAN EDUCATION CORPORATION
Directors' Stock Option Plan
I. Purpose
- -----------
The purpose of this Directors' Stock Option Plan is to promote the
long-term growth and profitability of The American Education
Corporation, a Colorado corporation (the "Company"), and the value of
its Common Stock by providing recognition and compensation to the
Outside Directors of the Company for their time, effort and
participation in the growth and protection of the Company's business
and for their substantial contributions to the success of its business.
II. Definitions
- ----------------
Whenever used herein, the following terms shall have the meanings set
forth below:
(a) "Board" or "Board of Directors" means the board of directors of
the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means a committee which administers the Plan.
(d) "Common Stock" shall mean the Common Stock, par value $0.025 per
share, of the Company.
(e) "Company" means The American Education Corporation.
(f) "Disability" means a permanent and total disability as defined in
Section 22(e)(3) of the Code or, if designated by the Committee, any
long-term disability plan adopted by the Company for the benefit of its
employees.
(g) "Effective Date" means March 27, 1998.
(h) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(i) "Fair Market Value", as of a particular date, means (i) if the
shares of Common Stock are then listed or admitted for trading on a
national securities exchange or quoted on the National Association of
Securities Dealers Automated Quotation System, the last reported sales
price or, if no such sale occurred, the average of the closing bid and
ask prices, as applicable, of the Common Stock on the last trading day
before such date, or (ii) if the shares of Common Stock are not then
listed or admitted for trading on a national securities exchange or
quoted on the National Association of Securities Dealers Automated
Quotation System, such value as the Committee, in its absolute
discretion, may determine in good faith.
(j) "Option" means a right or rights granted by the Committee to
purchase shares of Common Stock under the Plan.
(k) "Option Shares" means any shares of Common Stock issuable upon
exercise of an Option.
(l) "Outside Director" means a member of the Board who is eligible to
be granted options hereunder as described in Article V.
(m) "Participant" means an individual to whom an Option is
granted under the Plan.
(n) "Plan" - this Directors' Stock Option Plan, as it may be
amended and modified from time to time.
(o) "Subsidiary" means a corporation, partnership or other business
entity at least 50 percent of whose voting securities are owned,
directly or indirectly, by the Company.
III. Administration
- --------------------
(a) Appointment of Committee. The Committee shall consist of all of
members of the Board of Directors.
(b) Duties and Powers of Committee. The Committee shall administer
the Plan in strict accordance with the terms of the Plan and shall not
have the discretion to vary, add to or take from the terms of the Plan.
Subject to the terms, provisions and conditions of the Plan, the
Committee shall have full and final authority in its sole discretion
to determine such rules and regulations as the Committee may deem
advisable in the administration of the Plan and the procedures and
methods for construing and interpreting the Plan as well as the
construction of the terms of the Plan. Actions approved by a majority
of all members of the Committee at any meeting at which a quorum is
present, or actions approved in writing by all of the members of the
Committee without a meeting, shall be valid acts of the Committee.
Decisions of the Committee on all matters relating to the Plan shall
be in the Committee's sole discretion and shall be conclusive and
binding on all parties, including the Company, its stockholders, and
the Participants in the Plan.
IV. Shares Available for the Plan
- ----------------------------------
Subject to adjustment as provided in Article VIII, the maximum number
of shares of Common Stock that may be issued under this Plan shall be
100,000 shares. In the event that any outstanding Option for any
reason expires or is terminated, the Option Shares allocable to the
unexercised portion of such Option may again be subject to an Option
under the Plan.
V. Participation
- -----------------
Participation in the Plan shall be limited to Directors of the Company
who are not, and were not during the preceding twelve (12) months,
common law employees of the Company.
VI. Options
- ------------
Each Option shall be evidenced by a written option agreement, signed
by an authorized officer of the Company, which shall contain such terms
and conditions not inconsistent with the Plan as the Committee shall
determine. All option agreements need not be identical, but shall
comply with or incorporate by reference the terms set forth in this
Article VI and shall be subject to all other terms and conditions of
the Plan. In the event any option agreement is inconsistent with the
Plan, the terms of the Plan shall govern the issue in question.
(a) Grant of Options. Each Outside Director initially elected or
appointed after the Effective Date shall be granted an Option to
purchase 5,000 shares of Common Stock at the time of his or her initial
election or appointment to the Board of Directors. Commencing with
calendar year 1999, and each calendar year thereafter during the term
of this Plan, each Outside Director shall automatically be granted an
option to purchase 3,000 shares of Common Stock as of January 1 of such
calendar year.
(b) Price. The price per share payable upon the exercise of each
Option (the "Exercise Price") shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date the Option is
granted.
(c) Exercise of Options. Options shall be exercisable only by the
Participant to whom the Options were granted, or by the Participant's
legal guardian or personal representative, if any, in the case of
exercise following the death or Disability of the Participant. Options
shall be exercised by delivery to the Company of a written notification
specifying the number of Option Shares which the Participant then
desires to purchase, together with payment for such Option Shares.
Payment may be made in the form of (i) cash, certified check or other
immediately available funds for the aggregate Exercise Price for such
Option Shares, (ii) the exchange of a number of shares of Common Stock
owned by the Participant, free and clear of all liens or encumbrances,
the Fair Market Value of which at the time of exercise is equal to the
aggregate Exercise Price of such shares, and accompanied by executed
stock powers and any other documents of transfer requested by the
Committee, (iii) the relinquishment of Options to purchase Option
Shares which shall be deemed to have a value equal to the aggregate
Fair Market Value of the Option Shares issuable upon exercise thereof
less the aggregate Exercise Price for those Option Shares, or (iv) a
combination of (i), (ii), and (iii). No fractional shares may be
issued or accepted by the Company with respect to the exercise of an
Option.
(d) Terms of Options. Options granted to Participants shall be
immediately exercisable and may be exercised at any time from time to
time from the date of grant to the date which is three years after the
date of grant or, if earlier, thirty days after the date when the
Participant ceases to be a director of the Company; provided, however,
that if a Participant is removed as a director of the Company for cause
(as determined by the Board or the stockholders at the time of such
removal), then all Options held by the Participant shall immediately
lapse and no longer be exercisable.
(e) Restrictions on Transfer. Options granted under the Plan shall
not be transferable or assignable or capable of being pledged or
otherwise hypothecated in any way, and shall not be subject to
execution, attachment or similar process, other than by will or the
laws of descent and distribution as specifically permitted hereunder.
Any attempted assignment, transfer, pledge, hypothecation or other
disposition of an Option contrary to the provisions hereof shall result
in the termination of such Option, which termination shall be effective
immediately before the attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option. Shares delivered
upon exercise of an Option shall be subject to such resale restrictions
as may be provided by the Committee in the option agreement pertaining
to such Option.
VII. Withholding Taxes.
- ------------------------
The Company may require, as a condition to any grant under the Plan or
to the delivery of certificates for Common Stock issued upon the
exercise of an Option, that the Participant pay to the Company, in
cash, any federal, state or local taxes of any kind required by law to
be withheld with respect to any grant of an Option or any delivery of
Common Stock upon exercise of an Option. The Company, to the extent
permitted or required by law, shall have the right to deduct from any
payment of any kind (including salary or bonus) otherwise due to a
Participant any federal, state or local taxes of any kind required by
law to be withheld with respect to any grant of an Option or to the
delivery of Common Stock upon exercise of an Option under the Plan.
Subject to Committee approval, a Participant may elect to deliver
shares of Common Stock (or have the Company withhold shares acquired
upon exercise of an Option) to satisfy, in whole or in part, the amount
the Company is required to withhold for taxes in connection with a
grant under the Plan. Such election must be made on or before the date
the amount of tax to be withheld is determined and, if applicable,
subject to rules, regulations and interpretations of the Securities and
Exchange Commission under Section 16(b) of the Exchange Act. Once
made, the election shall be irrevocable. The withholding tax
obligation that may be paid by the withholding or delivery of shares
may not exceed the Participant's minimum federal, state and local
income tax obligations in connection with the grant. The Fair Market
Value of the shares to be withheld or delivered will be determined on
the date last preceding the date as of which the amount of tax to be
withheld is determined.
VIII. Changes in Capital Structure, Reorganizations, Merger, Etc.
- -----------------------------------------------------------------
(a) Company's Power to Change Structure, Reorganize, Merge, etc. The
existence of outstanding Options shall not affect in any way the right
or power of the Company or its stockholders to declare or distribute
any stock dividend or to make or authorize any recapitalization,
reorganization, merger, split-up, combination or other change in the
Company's capital structure or its business, or the dissolution or
liquidation of the Company or any sale or transfer of all or any part
of its assets or business, or any other corporate act or proceeding
whether of a similar character or otherwise. Except as expressly
provided herein, no such corporate act or the issuance of securities
by the Company shall affect any Options outstanding under the Plan.
(b) Effect of Recapitalization or Similar Transaction. In the event
of any change in the total number of outstanding shares of equity
securities of the Company by reason of any stock dividend, stock split,
recapitalization, or similar transaction in which there is a
distribution of equity securities of the Company for substantially
below their Fair Market Value, then (i) the number, class and per share
price of shares of Common Stock subject to outstanding Options shall
be appropriately adjusted in such manner as to entitle a Participant
to receive upon exercise of an Option, for the same aggregate Exercise
Price, the same total number and class of equity securities as he would
have received had he exercised his Option in full immediately prior to
the event requiring the adjustment; and (ii) the number and class of
equity securities then reserved for issuance under the Plan shall be
adjusted by substituting, for the total number and class of shares of
Common Stock then reserved for issuance under the Plan, that number and
class of shares of equity securities that would have been received by
the owner of the number of shares of Common Stock then available to be
issued under the Plan.
(c) Effect of Dissolution, Liquidation, Reorganization or other
Transaction in which the Company is not the Survivor. Upon the
dissolution or liquidation of the Company, the sale of all or
substantially all of the Company's assets, or the occurrence of any
merger, consolidation, reorganization, or other transaction in which
the Company is not the surviving corporation, then in the absolute
discretion of the Committee, (i) all Options outstanding under the Plan
shall be assumed by the successor, remaining, or surviving corporation,
or new options shall be substituted for such Options, all as provided
in Section 424(a) of the Code and to the extent permitted by Section
424(a) of the Code, in which event such assumption shall be made on a
full and equivalent basis in accordance with Section 424(a) of the Code
in order to preclude any modification of such Options which would be
considered to be the grant of new options, or (ii) all Options which
are then exercisable, or all Options outstanding under the Plan,
regardless of whether such Options otherwise would be exercisable,
shall be exercisable for a period of 15 days immediately prior to such
event and, after the Participant has been afforded the opportunity to
exercise such Options as aforesaid and to the extent that such Options
are not timely exercised during such period, the terms and provisions
of this Plan and any option agreement entered into hereunder will
terminate and the related Options will terminate.
IX. Compliance with Law and Approval of Regulatory Bodies.
- -----------------------------------------------------------
Notwithstanding any other provision of this Plan or of any option
agreement, the Company shall be under no obligation and shall not issue
shares or, in the case of treasury shares, transfer shares under this
Plan, except in compliance with all applicable federal and state laws
and regulations and in compliance with rules of any stock exchanges or
listing organizations with which the Company's shares may be listed.
The determination as to whether the issuance or transfer of shares
under this Plan is in compliance with applicable federal and state laws
and regulations and rules of stock exchanges and listing organizations
shall be made solely by the Committee.
(a) Use of Restrictive Legends. Any certificate issued to evidence
shares issued upon the exercise of an Option may bear such legends and
statements as the Committee shall deem advisable to assure compliance
with federal and state laws and regulations.
(b) Representation of Investment Intent. Any Participant receiving
an Option and any Participant or other person exercising an Option may
be required by the Committee to give a written representation that the
Option and the shares subject to the Option will be acquired for
investment and not with a view to public distribution; provided,
however, that the Committee, in its sole discretion, may release any
person receiving an Option from any such representations either prior
to or subsequent to the exercise of an Option granted pursuant to this
Plan.
(c) Representation of Ownership. In the case of the exercise of an
Option by a person or estate acquiring the right to exercise such
Option by bequest or inheritance or by reason of the death or
Disability of a Participant, the Committee may require reasonable
evidence as to the ownership of such Option or the authority of such
person and may require such consents and releases of taxing authorities
as the Committee may deem advisable.
X. Rights as a Stockholder.
- ----------------------------
The holder of an Option shall have no rights as a stockholder with
respect to any Option Shares until the date a stock certificate is
issued to him or her after the exercise of the Option. No adjustment
shall be made for dividends (ordinary or extraordinary) whether in
cash, securities or other property, or distributions, or other rights
for which the record date is prior to the date such stock certificate
is issued, except as provided in Article VIII.
XI. Amendment, Suspension or Termination of Plan.
- --------------------------------------------------
The Board of Directors may at any time terminate or from time to time
amend or suspend this Plan; provided, however, that (i) no such
amendment shall alter or impair the number of shares, exercise price
or duration of any Option theretofore granted to a Participant under
this Plan without the consent of the affected Participant, and (ii) no
amendment shall become effective without prior approval of the
stockholders of the Company if such approval would be required for
continued compliance with Rule 16b-3 promulgated under the Exchange
Act. Notwithstanding the foregoing, the Board of Directors may not,
without further approval of the stockholders of the Company, amend the
Plan to:
(a) materially increase the total number of shares of Common Stock
which may be made the subject of Options to be granted under the Plan,
either in the aggregate or to an individual Participant, except as
provided in Article VIII;
(b) change the manner of determination of the Exercise
Price;
(c) extend the maximum period during which Options may
be granted or exercised; or
(d) materially modify the requirements as to eligibility for
participation in the Plan.
XII. Commencement Date; Termination Date.
- ------------------------------------------
The date of commencement of this Plan shall be March 27, 1998.
No Options shall be issued under the Plan after the close of business
on March 31, 2008. The Plan was adopted by the Board on March 27, 1998
and was approved by the Company's stockholders on May 29, 1998. The
terms set forth herein constitute all of the terms and provisions of
the Plan until further amended pursuant to Article XI.
Exhibit "C"
- -----------
THE AMERICAN EDUCATION CORPORATION
Stock Option Plan
- ----------------------------------
I. Purpose
- -----------
The purpose of this Plan is to promote the long-term growth and
profitability of The American Education Corporation ("AEC") and its
Subsidiaries and the value of its Common Stock by (i) providing
employees of AEC with increased incentive to contribute to the success
of AEC and (ii) enabling AEC to attract, retain and reward persons of
exceptional skill for positions of substantial responsibility.
II. Definitions
- ----------------
Whenever used herein, the following terms shall have the meanings set
forth below:
"Board" or "Board of Directors" means the board of directors of AEC.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a committee of at least two members of the Board of
Directors designated by the Board to administer this Plan.
"Common Stock" shall mean the Common Stock, par value $0.025 per share,
of AEC.
"Disability" means a permanent and total disability as defined in
Section 22(e)(3) of the Code or as otherwise defined by the Committee.
"Fair Market Value", as of a particular date, means (i) if the shares
of Common Stock are then listed or admitted for trading on a national
securities exchange or quoted on the National Association of Securities
Dealers Automated Quotation System, the last reported sales price of
the Common Stock on such date or, if no such sale occurred, the average
of the closing bid and ask prices, as applicable, of the Common Stock
on the last trading day before such date, or (ii) if the shares of
Common Stock are not then listed or admitted for trading on a national
securities exchange or quoted on the National Association of Securities
Dealers Automated Quotation System, such value as the Committee, in its
discretion, may determine in good faith.
"Incentive Stock Option" means an Option conforming to the requirement
of Section 422 of the Code.
"Nonqualified Stock Option" means any Option other than an Incentive
Stock Option.
"Option" means a right or rights granted by the Committee to purchase
shares of Common Stock under the Plan.
"Option Agreement" means an agreement approved by the Committee
pursuant to which an Option is granted under this Plan.
"Option Shares" means any shares of Common Stock issuable upon exercise
of an Option.
"Participant" means an individual to whom an Option is granted under
the Plan.
"Plan" means this The American Education Corporation Stock Option Plan
as it may be amended from time to time.
"Retirement" means termination of a Participant's employment with AEC
because of the Participant's retirement at or after such Participant's
earliest permissible retirement date pursuant to and in accordance with
the regular retirement plan or practice of AEC.
"Subsidiary" means a corporation, partnership or other business entity
at least 50 percent of whose voting securities are owned, directly or
indirectly, by AEC.
III. Administration
- --------------------
3.1 Appointment of Committee. The Board of Directors may appoint any
two or more of its members to serve as the Committee to administer the
Plan; provided, however, that in its sole discretion, the Board of
Directors may act as the Committee.
3.2 Duties and Powers of Committee. Subject to the terms, provisions
and conditions of the Plan, the Committee shall have full and final
authority in its discretion to, among other things, determine
(i) the persons to whom Options are to be granted;
(ii) the number of shares subject to Options;
(iii) the time or times at which Options will be granted;
(iv) the exercise price of shares subject to Options;
(v) the time or times at which Options become exercisable and the
duration of the exercise period;
(vi) the provisions and forms of any Option Agreement or other
instrument evidencing an Option granted under the Plan;
(vii) whether shares of Common Stock which are subject to Options will
be subject to any restrictions on transfer after the exercise of the
Options;
(viii) such rules and regulations as the Committee may deem advisable
in the administration of the Plan; and
(ix) the procedures and methods for construing and interpreting the
Plan.
Actions approved by a majority of all members of the Committee at any
meeting at which a quorum is present, or actions approved in writing
by all of the members of the Committee without a meeting, shall be
valid acts of the Committee. Decisions of the Committee on all matters
relating to the Plan shall be in the Committee's sole discretion and
shall be conclusive and binding on all parties, including AEC, its
stockholders, and the Participants in the Plan.
IV. Shares Available for the Plan
- ----------------------------------
4.1 Total Shares Available. Subject to the provisions of Article VIII
hereof, the maximum number of shares of Common Stock which may be
issued pursuant to the exercise of Options under this Plan initially
shall be 750,000 shares. If any Option for shares of Common Stock
granted to a Participant lapses, expires or is cancelled, surrendered
or exchanged, or is otherwise terminated without having been fully
exercised, the Committee may, subject to the overall limitations stated
above, again make such Options available for grant hereunder (to the
same or to a different Participant). For purposes of calculating the
maximum number of shares of Common Stock which may be issued under the
Plan:
(1) All shares issued (including shares, if any, withheld for tax
withholding requirements) shall be counted when cash is used as full
payment for shares issued upon the exercise of an Option;
(2) Only the net shares issued (including the shares, if any, withheld
for tax withholding requirements) shall be counted when shares of
Common Stock are used as full or partial payment for shares issued upon
the exercise of an Option.
4.2 Source of Shares Available to be Issued. The shares of Common
Stock to be delivered upon the exercise of Options shall be made
available either from the authorized but unissued shares of Common
Stock or from shares of Common Stock held by AEC as treasury shares.
Shares of Common Stock with respect to which an Option is exercised
shall not again be available for grant as an Option under this Plan.
V. Participation
- -----------------
Participation in the Plan shall be limited to those employees of AEC
who are believed by the Committee to be in a position to make a
substantial contribution to the success of AEC.
Options may be granted to such persons and for such number of shares
as the Committee shall determine. The grant of any type of Option
hereunder in any one year to an eligible person shall neither guarantee
nor preclude a further grant of an Option to such person in that year
or in any subsequent year.
VI. Options
- ------------
Subject to the provisions hereof, the Committee may from time to time
grant Incentive Stock Options, Nonqualified Stock Options, or any
combination thereof to persons eligible to participate in the Plan.
Each Option shall be evidenced by a written Option Agreement, signed
by an authorized officer of AEC, which shall contain such terms and
conditions not inconsistent with the Plan as the Committee shall
determine. All Option Agreements need not be identical, but shall
comply with or incorporate by reference the terms set forth in this
Article VI and shall be subject to all other terms and conditions of
the Plan. In the event any Option Agreement is inconsistent with the
Plan, the terms of the Plan shall govern the issue in question.
6.1 Price. The price per share deliverable upon the exercise of each
Option ("exercise price") shall not be less than 100% of the Fair
Market Value on the date the Option is granted.
6.2 Exercise of Options. Options shall be exercisable only by the
Participant to whom the Options were granted, or by the Participant's
legal guardian or personal representative, if any, in the case of
exercise following the death or Disability of the Participant as
provided in Section
11.3. Options shall be exercised by delivery to AEC of a written
notification specifying the number of Option Shares which the
Participant then desires to purchase, together with payment for such
Option Shares. Payment may be made in the form of (i) cash, certified
check or other immediately available funds for the aggregate exercise
price for such Option Shares, (ii) the exchange of a number of shares
of Common Stock owned by the Participant, free and clear of all liens
or encumbrances, the Fair Market Value of which at the time of exercise
is equal to the aggregate exercise price of such Option Shares, and
accompanied by executed stock powers and any other documents of
transfer requested by the Committee; (iii) the relinquishment of
Options to purchase Option Shares which shall be deemed to have a value
equal to the aggregate Fair Market Value of the Option Shares issuable
upon exercise of such relinquished Options less the aggregate exercise
price for such Option Shares; or (iv) a combination of (i), (ii) or
(iii). No fractional shares may be issued or accepted by AEC with
respect to the exercise of an Option. Options may be exercisable in
installments (which may be cumulative or noncumulative or subject to
acceleration) during the terms of an Option as may be determined by the
Committee at the date of grant.
6.3 Form of Option. Each option agreement shall specify whether the
Option evidenced by such Option agreement is an Incentive Stock Option
or a Nonqualified Stock Option.
Notwithstanding such designation in an option agreement, in the event
an Option which is designated as an Incentive Stock Option fails to
qualify as an Incentive Stock Option under Section 422 of the Code,
then such Option shall be deemed to be a Nonqualified Stock Option.
6.4 Terms of Options. The term during which each Option may be
exercised shall be determined by the Committee, but in no event shall
an Option be exercisable in whole or in part more than ten years from
the date it is granted.
All rights to purchase Option Shares pursuant to an Option shall,
unless sooner terminated as set forth herein or in an Option Agreement,
expire at the date or dates designated by the Committee. The Committee
shall determine the date on which each Option shall become exercisable
and may provide that an Option shall become exercisable in
installments. The shares constituting each installment may be
purchased in whole or in part at any time after such installment
becomes exercisable, subject to such minimum exercise requirement as
may be designated by the Committee.
6.5 Restrictions on Transfer. Options granted under the Plan shall
not be transferable or assignable or capable of being pledged or
otherwise hypothecated in any way, and shall not be subject to
execution, attachment or similar process, other than by will or the
laws of descent and distribution as specifically permitted hereunder.
Any attempted assignment, transfer, pledge, hypothecation or other
disposition of an Option contrary to the provisions hereof shall result
in the termination of such Option, which termination shall be effective
immediately before the attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option. Option Shares
delivered upon exercise of an Option shall be subject to such resale
restrictions as may be provided by the Committee in the Option
Agreement pertaining to such Option.
6.6 Provisions Applicable to Ten Percent Stockholders.
Notwithstanding any other provision of this Plan, no Incentive Stock
Option shall be granted under this Plan to a person who, at the time
such Incentive Stock Option is granted, is the owner of more than 10
percent of the total combined voting power of all classes of stock of
AEC, unless at the time such Incentive Stock Option is granted, the
exercise price is at least 110 percent of the Fair Market Value of the
Common Stock subject to the Incentive Stock Option, and such Incentive
Stock Option by its terms is not exercisable more than five (5) years
after the date it is granted.
6.7 Limitations on Grants. If required by the Code at the time of
grant, to the extent that the aggregate Fair Market Value of Common
Stock (determined as of the grant date) with respect to which Incentive
Stock Options are exercisable for the first time by a Participant
during any calendar year (under all plans of AEC) exceeds $100,000,
such Options shall be treated as Nonqualified Stock Options. The
foregoing sentence shall be applied by taking Incentive Stock Options
into account in the order in which they were granted.
VII. Withholding Taxes
- -----------------------
AEC may require, as a condition to any Option under the Plan or to the
delivery of certificates for Common Stock issued hereunder, that the
Participant pay to AEC, in cash, any federal, state or local taxes of
any kind required by law to be withheld with respect to the award of
any Option or any delivery of Common Stock upon exercise of an Option.
AEC, to the extent permitted or required by law, shall have the right
to deduct from any payment of any kind (including salary or bonus)
otherwise due to a Participant any federal, state or local taxes of any
kind required by law to be withheld with respect to any grant of an
Option or to the delivery of Common Stock upon exercise of an Option
under the Plan.
Subject to Committee approval, a Participant may elect to deliver
shares of Common Stock (or have AEC withhold shares acquired upon
exercise of an Option) to satisfy, in whole or in part, the amount AEC
is required to withhold for taxes in connection with award of an Option
under the Plan. Such election must be made on or before the date the
amount of tax to be withheld is determined and, once made, the election
shall be irrevocable. The withholding tax obligation that may be paid
by the withholding or delivery of shares may not exceed the
Participant's minimum federal, state and local income tax obligations
in connection with the exercise of the Option. The Fair Market Value
of the Common Stock to be withheld or delivered will be the Fair Market
Value on the date last preceding the date the amount of tax to be
withheld is determined.
VIII. Changes in Capital Structure, Reorganizations, Merger, Etc.
- -----------------------------------------------------------------
8.1 AEC's Power to Change Structure, Reorganize, Merge, etc.
The existence of outstanding Options shall not affect in any way the
right or power of AEC or its stockholders to declare or distribute any
stock dividend or to make or authorize any recapitalization,
reorganization, merger, split-up, combination or other change in AEC's
capital structure or its business, or the dissolution or liquidation
of AEC or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding whether of a similar
character or otherwise. Except as expressly provided herein, no such
corporate act or the issuance of securities by AEC shall affect any
Options outstanding under the Plan.
8.2 Effect of Recapitalization or Similar Transaction. In the event
of any change in the total number of outstanding shares of equity
securities of AEC by reason of any stock dividend, stock split,
recapitalization, or similar transaction in which there is a
distribution of equity securities of AEC for substantially below their
Fair Market Value, then (i) the number, class and per share price of
shares of Common Stock subject to outstanding Options shall be
appropriately adjusted in such manner as to entitle a Participant to
receive upon exercise of an Option, for the same aggregate exercise
price, the same total number and class of equity securities as the
Participant would have received had the Participant exercised his or
her Option in full immediately prior to the event requiring the
adjustment; and (ii) the number and class of equity securities then
reserved for issuance under the Plan shall be adjusted by substituting
for the total number and class of shares of Common Stock then reserved
that number and class of shares of equity securities that would have
been received by the owner of an equal number of outstanding shares of
Common Stock as a result of the event requiring the adjustment.
8.3 Effect of Dissolution, Liquidation, Reorganization or other
Transaction in which AEC is not the Survivor. Upon the dissolution or
liquidation of AEC, the sale of all or substantially all of AEC'
assets, or the occurrence of any merger, consolidation, reorganization,
or other transaction in which AEC is not the surviving corporation,
then in the absolute discretion of the Committee, (i) new Options shall
be substituted for outstanding Options in accordance with and to the
extent permitted by Section 424(a) of the Code in order to preclude
any modification of such Options which would be considered to be the
grant of new Options, or (ii) all Options which are then outstanding
under the Plan, regardless of whether such Options otherwise would be
exercisable, shall be exercisable for a period of 15 days immediately
prior to such event and, after the Participants have been afforded the
opportunity to exercise such Options as aforesaid and to the extent
that such Options are not timely exercised during such period, the
terms and provisions of this Plan and any Option agreement granted
hereunder will no longer continue in effect, and the Options shall
terminate.
IX. Compliance with Law and Approval of Regulatory Bodies
- ----------------------------------------------------------
Notwithstanding any other provision of this Plan or of any Option
agreement, AEC shall be under no obligation and shall not issue shares
or, in the case of treasury shares, transfer shares under this Plan,
except in compliance with all applicable federal and state laws and
regulations and in compliance with rules of any stock exchanges or
listing organizations with which AEC's shares may be listed. The
determination as to whether the issuance or transfer of shares under
this Plan is in compliance with applicable federal and state laws and
regulations and rules of stock exchanges and listing organizations
shall be made solely by the Committee.
9.1 Use of Restrictive Legends. Any certificate issued to evidence
shares issued upon the exercise of an Option may bear such legends and
statements as the Committee shall deem advisable to assure compliance
with federal and state laws and regulations.
9.2 Representation of Investment Intent. Any Participant receiving
an Option and any Participant or other person exercising an Option may
be required by the Committee to give a written representation that the
Option and the Option Shares will be acquired for investment and not
with a view to public distribution; provided, however, that the
Committee, in its sole discretion, may release any person receiving an
Option from any such representations either prior to or subsequent to
the exercise of an Option granted pursuant to this Plan.
9.3 Representation of Ownership. In the case of the exercise of an
Option by a person or estate acquiring the right to exercise such
Option by bequest or inheritance or by reason of the death or
Disability of a Participant, the Committee may require reasonable
evidence as to the ownership of such Option or the authority of such
person and may require such consents and releases of taxing authorities
as the Committee may deem advisable.
X. Rights as a Stockholder
- ---------------------------
The holder of an Option shall have no rights as a stockholder with
respect to any shares covered by the Option until the date a stock
certificate is issued to him or her after the exercise of the Option.
No adjustment shall be made for dividends (ordinary or extraordinary)
whether in cash, securities or other property, or distributions, or
other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Article VIII. Any Option
Shares shall be subject to such restrictions, including, without
limitation, restrictions on transfer that the Committee deems to be
appropriate.
XI. Termination of Employment
- ------------------------------
11.1 Change of Employment Status. No Option shall be affected by any
change of duties or position of a Participant (including transfer to
or from a Subsidiary) so long as such Participant continues to be an
employee of AEC or a Subsidiary. Nothing in this Plan or in any Option
granted hereunder shall confer upon any Participant any right to
continue in the employ of AEC or any Subsidiary, and AEC's right to
terminate the employment of a Participant at any time for any reason
shall not be diminished or affected because an Option was granted to
the Participant.
11.2 Termination other than Because of Death, Disability or Cause.
If a Participant who is an employee of AEC or a Subsidiary ceases to
be an employee for any reason, other than by reason of the death or
Disability of the Participant, then all Options held by such
Participant which are not exercisable when the Participant ceases to
be an employee shall terminate. All Options which are exercisable when
the Participant ceases to be an employee must be exercised prior to the
earlier of (i) the expiration date of the Option, or (ii) the date
occurring 30 days after the date on which the Participant ceases to be
an employee of AEC or a Subsidiary.
11.3 Termination Because of Death or Disability. If a Participant
dies or suffers a Disability while he or she is an employee of AEC or
a Subsidiary, Options which are not exercisable at the date of death
or termination due to Disability shall terminate and Options which are
exercisable on the date of death or termination due to Disability of
such Participant may be exercised by the Participant, by his or her
personal representative or by his or her other lawful successor to the
extent that such Options could have been exercised by the deceased or
disabled Optionee immediately prior to his or her death or Disability.
Notwithstanding the foregoing, upon termination of an Optionee's
employment by reason of death or disability, the following provisions
shall apply:
(i) In the event the Optionee's termination of employment is due to
death, the Option to the extent exercisable upon the date of the
Optionee's death, shall be exercisable for a period of one (1) year
following the date of death.
(ii) In the case the Optionee's employment is terminated due to
Disability, the Option to the extent exercisable as of the date of
termination due to Disability, shall be exercisable for a period of one
(1) year from the date of termination.
Notwithstanding the foregoing, in no event shall any such period extend
beyond the Option Term.
11.4 Termination for Cause. Notwithstanding any other provisions set
forth herein, if an Optionee shall (a) commit any act of malfeasance
or wrongdoing affecting AEC or any Subsidiary of AEC, (b) breach any
covenant not to compete or employment contract with AEC or any
Subsidiary of AEC or (c) engage in conduct that would warrant the
Optionee's discharge for cause (excluding the general dissatisfaction
with the performance of the Optionee's duties but including any act of
disloyalty or any conduct clearly tending to bring discredit upon AEC
or any Subsidiary of AEC) any unexercised portion of an Option granted
to such Optionee shall immediately terminate and become void.
XII. Amendment, Suspension or Termination of Plan
- --------------------------------------------------
The Board of Directors may at any time terminate or from time to time
amend or suspend this Plan; provided, however, that (i) no such
amendment shall alter or impair any of the rights or obligations under
any Option theretofore granted to a Participant under this Plan without
the consent of the affected Participant, and (ii) no amendment shall
become effective without prior approval of the stockholders of AEC if
such approval would be required for continued compliance with Section
422 of the Code. Notwithstanding the foregoing, the Board of Directors
may not, without further approval of the stockholders of AEC, amend the
Plan to:
(1) materially increase the total number of shares of Common Stock
which may be made the subject of Options to be granted under the Plan,
either in the aggregate or to an individual Participant, except as
provided in Article VIII;
(2) materially modify the requirements as to eligibility for
participation in the Plan.
XIII. Termination Date
- -----------------------
The date of commencement of the Plan shall be March 27, 1998.
Unless previously terminated, no Options shall be issued under the Plan
after the close of business on March 31, 2008. The Plan was adopted
by the Board on March 27, 1998 and approved by AEC's stockholders on
May 29, 1998. The terms set forth herein constitute all of the terms
and provisions of the Plan until further amended pursuant to Article
XII.
PROXY
- -----
THE AMERICAN EDUCATION CORPORATION
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 29, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
- -----------------------------------------------------------
The undersigned hereby appoints Thomas Shively and Jeffrey E.
Butler, or either of them, as proxies, each with full power to
appoint his substitute, and hereby authorizes them to represent
and to vote, as designated below, all of the shares of Common
Stock of The American Education Corporation held of record by the
undersigned on April 20, 1998, at the Annual Meeting of
Shareholders to be held on May 29, 1998 or any adjournment
thereof.
1. Election of Directors.
[ ] For all nominees listed below (except as marked to the
contrary below).
[ ] Withhold authority to vote for all nominees listed below.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW.)
Jeffrey E. Butler
Monty C. McCurry
Newton Fink
Stephen E. Prust
2. Approval of amendment to the Articles of Incorporation to
increase the authorized shares
of Common Stock.
[ ] For [ ] Against [ ] Abstain
3. Ratification of Selection of Steakley, Gilbert & Bozalis,
P.C.
[ ] For [ ] Against [ ] Abstain
4. Approval of the Directors' Stock Option Plan.
[ ] For [ ] Against [ ] Abstain
5. Approval of the Stock Option Plan for Employees.
[ ] For [ ] Against [ ] Abstain
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
ALL NOMINEES LISTED ABOVE, FOR THE AMENDMENT TO THE COMPANY'S
ARTICLES OF INCORPORATION FOR THE RATIFICATION OF THE SELECTION
OF STEAKLEY, GILBERT & BOZALIS, P.C. AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS FOR 1998, FOR THE APPROVAL OF THE DIRECTORS'
STOCK OPTION PLAN, AND FOR THE APPROVAL OF THE STOCK OPTION PLAN
FOR EMPLOYEES. YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO
THE VOTE THEREOF.
The undersigned hereby acknowledges receipt of the Proxy
Statement and hereby expressly revokes any and all proxies
heretofore given or executed by him with respect to the shares
represented by the proxy.
Dated this ___ day of _____________________, 1998.
- ---------------------------------
Signature
- ----------------------------------
Signature
Please sign exactly as your name appears on your stock
certificate. When shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a corporation,
please sign in full corporate name by President or other
authorized officer. If a partnership or limited liability
company, please sign in the name of the legal entity by
authorized person.
Please complete, sign, date and mail the proxy promptly using the
enclosed postage paid envelope.
