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
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(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
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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To Be Held Friday, July 23, 1999
To the Shareholders of The American Education Corporation:
The 1999 Annual Meeting of Shareholders of The American Education
Corporation ("AEC" or the "Company") will be held on July 23,
1999, at 10:00 a.m. (Oklahoma City time), at The Waterford Marriott
Hotel located at 6300 Waterford Boulevard, Oklahoma City, Oklahoma, for
the following purposes:
1. To elect five (5) directors to serve until their
successors are duly elected and qualified;
2. To consider a proposal to amend the Company's Articles
of Incorporation to permit a reverse stock split of up to one-
for-four of the outstanding shares of the Company's common stock
with the authorized number of shares of common stock remaining at
30,000,000 shares, subject to the discretion of the Board of
Directors to determine whether to file such amendment and to
effect such a reverse stock split;
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, 1999;
4. To consider a proposal to amend the Company's 1998 Stock
Option Plan for Employees to increase the number of shares
authorized for issuance from 750,000 to 1,050,000; and
5. 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 June 15, 1999 (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 June 22, 1999 to July 23, 1999 and at the time and place of
the Annual Meeting.
A copy of the Company's Annual Report for 1998, 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. YOUR PROXY MUST BE SIGNED AND RETURNED
IN ORDER TO BE COUNTED.
By Order of the Board of Directors
/s/ Jeffrey E. Butler
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Jeffrey E. Butler
President and Chief Executive Officer
Oklahoma City, Oklahoma
June 18, 1999
THE AMERICAN EDUCATION CORPORATION
7506 North Broadway Extension, Suite 505
Oklahoma City, Oklahoma 73116
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PROXY STATEMENT
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For Annual Meeting of Shareholders
To Be Held Friday, July 23, 1999
Introduction
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
1999 Annual Meeting of Shareholders of the Company on July 23,
1999, at 10:00 a.m. (Oklahoma City time), which meeting will be held
at The Waterford Marriott Hotel located at 6300 Waterford Boulevard,
Oklahoma City, Oklahoma. Information in this Proxy Statement is
as of June 1, 1999 unless otherwise stated. The approximate date
on which the Proxy Statement and enclosed form of proxy have been
mailed to shareholders is June 22, 1999.
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 UMB Bank, N.A. 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 UMB Bank, N.A. total approximately $12,000. 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 telefacsimile
or in person.
Voting Rights and Outstanding Shares
Only holders of record of Common Stock at the close of
business on June 15, 1999 (the "Record Date") will be entitled to
notice of and to vote at the Annual Meeting. Any additional
notice required pursuant to Article 113 of Title 7 of the
Colorado Business Corporation Act will be given or made in
compliance with such statute. On the Record Date, there were
13,693,256 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 or for any other purpose. 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 and broker non-
votes as shares that are present and entitled to vote for
purposes of determining the presence of a quorum. "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.
John D. Garber, who beneficially owns approximately 44.1% of
the shares of Common Stock of the Company, has advised the Company
that he intends to vote for each of the director nominees named
herein, as well as for all of the other proposals described below.
Revocability of Proxies
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 UMB Bank, N.A. 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
UMB Bank, N.A., Attention: Securities Transfer Division, P.O. Box
410064, Kansas City, Missouri 64141-0064.
Summary of Proposals
Shareholders will be asked to vote upon the following
proposals at the Annual Meeting:
1. Election of the following five (5) persons to the Board of
Directors: Jeffrey E. Butler, Monty C. McCurry, Newton W. Fink,
Stephen E. Prust, and Geoffrey Glossop. General information
concerning these persons is found beginning on page 3 of this
Proxy Statement.
2. Approval of the proposal to amend the Company's Articles of
Incorporation to permit a reverse stock split of up to one-for-
four of the outstanding shares of the Company's common stock with
the authorized number of shares of common stock remaining at
30,000,000 shares. This proposal is described on pages 15-20.
3. Ratification of the selection of Steakley, Gilbert & Bozalis,
P.C. as the independent accountants for the Company in 1999.
This proposal is described on page 21.
4. Approval of an amendment to the Company's 1998 Stock Option
Plan for Employees to increase the number of shares authorized
for issuance from 750,000 to 1,050,000. This proposal is
described on pages 22-26.
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INFORMATION CONCERNING DIRECTORS AND NOMINEES
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The names, ages (as of June 1, 1999), positions with the
Company and business experience during the past five years of
each of the five Board of Directors nominees is set forth below.
Each director has served continuously with the Company since his
or her first election or appointment as indicated below. There are
no family relationships among the directors, the executive officers,
and the Board of Directors nominees, except that Jeffrey E. Butler is
the father of Jeffrey E. Butler, Jr., the Company's Vice President of
Sales and Marketing.
Current Position Director
Name Age with Company Since
- ---- --- ---------------- --------
Jeffrey E. Butler 57 Chief Executive Officer, 1989
President and Chairman
of the Board of Directors
Monty C. McCurry 53 Director 1989
Newton W. Fink 62 Director 1991
Stephen E. Prust 54 Director 1992
Geoffrey Glossop 50 Director 1998(1)
(1) On December 17, 1998, the Company's Board of Directors
increased the number of directors from four to five and appointed
Mr. Glossop to fill the one vacant directorship.
Jeffrey E. Butler became a director of the Company in August
1989 and was elected Chief Executive Officer and President of the
Company in March 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 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 he was associate general manager.
Newton W. Fink, Ed.D. was elected to the Board of Directors
in January 1991. Since September, 1998, Dr. Fink has been the
Superintendent of Schools in Manteno, IL. From 1994 to 1998 he
was Superintendent of the VIT Schools in Table Grove, IL. Prior
to 1994, Dr. Fink was the President of Computer Instructional Services,
Inc., a privately-held corporation providing computer educational
services to individuals, schools, corporations and institutions.
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. Since 1992, Mr. Prust has provided business
consulting services, including advice on equity and debt
transactions, mergers and acquisitions, to a variety of
companies, ranging from entertainment concerns, Internet
start-ups and industry consolidators. 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.
Geoffrey Glossop was appointed to the Board of Directors in
December 1998. He is the President of Learning Pathways, Limited,
a company he founded in 1997. From 1994 to 1996, Mr. Glossop was
the Research and Development Director for Systems Integrated
Research plc. Prior to 1994, Mr. Glossop was the Managing Director
of Global Learning Systems, Ltd. Mr. Glossop graduated from the
University of Newcastle upon Tyne in 1969 with a B.S. in Electrical
Engineering. He was awarded the M.B.E. for services to the educational
technology industry in the Queen's Birthday Honours in 1982.
Board of Directors Meetings And Committees
During 1998 the Board of Directors held ten meetings of
which eight were by written consent. All directors attended at
least 75% of the meetings of the Board of Directors (Mr. Glossop
was appointed a director in December 1998, and, accordingly, did
not attend any director meetings in 1998). The Board of
Directors does not have standing audit, nominating or
compensation committees or committees performing similar
functions.
Director Compensation
The Company's directors do not receive any cash or other
pecuniary compensation for service on the Board of Directors.
However, Directors may be reimbursed for certain out-of-pocket
expenses incurred in connection with attendance at Board of
Directors meetings. Three of the non-employee members of the
Board of Directors (namely, Monty C. McCurry, Newton W. 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 Stock Option Plan.
In addition, effective April 1, 1999, Stephen E. Prust was granted
12,000 shares of Common Stock, Monty C. McCurry was granted 7,000
shares of Common Stock, and Newton Fink was granted 7,000 shares
of Common Stock, all pursuant to the Company's Nonqualified Stock
Option Plan.
In May, 1998, the Company's shareholders approved 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 subsidiaries ("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.
The Director Plan is 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.
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 further 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. Pursuant to
the Director Plan, each of Messrs. McCurry, Fink, and Prust were
granted in January 1999 options to purchase 3,000 shares of
Common Stock.
The exercise price for all stock options granted under the
Director Plan may 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, ninety (90) 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, then
all options held by the Outside Director will immediately lapse
and will no longer be exercisable.
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.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
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As of the Record Date, there were 13,693,256 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 five
directors; (iii) the four executive officers of the Company named
in the Summary Compensation Table; and (iv) all directors and
executive officers of the Company as a group, as of June 1, 1999:
Number of Shares and
Name and Address of Nature of Beneficial Percent of
Beneficial Owner Ownership (1) Common Stock
- ------------------- -------------------- ------------
John D. and
Clare C. Garber
7530 Navigator Circle
Carlsbad, California
92009 6,038,286 (2) 44.1%
Robert M. Schoolfield
5 Pleasant Cove
Austin, Texas 78746 1,536,517 (3) 11.2%
Jeffrey E. Butler
4217 Old Farm Road
Oklahoma City, Oklahoma
73120 1,423,375 (4) 10.1%
Monty C. McCurry
2134 South Eagle Court
Aurora, Colorado 80014 122,400 (5) 0.8%
Newton W. Fink
1093 Lincoln
Manteno, Illinois 60950 90,400 (6) 0.6%
Stephen E. Prust
9025 East Kenyon Ave.
Denver, Colorado 80237 434,768 (7) 3.1%
Geoffrey Glossop
Field House
6 Haley Croft
Duffield, Derbyshire, UK 510,030 (8) 3.7%
Thomas A. Shively
14431-C North Pennsylvania
Oklahoma City, Oklahoma
73120 529,664 (9) 3.6%
Jeffrey E. Butler, Jr.
1813 Talequah
Edmond, Oklahoma
73013 333,919 (10) 2.3%
Neil R. Johnson
6500 N.W. Grand Blvd.
Oklahoma City, Oklahoma
73116 80,000 (11) 0.5%
All directors and
Executive officers as
a group 3,524,556 23.8%
(1) All shares of Common Stock are held directly unless
indicated otherwise.
(2) Includes 5,527,286 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; 440,000 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; and 71,000 shares of Common
Stock owned by a company controlled by the Garber family.
(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 1,046,575 shares of Common Stock owned by Mr.
Butler individually; options for 316,800 shares of Common Stock
exercisable at $0.50 per share within sixty (60) days of the
Record Date; and options for 60,000 shares of Common Stock
exercisable at $0.73 per share within sixty (60) days of the
Record Date. Exclusive of 333,919 shares of Common Stock
beneficially owned by Mr. Butler's son, Jeffrey E. Butler, Jr.
(5) Includes options for 76,000 shares of Common Stock, 63,000
of which are exercisable at $0.50 per share, 10,000 of which are
exercisable at $0.75 per share, and 3,000 of which are exercisable
at $0.73 per share, all within 60 days of the Record Date.
(6) Includes options for 76,000 shares of Common Stock, 63,000
of which are exercisable at $0.50 per share, 10,000 of which are
exercisable at $0.75 per share, and 3,000 of which are exercisable
at $0.73 per share, all within 60 days of the Record Date.
(7) Includes options for 121,000 shares of Common Stock, 108,000
of which are exercisable at $0.50 per share, 10,000 of which are
exercisable at $0.75 per share, and 3,000 of which are exercisable
at $0.73 per share, all within 60 days of the Record Date.
(8) All 510,030 shares of Common Stock are owned by Geoffrey
Glossop as Trustee of Field House No. 2 Trust.
(9) Includes options for 303,276 shares of Common Stock, 233,276
of which are exercisable at $0.50 per share and 70,000 of which
are exercisable at $0.73 per share, all within 60 days of the
Record Date.
(10) Includes options for 178,000 shares of Common Stock, 108,000
of which are exercisable at $0.50 per share and 70,000 of which
are exercisable at $0.73 per share, all within 60 days of the
Record Date. Exclusive of 1,423,375 shares of Common Stock
beneficially owned by Mr. Butler's father, Jeffrey E. Butler.
(11) Includes options to purchase 75,000 shares of Common Stock
exercisable at $0.73 per share within 60 days of the Record Date.
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EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION
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A biographical description of the Company's President and
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." Set forth below is the applicable table prescribed
by the proxy rules of the Securities and Exchange Commission that
discloses the compensation for the Company's executive officers.
Summary Compensation Table
Annual Compensation Long-Term
Compensation
Awards
Name All
and Other Other
Principal Annual Stock Compensation
Position Year Salary Bonus Compensation Options
(Shares)
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Jeffrey E. 1998 $89,355 $4,158 $0(1) 60,000 $5,000(2)
Butler 1997 $83,878 $0 $0(1) 0 $0
Chairman 1996 $60,570 $0 $0(1) 352,000 $0
of the
Board,
Chief
Executive
Officer and
President
Thomas A. 1998 $83,460 $3,922 $0 70,000 $5,000(2)
Shively 1997 $78,952 $0 $10,637(3) 0 $0
Executive 1996 $68,333 $2,148 $7,508(3) 259,195 $0
Vice
President
Jeffrey E. 1998 $69,322 $21,670 $27,161(4) 70,000 $5,000(2)
Butler, Jr.1997 $65,082 $0 $9,750(4) 0 $0
Vice 1996 $56,750 $5,574 $12,417(4) 120,000 $0
President
Sales and
Marketing
Neil R. 1998 $26,791(5) $0 $0 75,000 $0
Johnson,
Vice
President
and Chief
Financial
Officer
(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. The Company did reimburse Mr. Butler $11,551 for
relocation expenses in 1997.
(2) In January 1998, Jeffrey E. Butler, Thomas A. Shively, and
Jeffrey E. Butler, Jr. each received 10,000 shares of Common
Stock as bonus compensation for their performance in 1997.
(3) These amounts were paid to Mr. Shively for services rendered
prior to 1996.
(4) The amount paid to Jeffrey E. Butler, Jr. in 1998 was for
incentives from 1996. The amounts paid in 1997 and 1996 were for
services rendered prior to 1996.
(5) Mr. Johnson became an employee of the Company in August,
1998.
Note: Mr. Jeffrey E. Butler was awarded 35,200 shares of Common
Stock, Thomas A. Shively 25,919 shares of Common Stock, and
Jeffrey E. Butler, Jr. 12,000 shares of Common Stock, all
effective in April 1999 under the Company's Nonqualified Stock
Option Plan.
Option Grants In 1998(1)
The following table sets forth information concerning the
stock options granted during the last fiscal year to the
Company's executive officers:
Percentage
of Total
Options
Options Granted to Exercise
Granted Employees in Price Expiration
Name (Shares) 1998 (Per Share) Date
- ------------------- -------- ------------ ----------- -----------
Jeffrey E. Butler 60,000 7.7% $0.73 November 1,
2001
Thomas A. Shively 70,000 9.0% $0.73 November 1,
2001
Jeffrey E. Butler, Jr. 70,000 9.0% $0.73 November 1,
2001
Neil R. Johnson 75,000 9.6% $0.73 November 1,
2001
(1) No stock appreciation rights (SARs) were granted in 1998.
Option Exercises and Fiscal Year-End Values
No executive officer exercised options during 1998. The
following table sets forth, for the Company's executive officers
named in the Summary Compensation table above, the year-end
values of unexercised stock options:
Value of
Unexercised
Number of In-the-
Unexercised Money
Options at Options at
Name Year End Year End
- ------------------ ----------- -----------
Jeffrey E. Butler 412,000 $229,280
Thomas A. Shively 329,195 $178,125
Jeffrey E. Butler, Jr. 190,000 $ 96,000
Neil R. Johnson 75,000 $ 27,000
In May 1998, the Company's shareholders approved the 1998 Stock
Option Plan for Employees (the "Option Plan"). The Option Plan
permits the granting of stock options, including incentive stock
options.
The Option Plan is administered by the Board of Directors. An
aggregate of 750,000 shares of Common Stock is currently
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. If Proposal 4 is approved
by the shareholders, an aggregate of 1,050,000 shares of Common
Stock would be authorized for issuance under the Option Plan.
All key employees of the Company are eligible to be participants
(there are currently approximately forty-seven employees of the
Company who are eligible to receive options under the Option
Plan). Approximately 80% of the eligible employees have 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.
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.
Employment Agreements
In December 1998, the Company entered into Executive Employment
Agreements with Jeffrey E. Butler, Thomas A. Shively, Jeffrey E.
Butler, Jr., and Neil R. Johnson. Following is a summary of the
material terms of those Executive Employment Agreements:
Term Change of
from Annual Control Auto
Name Title 12/1998 Salary Severance Benefits(1) Allowance
- ---------- --------- ------- -------- --------- ----------- ---------
Jeffrey E. Chief 2 years $100,796 1 year Yes Yes
Butler Executive
Officer
Thomas A. Executive 2 years $91,903 6 months Yes Yes
Shively Vice
President
Jeffrey E. Vice 2 years $77,313 6 months Yes Yes
Butler, President
Jr.
Neil R. Vice 2 years $84,801 6 months Yes No
Johnson President
and Chief
Financial
Officer
(1) Each Executive Employment Agreement provides benefits to
the employee upon a "change of control" of the Company. A change
of control would generally include, among other events, any
merger of the Company in which the Company is not the surviving
corporation, any sale of all or substantially all of the assets
of the Company, or any person becomes the beneficial owner of
more than 25% of the Company's then outstanding capital stock.
If a change in control occurs then the employee may, in his sole
discretion, require the Company to purchase up to 50% of the
shares of Common Stock beneficially owned by him.
PROPOSAL 1
Election of Directors
- -----------------------------------------------------------------
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 five (each director is serving until his successor
is duly elected and qualified). Five directors, constituting the
entire existing Board of Directors of the Company, are to be
elected at the Annual Meeting. Geoffrey Glossop was appointed by
the Board as a director on December 17, 1998 to fill a vacancy
created when the number of directors was increased from four to
five. Management will present as nominees and recommend to the
shareholders that Jeffrey E. Butler, Monty C. McCurry, Newton W.
Fink, Stephen E. Prust, and Geoffrey Glossop, 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, Prust, and Glossop
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 five director
slots to be filled, the five 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.
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
Amendment of the Company's Articles of Incorporation to Permit a
Reverse Stock Split
- -----------------------------------------------------------------
General
The Board of Directors has authorized, subject to
shareholder approval, up to a one-for-four reverse stock split
(the "Reverse Stock Split") of the Company's outstanding Common
Stock. The Board believes, as a part of a restructuring of the
Company's ownership, that it is essential to increase the
marketability and liquidity of the Common Stock. One way to
accomplish this is to list the stock on the Nasdaq Smallcap
Market or the American Stock Exchange ( "the Exchanges" ). The
criterion for listing on either of the Exchanges requires a
minimum share price that exceeds the current price of the
Company's Common Stock. If the price of the stock does not rise
to the necessary level through valuation in the marketplace, a
Reverse Stock Split may be necessary to accomplish this
objective.
At the Annual Meeting, holders of the Company's Common Stock
will vote on a proposal to amend the Company's Articles of
Incorporation to permit the Reverse Stock Split. The Reverse
Stock Split would only occur if the Board of Directors
specifically votes to proceed. The proposal would allow the
amendment to be abandoned or the Reverse Stock Split to be
reduced to something less than one-for-four (such as one-for-
three or one-for-two) by action of the Board of Directors at any
time after the Annual Meeting and prior to March 31, 2000 (the
"Effective Date"), if the Board of Directors determines in its
sole discretion that the Reverse Stock Split would not be in the
best interests of the Company and its shareholders or that a
different ratio (but not greater than one-for-four) would be in
the best interests of the Company and its shareholders. A copy of
the proposed amendment to the Company's Articles of Incorporation
is set forth as Exhibit "A" hereto.
No fractional shares will be issued and no cash will be paid
for fractional shares. Instead, each fractional share would be
rounded up to a whole share.
Purposes and Effects of the Reverse Stock Split
The Company's Common Stock is currently quoted on the OTC
Bulletin Board under the symbol "AEDU". The Board of Directors
believes that one of the ways that the marketability and
liquidity of the Common Stock could be increased is by listing
the Company's Common Stock on one of the Exchanges. The Board
believes that many brokerage firms and institutional investors
are reluctant to recommend low priced stocks that are not traded
on one of the Exchanges to their clients or hold them in their
own portfolios. Listing on one of the Exchanges could increase
visibility of the stock and help persuade market makers to become
interested in the Company.
Each Exchange has guidelines for an initial listing. In each
case the Company meets all of the criterion for listing with the
exception of maintaining a minimum stock price. This price is
$4.00 for the Nasdaq Smallcap Market and $3.00 for the American
Stock Exchange. The purpose of the Reverse Stock Split would be
to obtain this minimum share price if it is not achieved through
valuation in the marketplace.
If the share price for listing on one of the Exchanges can
be achieved without effecting the Reverse Stock Split, it is
unlikely that the Board of Directors will vote to proceed with
implementation.
On June 8, 1999, the last reported bid and ask prices of
the Company's Common Stock were $1.50 and $1.625, respectively.
If effectuated, the Reverse Stock Split may raise the minimum bid
for the Common Stock above, at least, the $3.00 minimum threshold.
Due to market uncertainties beyond the Company's control,
however, there can be no assurance that the Reverse Stock Split
will raise the minimum bid for the Common Stock above the
thresholds. Also, there is no assurance that, even if the
Reverse Stock Split has the effect of raising the minimum bid
price of the Common Stock above the $3.00 or $4.00 thresholds,
the Company would be able to satisfy the other financial
guidelines for listing on the Exchanges. Moreover, even if such
Reverse Stock Split is accomplished and the Common Stock has a
minimum bid that exceeds the thresholds, future operating losses
or acquisitions could result in reductions of the Company's net
income (or other changes to the Company's financial ratios) below
the minimum required for continued listing. There is no
assurance that if the Company qualifies and is listed that it
will be able to satisfy all other continuing listing requirements
of the Exchanges.
There can be no assurance that any other positive effects
will occur as a result of the Reverse Stock Split including,
without limitation, that the market price per share of Common
Stock after the Reverse Stock Split will either exceed or remain
in excess of the current market price. Further, there can be no
assurance that the market for the Common Stock will be improved.
Holders of the Company's Common Stock should note that the Board
of Directors cannot predict what effect the Reverse Stock Split
will have on the market price of the Common Stock.
Holders of the Company's Common Stock should also note that,
in fact, certain disadvantages may result from the approval of
this proposal and the effectuation of the Reverse Stock Split.
The number of outstanding shares of Common Stock would be
decreased as a result of the Reverse Stock Split, but the number
of authorized shares of Common Stock would not be so decreased.
The Company would therefore have the authority to issue a greater
number of shares of Common Stock following the Reverse Stock
Split without the need to obtain shareholder approval to authorize
additional shares. Any such additional issuances may have the effect
of significantly reducing the interests of the existing shareholders
of the Company with respect to earnings per share, voting, liquidation
value and book and market value per share. Although the Board of
Directors has no present intention of doing so, the additional authorized
but unissued shares could also be used by the Board of Directors to
defeat or delay a hostile takeover. Faced with an actual or proposed
hostile takeover, the Board of Directors could issue shares, in a private
transaction, to friendly parties who might align themselves with the Board
of Directors in opposing a hostile takeover. Accordingly, the proposed
amendment could be considered to have the effect of discouraging a takeover
of the Company. The Board of Directors is not aware, however, of any
current proposals by any party to acquire control of the Company, and the
Reverse Stock Split is not intended to be an anti-takeover device.
The Company does not anticipate that the Reverse Stock Split
will result in a material reduction in the number of holders of
Common Stock, and does not currently intend to effect any Reverse
Stock Split that would result in a reduction in the number of
holders large enough to jeopardize the Company no longer being
subject to the periodic reporting requirements of the Securities
and Exchange Commission under the Securities Exchange Act of
1934.
After giving effect to the settlement of fractional shares
of Common Stock as described herein (i.e., rounding up), there
will be no material differences between or substantial alteration
of the rights of the shares of Common Stock outstanding prior to the
Reverse Stock Split and those to be outstanding after the Reverse Stock
Split is effected. Consummation of the Reverse Stock Split will not
alter the number of authorized shares of Common Stock, which will remain
at 30,000,000 shares, or the number of authorized shares of preferred
stock, which will remain at 50,000,000. Other than the treatment of
fractional shares discussed below, proportionate voting rights and other
rights of the holders of Common Stock will not be substantially altered
by the Reverse Stock Split, except for the negligible effect which would
result from the rounding up of fractional shares.
As of June 1, 1999, there were outstanding options to
purchase an aggregate of 1,676,876 shares of Common Stock under
the Company's Nonqualified Stock Option Plan, Stock Option Plan for
Employees and Directors' Stock Option Plan. All of the outstanding
options include provisions for adjustments in the number of shares
covered thereby, and the exercise price thereof, in the event of a
reverse stock split. If the Reverse Stock Split is approved and
effective, there will be reserved for issuance upon exercise of
all outstanding options a total of approximately 419,219 shares
(assuming a one-for-four reverse split) of New Common Stock, as
defined below. Each of the outstanding options will thereafter
evidence the right to purchase approximately 25% of the shares of
Old Common Stock, as defined below, previously covered thereby,
and the exercise price would be four times the previous exercise
price (assuming a one-for-four reverse split).
If this proposal is approved, and if the Board of Directors
votes to implement, at least ten days prior to the Reverse Stock
Split Effective Date, the Company intends to issue a press
release regarding the planned Reverse Stock Split, notify its
primary market makers, the OTC Bulletin Board, and the Transfer
Agent. On the Reverse Stock Split Effective Date, each share of
Common Stock issued and outstanding prior thereto (the "Old
Common Stock") will be reclassified as and changed into
one-fourth (1/4th) of a share of the Company's Common Stock, par
value $.025 per share (the "New Common Stock"), subject to the
treatment of fractional interests (assuming a one-for-four split
is effected). Shortly after the Reverse Stock Split Effective
Date, the Company will send transmittal forms to the holders of
the Old Common Stock to be used in forwarding their certificates
formerly representing shares of Old Common Stock for surrender
and exchange for certificates representing whole shares of New
Common Stock. CERTIFICATES SHOULD NOT BE SENT TO THE COMPANY OR
THE TRANSFER AGENT PRIOR TO RECEIPT OF SUCH LETTER OF TRANSMITTAL
FROM THE COMPANY. IN ORDER TO RECEIVE CERTIFICATES FOR NEW
COMMON STOCK, SHAREHOLDERS MUST SURRENDER THEIR CERTIFICATE FOR
OLD COMMON STOCK PURSUANT TO THE TRANSMITTAL LETTER.
Beginning with the Reverse Stock Split Effective Date, each
certificate for Old Common Stock will, until surrendered and
exchanged as described above, be deemed for all corporate
purposes to evidence ownership of the whole number of shares of
the New Common Stock into which the shares evidenced by such Old
Common Stock have been changed.
Treatment of Fractional Shares
No fractional shares of Common Stock will be issued. In
lieu thereof, each fractional share will be rounded up to the
nearest whole share. The number of shares of New Common Stock
to be issued in connection with rounding up such fractional
interests is not expected by management of the Company to be
material.
Federal Income Tax Consequences of the Reverse Stock Split
The following discussion of the federal income tax
consequences of the Reverse Stock Split is for general
information only. This summary is based upon laws, regulations,
rulings and judicial decisions now in effect, all of which are
subject to change. This discussion does not cover all aspects of
federal taxation that may be relevant and it does not address
state, local, foreign or other tax laws. The discussion is not
intended to be, nor should it be relied on as, a comprehensive
analysis of the tax issues arising from or relating to the
proposed Reverse Stock Split. Income tax consequences to the
holders of the Common Stock may vary from the federal tax
consequences generally described below.
HOLDERS OF COMMON STOCK SHOULD CONSULT THEIR OWN TAX
ADVISORS AS TO THE EFFECT OF THE REVERSE STOCK SPLIT UNDER
APPLICABLE FEDERAL, STATE AND LOCAL INCOME TAX LAWS.
The amendment of shares of Old Common Stock to become shares
of New Common Stock should not result in recognition of gain or
loss (except in the case of the portion of a whole share of New
Common Stock attributable to the rounding up to the nearest whole
number of shares of New Common Stock in lieu of fractional shares
as described above). The holding period for the shares and
portions of shares of New Common Stock will include the
shareholder's holding period for his shares of Old Common Stock,
provided that the shares of Old Common Stock were held as a
capital asset. The portion of the shares of New Common Stock
attributable to rounding up for fractional shares will have a
holding period commencing on the Reverse Stock Split Effective
Date. The adjusted basis of the shares of New Common Stock will
be the same as the adjusted basis of the shares of Old Common
Stock, increased by the income or gain attributable to the
rounding up to a whole number of shares as described herein.
Shares of New Common Stock attributable to the rounding up to the
nearest whole number of shares will be treated for tax purposes
as if the fractional shares constitute a disproportionate
dividend distribution. Such shareholders should generally
recognize ordinary income to the extent of earnings and profits
of the Company allocated to the portion of each share of New
Common Stock attributable to the rounding up process, and the
remainder of the gain, if any, shall be treated as received from
the exchange of property.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION
ONLY. ACCORDINGLY, EACH HOLDER OF COMMON STOCK IS URGED TO
CONSULT WITH HIS OWN TAX ADVISOR WITH RESPECT TO THE TAX
CONSEQUENCES OF THE PROPOSED REVERSE STOCK SPLIT, INCLUDING THE
APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, MUNICIPAL,
FOREIGN OR OTHER TAXING JURISDICTION.
Vote Required
The affirmative vote of the holders of a majority of the
shares of Common Stock outstanding and entitled to vote at the
Annual Meeting will be required to approve the Reverse Stock
Split. Abstentions and broker non-votes will have the same effect
as negative votes.
If approved, this proposal will become effective upon the
filing of Articles of Amendment to the Articles of Incorporation
of the Company with the Secretary of State of Colorado, only if
filed prior to March 31, 2000. A copy of the proposed amendment
to the Articles of Incorporation effecting the Reverse Stock
Split is set forth on Exhibit "A"; provided, however, that the
text of the proposed amendment is subject to change as may be
required by the Colorado Secretary of State, and the Board of
Directors may make any and all changes to the Articles of
Amendment to the Articles of Incorporation relating to the
amendment that it deems necessary to file the document with the
Colorado Secretary of State and give effect to the Reverse Stock
Split described in this proposal. The Board of Directors will be
authorized, without a further vote of the shareholders, to change
the ratio (but not greater than one-for-four) or to abandon the
Reverse Stock Split and determine not to file the Amendment to
the Articles of Incorporation effecting the Reverse Stock Split
if the Board concludes that such action would be in the best
interests of the Company and its shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO
THE ARTICLES OF INCORPORATION TO PERMIT THE REVERSE STOCK SPLIT.
PROPOSAL 3
Ratification of Selection of Independent Public Accountants
- -----------------------------------------------------------------
The independent public accounting firm utilized by the
Company during the years ended December 31, 1996, 1997 and 1998
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, 1999. 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.
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 and to
ascertain the views of the shareholders regarding such selection.
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
its 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.
Steakley, Gilbert & Bozalis, P.C. has audited the Company's
financial statements for the years ending December 31, 1994
through 1998. There are no disputes with the 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 1999.
PROPOSAL 4
Amendment to Stock Option Plan for Employees
- -----------------------------------------------------------------
The Board of Directors has approved an amendment to the 1998
Stock Option Plan for Employees (the "Option Plan") to increase
the number of shares authorized for issuance from 750,000 to
1,050,000.
Stock-based awards have become increasingly important when
the Company seeks to hire the kind of talented executives needed
to drive the Company's business objectives. The Company competes
for executive talent with a number of other companies. These
companies have traditionally utilized aggressive amounts of
stock-based awards to compensate, motivate, and retain executive
talent. The Board of Directors believes that these amendments
will help the Company compete for executive talent.
In May 1998, the Company's shareholders approved the Option
Plan. Under its terms, the Option Plan can be amended by the
Board of Directors at any time and from time to time; provided
that no amendment will be effective unless the approval of the
Company's shareholders has been obtained if (i) the amendment
would alter or impair any of the rights or obligations under any
option previously granted to an employee under the Option Plan;
(ii) approval of the amendment is required for the Option Plan to
continue to be in compliance with Section 422 of the Internal
Revenue Code; (iii) the amendment materially increases the total
number of shares of Common Stock which may be made the subject of
options to be granted under the Option Plan; or (iv) the
amendment materially modifies the requirements as to eligibility
for participation in the Option Plan.
The Board of Directors recommends that the shareholders
approve and ratify the proposed amendment to the Option Plan.
Summary of the Option Plan
A summary description of the Option Plan as proposed to be
amended follows. This description is qualified in its entirety
by reference to the specific provisions of the Option Plan which
have been filed with the Securities and Exchange Commission.
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.
The Option Plan permits the granting of stock options,
including incentive stock options.
Administration
- --------------
The Option Plan is administered by the Board of Directors.
The Option Plan, as originally adopted, allowed the Company to
grant an aggregate of 750,000 shares of Common Stock 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. As amended, the number of shares of
Common Stock which can be issued pursuant to the Option Plan will
be increased from 750,000 to 1,050,000. 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 forty-seven
employees of the Company who are 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 Internal Revenue Code (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, must be at least 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 90 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.
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. On any subsequent disposition of
stock acquired through the exercise of a Nonstatutory Option, the
gain or loss, measured as the sales price less the fair market
value on the date of exercise, will be capital gain or loss.
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.
Summary of Benefits Provided Under the Option Plan
- --------------------------------------------------
The number of and value of options to be granted to
employees in the future is not presently known and will be
determined by the Stock Option Committee. Since the adoption of
the Option Plan in 1998, options to purchase a total of 498,000
shares of Common Stock have been granted. Optionees have
exercised options to purchase a total of 2,500 shares and options
to purchase 5,000 shares have terminated. As of the Record Date,
there were outstanding options to purchase 490,500 shares of
Common Stock. This number represents 3.6% of the total number of
shares of Common Stock issued and outstanding as of the Record
Date.
From the adoption of the Option Plan through the Record
Date, options to purchase 275,000 shares of Common Stock have
been granted to current executive officers of the Company, and
options to purchase 223,000 shares have been granted to other
current and former employees.
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 amendment
to the 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 AMENDMENT TO
THE 1998 STOCK OPTION PLAN FOR EMPLOYEES.
- ----------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -----------------------------------------------------------------
On December 1, 1998, the Company acquired the business of
Learning Pathways Limited ("LP"), an entity organized under the
laws of the United Kingdom, pursuant to the terms of an Agreement
(the "Purchase Agreement") dated as of November 25, 1998, between
Geoffrey and Teresa Glossop (the "Sellers") and the Company. One
of the Sellers, Geoffrey Glossop, is a current director and is a
nominee for director. Pursuant to the Purchase Agreement, the
Company paid the Sellers 510,030 shares of Common Stock and cash
of U.S. $165,760. The Purchase Agreement further provides that,
if LP meets or exceeds certain financial goals set forth in the
Purchase Agreement, then the Company will pay the Sellers
additional shares of the Company's Common Stock. In connection
with the Purchase Agreement, the Company also granted the Sellers
piggy-back registration rights for the shares of the Common Stock
issued to them. Also, in 1998, LP paid Editplan Services, Ltd.,
a consultant fee of $37,000 to perform management services for
LP. Geoffrey Glossop is an executive officer of, and owns more
than 10% of the equity ownership in, Editplan Services, Ltd.
Since 1991, John D. Garber has been the holder of a note
issued by the Company which was convertible into Common Stock at
$0.1346 per share. As of September 30, 1998, the principal
amount and accrued interest due under such note was $50,000 and
$11,750, respectively. Effective September 30, 1998, Mr. Garber
sold the principal portion of the amount due under such note to
Jeffrey E. Butler in exchange for $50,000 in cash and notes from
Mr. Butler. Immediately after that transaction, both Mr. Butler
and Mr. Garber converted the respective amounts owed by the
Company under such note into Common Stock of the Company. The
$50,000 owed to Mr. Butler converted into 371,471 shares of
Common Stock, and the $11,750 owed to Mr. Garber converted into
87,296 shares of Common Stock. The Company is indebted to Mr. Garber
for tempory advances of $91,319. Mr. Garber beneficially owns
approximately 44.1% of the Common Stock.
The Company paid $8,833 in 1998 and $1,733 in 1997 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.
The Company paid deferred consulting fees to AMD Corporation
in the amount of $25,556 during 1998 for services rendered and
out-of pocket expenses incurred in prior years. Jeffrey E. Butler,
who is the President and a director of the Company (and a director
nominee), is an executive officer of, and owns more than 10% of the
equity ownership in AMD Corporation.
The Company reimbursed Jeffrey E. Butler in 1997 in the
amount of $11,551 for moving expenses.
DEADLINE FOR SHAREHOLDER PROPOSALS
- -----------------------------------------------------------------
Proposals of shareholders for consideration at the 2000
Annual Meeting of Shareholders must be received by the Company on
or before March 8, 2000, 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, 1998, 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 that 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 1998 Annual Report of the Company, as filed with the
Commission, is being mailed to the shareholders with this Proxy
Statement. The 1998 Annual Report is not to be considered part
of the soliciting material.
By Order of the Board of Directors
/s/ Jeffrey E. Butler
- -------------------------------------
Jeffrey E. Butler
President and Chief Executive Officer
Oklahoma City, Oklahoma
June 18, 1999
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING
POSTAGE-PAID ENVELOPE.
EXHIBIT "A"
REVERSE STOCK SPLIT PROPOSED AMENDMENT TO ARTICLES OF
INCORPORATION
If the shareholders approve the Reverse Stock Split, and if the
Company's Board of Directors were to vote to effect the same, the
Company's Articles of Incorporation will be amended to add to
Article Four a new paragraph substantially as follows (assuming a
one-for-four reverse split):
4.2 Reverse Stock Split:
(a) Notwithstanding other reverse stock splits previously
effectuated by the Company, effective ________ __, 199_ (the
"Reverse Stock Split Effective Date"), each outstanding share of
the Corporation's common stock, $0.025 par value per share (the
"Old Common Stock"), shall be converted into 1/4th of a share of
common stock, par value $0.025 per share (the "New Common Stock")
with all of the rights and preferences set forth in these
Articles of Incorporation and under applicable law.
(b) Each stock certificate representing issued and outstanding
shares of Old Common Stock will automatically represent the
proportionate number of shares of New Common Stock. The holders
of Old Common Stock may, but are not required to, exchange their
existing Old Common Stock certificates for certificates
representing the proportionate number of shares of New Common
Stock. If not exchanged earlier, the Old Common Stock
certificates will be exchanged for certificates representing the
proportionate number of shares of New Common Stock at such time
as a holder surrenders the certificates for the purpose of
transferring shares to another person.
(c) No fraction of a share will be issued upon the conversion of
the Old Common Stock. In lieu of issuing any fraction of a
share, each partial share shall be rounded up to the nearest
whole share.
PROXY
THE AMERICAN EDUCATION CORPORATION
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 23, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas A. 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 June 15, 1999, at the Annual Meeting of
Shareholders to be held on July 23, 1999 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 W. Fink
Stephen E. Prust
Geoffrey Glossop
2. Approval of amendment to the Articles of Incorporation to
permit the Reverse Stock Split.
- ------------------------------------------------------------
- -- For -- Against -- Abstain
3. Ratification of Selection of Steakley, Gilbert & Bozalis, P.C.
- -----------------------------------------------------------------
- -- For -- Against -- Abstain
4. Approval of amendment to the Company's 1998 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 and at any
and all adjournments thereof.
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 TO PERMIT THE REVERSE STOCK SPLIT, FOR
THE RATIFICATION OF THE SELECTION OF STEAKLEY, GILBERT & BOZALIS,
P.C. AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR 1999,
AND FOR THE AMENDMENT TO THE COMPANY'S 1998 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 _____________________, 1999.
____________________________________
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.
