<PAGE>
As filed with the Securities and Exchange Commission on September 25, 1995.
Registration No.
-------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933
AMERICAN EDUCATIONAL PRODUCTS, INC.
-----------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED ON ITS CHARTER)
Colorado 84-1012129
- -------- ----------
(STATE OR OTHER JURISDICTION IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER
3101 Iris Avenue, Suite 215
Boulder, Colorado 80301
(303) 443-0020
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(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
Paul D. Whittle
American Educational Products, Inc.
3101 Iris Avenue, Suite 215
Boulder, Colorado 80301
(303) 443-0020
-------------------------------------------------------
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER OF
AGENT FOR SERVICE OF PROCESS)
Copies to:
Clifford L. Neuman, Esq.
Neuman & Cobb
1507 Pine Street
Boulder, Colorado 80302
(303) 447-2212
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box.
/_____/
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / X /
-----
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
Title of Each Class Proposed Maximum Proposed Maximum
of Securities to be Amount to be Offering Price Aggregate Amount of
Registered Registered Per Share(1) Offering Price(1) Registration Fee
- ----------------------------------------------------------------------------------------------------
Common Stock
$.01 par value 250,000(2) $2.00(3) $500,000 $172.42
- ----------------------------------------------------------------------------------------------------
Total: $500,000 $172.42
- ----------------------------------------------------------------------------------------------------
<FN>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Reflects 250,000 shares of Common Stock issuable upon exercise of
outstanding Common Stock Purchase Warrants (the "Warrants").
(3) Based upon the $2.00 per share exercise price of the Warrants.
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
AMERICAN EDUCATIONAL PRODUCTS, INC.
ITEM NO. AND HEADING LOCATION
IN FORM S-3 IN PROSPECTUS
REGISTRATION STATEMENT
1. Forepart of the Registration Statement Forepart of Registration Statement
and outside front cover page of and outside front cover page of
Prospectus Prospectus
2. Inside front and outside back cover Inside front and outside back cover
pages of Prospectus pages of Prospectus
3. Summary Information, Risk Factors and Risk Factors
Ratio of Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Determination of Offering Price
6. Dilution Dilution
7. Plan of Distribution Plan of Distribution
8. Description of Securities to be Description of Securities
Registered
9. Interest of Named Experts and Counsel Legal Matters
10. Material Changes Recent Developments
11. Incorporation of Certain Information Incorporation of Certain Documents
by Reference by Reference
12. Disclosure of Commission Position on Indemnification
Indemnification for securities Act
Liabilities
_______________________________
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<PAGE>
PROSPECTUS
AMERICAN EDUCATIONAL PRODUCTS, INC.
-----------------------------------
250,000 Shares
$.01 par value Common Stock
This Prospectus relates to the offer and sale by American Educational
Products, Inc., a Colorado corporation (the "Company"), of 250,000 shares of
its $.01 par value common stock (the "Common Stock") which are issuable by
the Company pursuant to the exercise of Common Stock Purchase Warrants (the
"Warrants") held by two (2) investors (the "Warrantholders"). The
Warrantholders have agreed to exercise all outstanding Warrants to purchase
an aggregate of 250,000 shares of Common Stock at an exercise price of $2.00
per share (the "Exercise Price"), within ten (10) days following the
effective date of the Registration Statement of which this Prospectus is a
part registering for sale under the Securities Act of 1933, as amended
("Securities Act") the shares of Common Stock issuable upon exercise of the
Warrants ("Warrant Stock"). Upon exercise of the Warrants, the
Warrantholders may offer all 250,000 shares of the Company's Common Stock in
transactions in the over-the-counter market at prices obtainable at the time
of sale, or in privately negotiated transactions at prices determined by
negotiation. The Warrantholders may effect such transactions by selling the
shares to or through securities broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions, or commissions
from the Warrantholders, and/or the purchasers of the shares for whom such
broker-dealers may act as agent or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer may be in excess of
customary commissions). (See "PLAN OF DISTRIBUTION.") The Warrantholders
and the brokers and dealers through whom sales of the shares are made may be
deemed to be "underwriters" within the meaning of the Securities Act, and any
profits realized by them on the sale of the shares may be considered to be
underwriting compensation.
Assuming the Warrantholders exercise all Warrants to purchase 250,000
shares, the Company will receive gross proceeds of $500,000. The Company will
not receive any of the proceeds from the resale of the shares by the
Warrantholders. Pursuant to an agreement between the Company and the
Warrantholders, the Company has agreed to pay all of the expenses incurred in
connection with the registration of the shares, which are estimated to be
$12,000.
The Company's Common Stock is traded on the NASDAQ National Market System
under the symbol AMEP. On September 19, 1995, the closing price was $2.00
per share as reported by NASDAQ NMS.
-------------------------
FOR DISCUSSION OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED IN EVALUATING
AN INVESTMENT IN THE COMPANY, SEE "RISK FACTORS."
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSIONS, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Price to Underwriting Proceeds to
Warrantholders(1) Discount(2) Company(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share: $2.00 * $2.00
Total $500,000 * $500,000
- -------------------------------------------------------------------------------
<FN>
The Date of This Prospectus is ______________, 1995.
(1) Reflects the exercise by the Warrantholders of all outstanding Warrants to
purchase an aggregate of 250,000 shares of Common Stock at an exercise
price of $2.00 per share. The Warrantholders have irrevocably and
unconditionally agreed to exercise, upon written demand of the Company, all
issued and outstanding Warrants; provided, however, said exercise is
subject to and shall only occur within ten (10) days following the
Registration Statement, of which this Prospectus forms a part, being
declared effective by the Commission (see "DESCRIPTION OF SECURITIES-
WARRANTS.")
(2) The Warrantholders may reoffer their shares in transactions in the over-
the-counter market at prices obtainable at the time of sale or in privately
negotiated transactions at prices determined by negotiation. The
Warrantholders may effect transactions by selling to or through securities
broker-dealers and such broker-dealers may receive compensation in the form
of discounts, concessions, or commissions from the Warrantholders. While
it is impracticable to determine the precise amount that the Warrantholders
will incur, it is anticipated that any such discounts, selling concessions
or commissions will be consistent with those customarily charged by broker-
dealers who are members of the National Association of Security Dealers,
Inc. ("NASD").
(3) Consists of proceeds to the Company from the exercise by the Warrantholders
of all Warrants which are exercisable to purchase 250,000 shares of the
Company's Common Stock at an exercise price of $2.00 per share. Does not
reflect deduction of expenses of the Offering for printing, legal,
accounting, transfer agent and miscellaneous expenses of the Offering, the
total of which is estimated at $12,000, which the Company has agreed to
pay. See "USE OF PROCEEDS."
</TABLE>
No dealer, salesman or other person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus, and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction, or in any jurisdiction in
which the person making such offer or solicitation is not qualified to do so.
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<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance with
the Exchange Act files periodic reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information concerning the Company can be inspected and
copied (at prescribed rates) at the Commission's Public Reference Section, Room
1024, 450 Fifth Street, N.W. Judiciary Plaza, Washington, D.C. 20549, as well as
at the following Regional Offices: Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material also may be obtained
at prescribed rates from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In addition, the
Company's Common Stock is traded in the over-the-counter market on the NASDAQ
system, and reports, proxy statements and other information concerning the
Company can be inspected and copied at the Office of the National Association of
Securities Dealers, Inc., 1735 "K" Street, N.W., Washington, D.C. 20006.
The Company has filed a Registration Statement on Form S-3 with the
Commission, Washington, D.C., in accordance with the provisions of the Act.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which have been omitted as permitted
by the rules and regulations of the Commission. For further information
pertaining to the shares of Common Stock offered hereby and the Company,
reference is made to the Registration Statement, including the exhibits and
financial statement schedules filed as a part thereof. Reference also should be
made to the Annual Report to Shareholders and Annual Report on Form 10-KSB for
the year ended December 31, 1994, the Company's definitive Proxy Statement, and
the Company's Quarterly Reports on Form 10-QSB for the quarters ended March 31,
1995 and June 30, 1995, incorporated by reference into this Prospectus.
Statements herein contained concerning the provisions of any document are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an Exhibit to the Registration Statement. Each such
statement is qualified in its entirety by such reference. The Registration
Statement may be obtained from the Commission upon payment of the fees
prescribed therefor and may be examined at the principal office of the
Commission in Washington, D.C.
-3-
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed with the SEC pursuant to the
Securities Exchange Act of 1934, as amended, are incorporated herein by
reference:
(a) The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1994.
(b) The Company's definitive Proxy Statement for the Annual Meeting of
Shareholders held on June 5, 1995.
(c) The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1995 as filed with the Commission on May 15, 1995.
(d) The Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1995 as filed with the Commission on August 18, 1995.
All documents filed by the Company with the Commission pursuant to Section
13a, 13c, 14 or 15d of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering covered by this Prospectus will be
deemed incorporated by reference into this Prospectus and to be a part hereof
from the date of filing of such documents.
Any statement contained in the above-referenced documents shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained in this Prospectus modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Copies of any documents or portions of such documents incorporated in this
Prospectus, not including exhibits to the information that is incorporated by
reference, unless such exhibits are specifically incorporated by reference to
this Prospectus, may be obtained at no charge by a written or oral request to
Paul D. Whittle, President, American Educational Products, Inc., 3101 Iris
Avenue, Suite 215, Boulder, Colorado 80301 (303) 443-0020.
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<PAGE>
THE COMPANY
The Company is engaged in the manufacture, development, marketing and
distribution of both proprietary and non-proprietary supplemental educational
materials and instructional programs through its four wholly-owned
subsidiaries: Scott Resources, Inc. ("Scott Resources"); Hubbard Scientific,
Inc. ("Hubbard Scientific"); Summit Learning, Inc. ("Summit Learning"); and AEP
Media Corporation, d/b/a Churchill Media ("Churchill"). The executive offices
of the Company are located at 3101 Iris Avenue, Suite 215, Boulder, Colorado
80301. Its telephone number at that address is (303) 443-0020.
Scott Resources, a wholly-owned subsidiary, manufactures, develops and
markets both proprietary and non-proprietary supplemental educational materials
and instructional programs in the fields of science and mathematics at its
principal manufacturing facility located at 401 Hickory Street, Fort Collins,
Colorado 80524. Its telephone number at that address is (970) 484-7445.
Hubbard Scientific, another wholly-owned subsidiary, manufactures, develops
and markets both proprietary and non-proprietary supplemental educational and
instructional materials in the field of science. Hubbard Scientific maintains
its principal manufacturing facility at 1120 Halbeib Road, Chippewa Falls,
Wisconsin 94729, and shares executive offices with the parent corporation in
Boulder, Colorado.
Summit Learning is primarily engaged in the catalogue distribution of
supplemental educational material and instructional programs. Summit Learning
distributes products manufactured by Scott Resources and Hubbard Scientific, as
well as products manufactured by third parties. The principal offices of Summit
Learning are maintained at 825 S.W. Frontage Rd., Fort Collins, Colorado 80522,
where its telephone number is (970) 490-2627.
Churchill is primarily in the development, manufacture and distribution of
video tapes and video disks to the educational market. Its principal offices
are located at 6901 Woodley Avenue, Van Nuys, California 91406, where its
telephone number is (818)778-1978.
-5-
<PAGE>
RISK FACTORS
Prospective investors should review carefully the following investment
considerations in evaluating the Company and its business:
LIMITED LIQUIDITY AND CAPITAL RESOURCES. At June 30, 1995, the Company had
a working capital deficit of $1,777,000 based upon current assets of $9,634,000
and current liabilities of $11,411,000. Of current liabilities, however,
approximately $3,000,000 represents previously classified long-term debt which
the Company's primary lender accelerated to mature January 1, 1996. On a pro
forma basis, if the debt is assumed to be reclassified as long-term, the
Company's working capital at June 30, 1995 would be $1,256,000, or a current
ratio of 1.15. Nevertheless, due to the Company's operating deficits incurred
during the year ended December 31, 1994 and during the six months ended June 30,
1995, the Company is experiencing limited liquidity in capital resources which
have been adversely impacting operations.
LACK OF OPERATING PROFITS. For the six months ended June 30, 1995, the
Company reported a pre-tax loss of $63,000 compared to pre-tax income of
$373,000 for the six months ended June 30, 1994. The Company attributes the
decline in operating results to a decline in market demand for its products and
has taken steps to reduce operating expenses to adjust for this decline in
sales. Nevertheless, there can be no assurance that the Company can regain
profitable operations and reverse the downward trend which it has been
experiencing for the past year and a half.
LIMITED FUNDS AVAILABLE FOR OPERATIONS. If the maximum number of Warrants
are exercised, the Company will receive net proceeds of approximately $488,000,
after deducting Offering costs estimated to be $12,000. The Company has
budgeted the net proceeds of this Offering to provide working capital on a
short-term basis. However, given the limited amount of working capital
currently available, it is unlikely that the proceeds of the Offering will be
sufficient to satisfy all of the Company's working capital requirements.
ADDITIONAL CAPITAL REQUIREMENTS. It is probable that the Company will
require additional capital to finance its future business activities.
Therefore, even if the maximum of this Offering is achieved, given the limited
amount of working capital available to the Company, proceeds to the Company will
be substantially below the funding needed to accomplish the Company's
turnaround. Such additional needed capital may be obtained through borrowings
or by additional equity financing, or by the disposition of one or more of the
Company's assets. There can be no assurance that additional capital or funding
can be arranged or, if obtained, will not be obtained upon terms unfavorable to
shareholders of the Company.
ARBITRARY EXERCISE PRICE OF WARRANTS. The exercise price of the Warrants
was arbitrarily determined by the Company and bears no direct relationship to
the Company's assets, book value, net worth or operations. The $2.00 per share
exercise price of the Warrants is $.77 per share greater than the $1.23 per
share net tangible book value of the Company at June 30, 1995.
UNSPECIFIED USE OF PROCEEDS. The monies received by the Company upon
exercise of the Warrants have been allocated generally by the Company to provide
working capital for operations. As such, the Company will utilize funds as they
are received for such purposes and in such proportions as management deems
advisable. While management will apply the proceeds of the Offering in a manner
consistent with their fiduciary duty and in a manner consistent with the best
interests of the Company, there can be no assurance that the monies received
will result in any present or future improvement in the Company's results of
operations.
COMPETITION. The Company faces competition from businesses with greater
resources and larger current market shares. The development of new products can
give a competitor significant market advantage.
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<PAGE>
There can be no assurance that the Company will be able to acquire and develop
new products or increase its portfolio of products to the extent necessary to
keep it competitive.
PRODUCT PROTECTION. The Company relies on copyrights, trademarks and trade
secrets for protection of its products. Although believed to be adequate by the
Company, this protection is limited, and it is possible for competitors of the
Company to imitate some of the Company's manipulatives and models, none of which
are patented. There can be no assurance that such imitations, if significant in
number and degree, would not have a material adverse effect on the operations of
the Company.
POSTAL RATES. The Company's business is dependent on shipping and mailing
catalogs and products. Therefore, the imposition of increased postal rates, a
factor over which the Company has no control, would have a material adverse
impact on the Company's earnings, if such costs could not effectively be passed
on to its customers.
EDUCATIONAL FUNDING. The sale or distribution of the Company's products is
highly dependent upon public funding for elementary, middle and secondary school
systems. As a result, the continued viability of those markets for the
Company's products is dependent upon continued support and funding for public
education.
LIMITED LIQUIDITY IN TRADING MARKET OF SHARES. Prior to the Offering, the
Company's Common Stock has been thinly traded on the NASDAQ National Market
System ("NMS"). Continuation of low volume trading may adversely affect the
liquidity of large holdings and may contribute to high volatility of the price
of the Company's Common Stock.
NASDAQ SYSTEM MAINTENANCE REQUIREMENTS; POSSIBLE DELISTING OF SECURITIES
FROM NASDAQ SYSTEM; RISKS OF LOW-PRICED STOCKS. The Securities Exchange
Commission (the "Commission") has approved rules imposing more stringent
criteria for the listing of securities on NASDAQ, including standards for
maintenance of such listing. If the Company is unable to satisfy NASDAQ's
maintenance criteria in the future, its securities could be de-listed, and
trading, if any, would thereafter be conducted in the over-the-counter market in
the so-called "pink sheets" or the "Electronic Bulletin Board" of the National
Association of Securities Dealers, Inc. ("NASD"). As a consequence of such de-
listing, an investor could find it more difficult to dispose of, or to obtain
accurate quotations as to the price of, the Company's securities.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks, in connection
with trades in any stock defined as a penny stock. The Commission recently
adopted regulations that generally define a penny stock to be any equity
security that has a market price of less than Five Dollars ($5.00) per share,
subject to certain exceptions. Such exceptions include any equity security
listed on NASDAQ and any equity security issued by an issuer that has (i) net
tangible assets of at least Two Million Dollars ($2,000,000), if such issuer has
been in continuous operation for three (3) years, (ii) net tangible assets of at
least Five Million Dollars ($5,000,000), if such issuer has been in continuous
operation for less than three (3) years, or (iii) an average annual revenue of
at least Six Million Dollars ($6,000,000), if such issuer has been in continuous
operation for less than three (3) years. Unless an exception is available, the
regulations require the delivery, prior to any transaction involving a penny
stock, of a disclosure schedule explaining the penny stock market and the risks
associated therewith.
If the Company's securities are not quoted on NASDAQ, or the Company
does not have Two Million Dollars ($2,000,000) in net tangible assets, trading
in the Company's securities would be covered by Rules 15g-1 through 15g-6
promulgated under the Exchange Act for non-NASDAQ and non-exchange listed
securities. Under such rules, broker-dealers who recommend such securities to
persons other than established customers and accredited investors must make a
special written suitability determination that the penny stock
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<PAGE>
is a suitable investment for the purchaser and receive a purchaser's written
agreement to the transaction. Securities are exempt from these rules if the
market price of the Common Stock is at least Five Dollars ($5.00) per share.
Although the Company's Common Stock will, as of the date of this
Prospectus, be outside the definitional scope of a penny stock, as it will be
listed on NASDAQ, in the event the Common Stock was subsequently to become
characterized as a penny stock, the market liquidity for the Company's
securities could be severely affected. In such an event, the regulations on
penny stocks could limit the ability of broker-dealers to sell the Company's
securities and adversely affect the ability of purchasers of the Company's
securities to sell their securities in the secondary market.
DIVIDEND. No dividend has been paid on the Company's Common Stock since
1990, nor, by reason of its present financial status and its contemplated
financial requirements, does the Company contemplate or anticipate paying any
dividends upon its Common Stock in the foreseeable future. (See "DESCRIPTION OF
SECURITIES.")
SHARES ELIGIBLE FOR FUTURE SALE. As of September 18, 1995, 4,150,658
shares of the Company's $.01 par value Common Stock, were issued and
outstanding, 723,602 of which are "restricted securities" and under certain
circumstances may, in the future, be sold pursuant to a registration under the
Securities Act or in compliance with Rule 144 adopted under the Securities Act.
In general, under Rule 144, subject to the satisfaction of certain other
conditions, a person, including an affiliate of the Company, who has
beneficially owned restrictive shares of Common Stock for at least two (2)
years is entitled to sell, within any three-month (3-month) period, a number of
shares that does not exceed the greater of one percent (1%) of the total
number of outstanding shares of the same class, or if the Common Stock is
quoted on NASDAQ or a stock exchange, the average weekly trading volume during
the four (4) calendar weeks immediately preceding the sale. A person who
presently is not and who has not been an affiliate of the Company for at least
three (3) months immediately preceding a sale and who has beneficially owned
the shares of Common Stock for at least three (3) years is entitled to sell
such shares under Rule 144 without regard to any of the volume limitations
described above. The Company also may grant options to purchase an additional
855,000 shares of Common Stock pursuant to the Stock Incentive Plan (the
"Plan"). The Company plans to register for sale under the Act all shares
issuable upon exercise of the options granted pursuant to the Plan, such that
when the options are exercised and the shares issued, they will be free-trading,
except for certain limitations imposed upon directors, officers and affiliates
who exercise options granted under such Plan. No prediction can be made as to
the effect, if any, that sales of shares of Common Stock or the availability
of such shares for sale will have on the market prices prevailing from
time-to-time. Nevertheless, the possibility that substantial amounts of
Common Stock may be sold in the public market may adversely effect prevailing
prices for the Common Stock and could impair the Company's ability to raise
capital in the future through the sale of equity securities. Actual sales or
the prospect of future sales of shares of Common Stock under Rule 144 may have
a depressive effect upon the price of the Common Stock and the market therefor.
FUTURE SALES OF PREFERRED STOCK. The Company's Articles of Incorporation,
as amended, authorize the issuance of up to 50,000,000 shares of preferred
stock. The Board of Directors has been granted the authority to fix and
determine the relative rights and preferences of preferred shares, as well as
the authority to issue such shares, without further stockholder approval. As a
result, the Board of Directors could authorize the issuance of a series of
preferred stock which would grant to holders preferred rights to the assets of
the Company upon liquidation, the right to receive dividend coupons before
dividends would be declared to common stockholders, and the right to the
redemption of such shares, together with a premium, prior to the redemption of
Common Stock. Common stockholders have no redemption rights. In addition, the
Board could issue large blocks of voting stocks to fend against unwanted tender
offers or hostile takeovers without further shareholder approval. (See
"DESCRIPTION OF SECURITIES.")
-8-
<PAGE>
FUTURE SALES OF ADDITIONAL SHARES. The Company's Board of Directors has
the authority to issue additional shares of Common Stock and to issue options
and warrants to purchase shares of the Company's Common Stock without
shareholder approval. Future issuance of Common Stock could be at values
substantially below the exercise price of the Warrants, and therefore could
represent further substantial dilution to investors in this Offering. In
addition, the Board could issue large blocks of voting stock to fend off
unwanted tender offers or hostile takeovers without further shareholder
approval. The Company has outstanding warrants and options exercisable to
purchase up to 954,000 shares of Common Stock at a weighted average exercise
price of $2.88 per share. Exercise of the warrants and options could have a
further dilutive effect on existing stockholders and investors in this Offering.
(See "DESCRIPTION OF SECURITIES.")
DILUTION. As of June 30, 1995, the Company had sold or issued the
outstanding 4,131,000 shares of Common Stock at an average cost per share of
approximately $1.46, which is $.54 per share less than the Warrant exercise
price. At June 30, 1995, the Company had a net tangible book value of
$5,065,000 or $1.23 per share of Common Stock outstanding, based on 4,131,000
shares issued and outstanding. If 100% of the Warrants are exercised, after
deduction of expenses of the Offering, the Company will have a net tangible
book value of approximately $1.27 per share. Under this scenario, investors
in this Offering exercising Warrants will sustain an immediate substantial
dilution of $.73 or 37% of their exercise price per share.
NEED FOR CURRENT PROSPECTUS. The Warrants will not be exercised unless the
Company maintains with the Securities and Exchange Commission a current and
effective Registration Statement and Prospectus covering the shares of Common
Stock issuable upon their exercise. While the Company has undertaken to do so
and plans to do so, there can be no assurance that a current Registration
Statement and Prospectus will be in effect when any of the Warrants are
attempted to be exercised.
MARKET OVERHANG FROM WARRANTS AND OPTIONS. Immediately after the Offering,
the Company will have outstanding 954,000 warrants and options. To the extent
that such stock options or warrants are exercised, dilution to the interests of
the Company's stockholders may occur. Exercise of these options or warrants, or
even the potential of their exercise or conversion, may have an adverse effect
on the trading price and market for the Company's Common Stock. The holders of
the options or warrants are likely to exercise at times when the market price
for the shares of Common Stock exceeds the exercise price of the options or
warrants. Accordingly, the issuance of shares of Common Stock upon exercise of
the options or warrants may result in dilution of the equity represented by the
then outstanding shares of Common Stock held by other shareholders. Holders of
the options or warrants can be expected to exercise them at a time when the
Company, would, in all likelihood, be able to obtain any needed capital on terms
which are more favorable to the Company than the exercise terms provided by such
options or warrants. (See "DESCRIPTION OF SECURITIES.")
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<PAGE>
DILUTION
The net tangible book value of the Company at June 30, 1995 was $5,065,000,
or $1.23 per share, based upon 4,131,000 shares outstanding. Net tangible book
value per share is determined by dividing the number of outstanding shares of
Common Stock into the net tangible book value of the Company (total assets less
total liabilities and intangible assets).
If any outstanding Warrants are exercised, the number of Common Shares
outstanding will increase and the Company's net tangible book value will
increase. While the Warrantholders have executed a Subscription Agreement
irrevocably and unconditionally requiring them to exercise all Warrants within
ten (10) days following the date this Registration Statement is declared
effective by the Commission, given the fact that the exercise price of the
Warrants is $.77 per share greater than the net tangible book value per share of
the Company's outstanding Common Stock, without giving effect to such exercise,
there can be no assurance that all or any of the Warrants will be exercised.
Moreover, the exercise of any Warrants will increase the net tangible book value
per share of shares held by current shareholders and decrease the net tangible
book value per share of the shares purchased pursuant to the Warrant exercise.
Dilution is the reduction of value of the purchaser's investment measured by the
difference between the Warrant exercise price and the net tangible book value
per share after the Offering. The dilution per share will decrease with the
exercise of each additional Warrant because the proceeds from each such exercise
will increase the Company's net tangible book value.
The following table sets forth the estimated dilution to be incurred by the
Warrantholders based upon the assumption that 100% of the outstanding Warrants
are exercised:
<TABLE>
<S> <C>
Warrant Exercise Price(1) $2.00
Net Tangible Book Value Before Offering
(Per Share)(2) $1.23
Number of Shares Outstanding After Offering 4,381,000
Net Tangible Book Value After Offering
(Per Share)(3) $1.27
Increase Attributable to Exercise of
Warrants $0.04
Dilution to Warrantholders (Per Share) $0.73
Dilution as a Percent of Warrant
Exercise Price 37%
- -------------------------
<FN>
(1) Assumes Warrants are exercised to purchase 250,000 shares at an exercise
price of $2.00 per share.
(2) Determined by dividing the number of shares of Common Stock outstanding
into the net tangible book value of the Company.
(3) After deduction of estimated offering expenses, and based on June 30, 1995
book value.
</TABLE>
-10-
<PAGE>
The following table summarizes, on a pro forma basis as of June 30, 1995,
the differences between the number of shares purchased from the Company, the
total consideration paid, and the average price per share paid by the existing
stockholders, and by the Warrantholders.
<TABLE>
<CAPTION>
Percent
Percent Total of Total Average
Shares of Total Consideration Consideration Price Per
Owned Shares Paid Paid Share
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders 4,131,000 94.3% $6,030,000 92.3% $1.46
Warrantholders (1) 250,000 5.7% $500,000 7.7% $2.00
- -------------------------
<FN>
(1) Assumes the exercise by the Warrantholders of all outstanding Warrants to
purchase a total of 250,000 additional shares of Common Stock for an
aggregate purchase price of $500,000. Although each Warrantholder has
executed a Subscription Agreement irrevocably and unconditionally
committing him to exercise all of the Warrants owned within ten (10) days
following the date the Registration Statement, of which this Prospectus
forms a part, is declared effective by the Commission, there can be no
assurance that all or any of the Warrants will be exercised.
</TABLE>
-11-
<PAGE>
USE OF PROCEEDS
If all of the 250,000 shares offered hereby are purchased upon exercise of
the Warrants, then the Company will receive gross proceeds of up to $500,000,
from which the Company will pay the expenses which will be incurred in
connection with the registration of the shares, which are estimated to be
$12,000. The Warrantholders will not pay any of the expenses which are expected
to be incurred in connection with the registration of the shares, but will pay
all commissions, discounts and other compensation to any securities broker-
dealers through whom they sell any of the shares.
The Company will utilize the net proceeds, if any, realized from the
exercise of the Warrants for working capital and for general corporate purposes,
at the discretion of management. Actual expenditures, however, may vary
substantially depending upon economic conditions and opportunities the Company
is able to identify. Due to an inability to precisely forecast events, the
Company is unable to predict the precise period for which this Offering will
provide financing. Given the Company's limited amount of working capital, it is
believed that the proceeds from this Offering will be utilized immediately upon
receipt and will not provide working capital to meet future requirements. The
Company may need to seek additional funds through loans, other financing
arrangements, future sales of securities, or the sale or disposition of assets;
however, there can be no assurance that the Company will be able to make such
arrangements in the future should the need arise.
DETERMINATION OF OFFERING PRICE
The Offering Price of the 250,000 shares offered pursuant to the exercise
of the Warrants is $2.00 per share. The exercise price per share represents the
bid price for the Company's Common Stock on the date that the terms of the
Warrants were agreed upon by the Company and the Warrantholders. The exercise
price of $2.00 per share was determined by negotiation between the Company and
the respective Warrantholders. Among the factors considered in determining the
exercise price were the prevailing market price of the Company's Common Stock at
the time the Company agreed to issue the Warrants, the prevailing market
conditions, operating results of the Company in recent periods, estimates of the
Company's business potential, the book value of the Company, and other factors
deemed relevant.
-12-
<PAGE>
PLAN OF DISTRIBUTION
The Warrants entitle the holders to acquire 250,000 shares of Common Stock
at an exercise price of $2.00 per share. The Company issued the Warrants to the
investors in consideration of the right of the Company to compel the investor to
exercise the Warrants in accordance with their terms during the ten (10) days
following the effective date of the Registration Statement, of which this
Prospectus forms a part.
The shares of Common Stock to be issued upon exercise of the Warrants are
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
The Company has been advised by the Warrantholders that they may hold some
of the shares of Common Stock which they may acquire pursuant to the exercise of
the Warrants, for investment purposes. However, the Warrantholders have not
determined how many shares they will hold for investment and how many shares
they will sell. The Warrantholders may distribute or resell the shares offered
hereby to the public in the over-the-counter market at prices and on terms
prevailing on the date of sale or in negotiated transactions or otherwise. The
Warrantholders have advised the Company that sales to certain dealers may be
made at a discount, not in excess of ten percent of the offering price of the
shares. The Warrantholders also may pay customary brokerage commissions on
sales. The Warrantholders and any brokers or dealers through whom sales of the
common stock are made may be deemed "underwriters" within the meaning of the
Securities Act, and any profits realized on the sale may be deemed underwriting
compensation. The Warrantholders have undertaken to the Company to comply with
Rule 10b-6 under the Securities Exchange Act of 1934, as amended, in connection
with any distribution of the Company's securities.
The Company has agreed to indemnify the Warrantholders against certain
liabilities that may be incurred in connection with this offering, including
certain liabilities under the Securities Act.
The Company has agreed to pay all expenses incurred in connection with the
registration of the shares offered hereby. The Warrantholders shall be
exclusively liable to pay any and all commissions, discounts and other payments
to broker-dealers incurred in connection with their sale of the Shares.
INDEMNIFICATION
The By-Laws of the Company provide for the indemnification of Officers and
Directors to the maximum extent allowable under Colorado law. Insofar as the
indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to Directors, Officers or persons controlling the
Company pursuant to such provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
-13-
<PAGE>
DESCRIPTION OF SECURITIES
The Company's authorized capital consists of 100,000,000 shares of Common
Stock, $.01 par value per share, and 50,000,000 of preferred stock, $.01 par
value per share.
The shares of Common Stock covered by this Prospectus are fully paid and
nonassessable.
COMMON STOCK
Each holder of Common Stock of AEP is entitled to one vote for each share
held of record. Voting rights in the election of directors are not cumulative,
and, therefore, the holders of more than 50% of the Common Stock of the Company
could, if they chose to do so, elect all of the directors.
The shares of Common Stock are not entitled to preemptive rights and are
not subject to redemption or assessment. Subject to the preferences which may
be granted to holders of preferred stock, each share of Common Stock is entitled
to share ratably in distributions to shareholders and to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. Upon liquidation, dissolution or winding up of the Company,
subject to prior liquidation or other preference rights of holders of preferred
stock, if any, the holders of Common Stock are entitled to receive pro rata the
assets of the Company which are legally available for distribution to
shareholders. The issued and outstanding shares of Common Stock are validly
issued, fully paid and nonassessable.
PREFERRED SHARES
The Articles of Incorporation of the Company authorize issuance of a
maximum of 50,000,000 Preferred Shares. The Articles of Incorporation vest the
Board of Directors of the Company with authority to divide the class of
Preferred Shares into series and to fix and determine the relative rights and
preferences of the shares of any such series so established to the full extent
permitted by the laws of the State of Colorado and the Articles of Incorporation
in respect of, among other things, (1) the number of Preferred Shares to
constitute such series, and the distinctive designations thereof; (b) the rate
and preference of dividends, if any, the time of payment of dividends, whether
dividends are cumulative and the date from which any dividend shall accrue; (c)
whether Preferred Shares may be redeemed and, if so, the redemption price and
the terms and conditions of redemption; (d) the liquidation preferences payable
on Preferred Shares in the event of involuntary or voluntary liquidation; (e)
sinking fund or other provisions, if any, for redemption or purchase of
Preferred Shares; (f) the terms and conditions by which Preferred Shares may be
converted, if the Preferred Shares of any series are issued with the privilege
of conversion; and (g) voting rights, if any.
In the event of a proposed merger, tender offer, proxy contest or other
attempt to gain control of the Company not approved by the Board of Directors,
it would be possible for the Board of Directors, subject to any limitations
imposed by applicable law, the Company's Articles of Incorporation, the terms
and conditions of any outstanding class or series of preferred shares and the
applicable rules of any securities exchanges upon which securities of the
Company are at any time listed or of other markets in which securities of the
Company are at any time listed, to authorize the issuance of one or more series
of Preferred Stock with voting rights or other rights and preferences which
would impede the success of the proposed merger, tender offer, proxy contest or
other attempt to gain control of the Company. The issuance of Preferred Stock
may have an adverse effect on the rights (including voting rights) of holders of
Common Stock.
-14-
<PAGE>
WARRANTS
The shares of Common Stock offered hereby are issuable upon the exercise by
certain Common Stock Purchase Warrants beneficially owned by the Warrantholders.
The Warrants entitle the holders thereof to purchase 250,000 shares of Common
Stock at an exercise price of $2.00 per share. The Warrants are exercisable for
a period commencing upon the effective date of the Registration Statement of
which this Prospectus forms a part and ending ten (10) days from the date of
such effectiveness. In the event the Warrants are not exercised within the ten
(10) days following the date the Registration Statement is declared effective by
the Commission, all unexercised Warrants will expire and be void and of no
further force or effect. Each Warrantholder has unconditionally and irrevocably
agreed to exercise all Warrants within the exercise period upon demand by the
Company. The Warrant exercise period may be extended by the Company at the sole
discretion of the Board of the Directors upon thirty (30) days' notice to the
Warrantholder. The Warrants will expire, become void and be of no further force
or effect upon conclusion of the applicable exercise period, or any extension
thereof.
The exercise price, number and kind of common shares to be received upon
exercise of the Warrants are subject to adjustment on the occurrence of certain
events, such as stock splits, stock dividends or recapitalization of the
Company. Adjustment will also occur in the exercise price, number and kind of
common shares to be received upon exercise of the Warrants in the event the
Company issues additional shares of Common Stock, or options, warrants or other
rights convertible into Common Stock of the Company at a price below the then-
prevailing exercise price of the Warrants. In the event of liquidation,
dissolution or winding up of the Company, the holders of the Warrants will not
be entitled to participate in the distribution of the assets of the Company.
Additionally, holders of the Warrants have no voting, pre-emptive, liquidation
or other rights of shareholders, and no dividends will be declared on the
Warrants or the shares underlying the Warrants.
The Warrants were issued to the Warrantholders in reliance upon an
exemption from the Registration Requirements of the Securities Act, and as such,
are "restricted securities" under the Securities Act. Prior to this Offering,
there exists no public trading market for the Warrants, and the Company does not
intend to develop such a market in the future.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed on for the
Company by Neuman & Cobb, Temple-Bowron House, 1507 Pine Street, Boulder,
Colorado 80302, which has served as legal counsel to the Company since its
inception in 1986. Clifford L. Neuman, a partner in the firm, has been a member
of the Company's Board of Directors since November 1990, and its Audit Committee
since April, 1991, and is also the beneficial owner of 65,000 shares of the
Company's Common Stock and options exercisable to purchase, in the aggregate, an
additional 15,000 shares of Common Stock.
EXPERTS
The consolidated financial statements and schedules of the Company as of
December 31, 1994 and 1993 and for each of the years in the three-year period
ended December 31, 1994, have been incorporated by reference herein and in
the Registration Statement and Prospectus in reliance upon the report of HEIN
+ ASSOCIATES, LLP, Independent Certified Public Accountants, incorporated by
reference and upon the authority of said firm as experts in accounting and
auditing.
-15-
<PAGE>
No person is authorized to give any information or to make any
representation other than those contained in this Prospectus, and if made such
information or representation must not be relied upon as having been given or
authorized. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Securities offered
by this Prospectus or an offer to sell or a solicitation of an offer to buy the
Securities in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation in such jurisdiction.
The delivery of this Prospectus shall not, under any circumstances, create
any implication that there has been no changes in the affairs of the Company
since the date of this Prospectus. However, in the event of a material change,
this Prospectus will be amended or supplemented accordingly.
TABLE OF CONTENTS
PAGE
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . . 4
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Determination of Offering Price. . . . . . . . . . . . . . . . . . . . . . 12
Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Description of Securities. . . . . . . . . . . . . . . . . . . . . . . . . 14
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
- -------------------------------------------------------------------------------
AMERICAN EDUCATIONAL PRODUCTS, INC.
250,000 Shares
- -------------------------------------------------------------------------------
PROSPECTUS
- -------------------------------------------------------------------------------
_________________________________________________________________________, 1995
- -------------------------------------------------------------------------------
-16-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering, all of which are to be borne by the
Company, are as follows:
<TABLE>
<S> <C>
SEC Filing Fee $ 173.00
NASD Fees 2,500.00
Printing Expenses* 1,200.00
Accounting Fees and Expenses* 2,500.00
Legal Fees and Expenses* 5,000.00
Blue Sky Fees and Expenses* 500.00
Registrar and Transfer Agent Fee ---
Miscellaneous* 127.00
----------
Total $12,000.00
______________________________
<FN>
* Estimated
</TABLE>
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The only statute, charter provision, bylaw, contract, or other
arrangement under which any controlling person, director or officers of the
Registrant is insured or indemnified in any manner against any liability which
he may incur in his capacity as such, is as follows:
Sections 7-109-101 through 7-109-110 of the Colorado Corporation Code
provide as follows:
7-109-101. DEFINITIONS. As used in this article:
(1) "Corporation" includes any domestic or foreign entity
that is a predecessor of a corporation by reason of a merger
or other transaction in which the predecessor's existence
ceased upon consummation of the transaction.
(2) "Director" means an individual who is or was a director
of a corporation or an individual who, while a director of a
corporation, is or was serving at the corporation's request
as a director, officer, partner, trustee, employee,
fiduciary, or agent of another domestic or foreign
corporation or other person or of an employee benefit plan.
A director is considered to be serving an employee benefit
plan at the corporation's request if his or her duties to
the corporation also impose duties on, or otherwise involve
services by, the director to the plan or to participants in
or beneficiaries of the plan. "Director" includes, unless
the context requires otherwise, the estate or personal
representative of a director.
(3) "Expenses" includes counsel fees.
II-1
<PAGE>
(4) "Liability" means the obligation incurred with respect
to a proceeding to pay a judgment, settlement, penalty,
fine, including an excise tax assessed with respect to an
employee benefit plan, or reasonable expenses.
(5) "Official capacity" means, when used with respect to a
director, the office of director in a corporation and, when
used with respect to a person other than a director as
contemplated in section 7-109-107, the office in a
corporation held by the officer or the employment,
fiduciary, or agency relationship undertaken by the
employee, fiduciary, or agent on behalf of the corporation.
"Official capacity" does not include service for any other
domestic or foreign corporation or other person or employee
benefit plan.
(6) "Party" includes a person who was, is, or is threatened
to be made a named defendant or respondent in a proceeding.
(7) "Proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative and whether
formal or informal.
7-109-102. AUTHORITY TO INDEMNIFY DIRECTORS.
(1) Except as provided in subsection (4) of this section, a
corporation may indemnify a person made a party to a
proceeding because the person is or was a director against
liability incurred in the proceeding if:
(a) The person conducted himself or herself in good
faith; and
(b) The person reasonable believed:
(I) In the case of conduct in an official capacity with
the corporation, that his or her conduct was in the
corporation's best interests; and
(II) In all other cases, that his or her conduct was at
least not opposed to the corporation's best interests; and
(c) In the case of any criminal proceeding, the person
had no reasonable cause to believe his or her conduct was
unlawful.
(2) A director's conduct with respect to an employee
benefit plan for a purpose the director reasonably believed
to be in the interests of the participants in or
beneficiaries of the plan is conduct that satisfies the
requirement of subparagraph (II) of paragraph (b) of
subsection (1) of this section. A director's conduct with
respect to an employee benefit plan for a purpose that the
director did not reasonably believe to be in the interests
of the participants in or beneficiaries of the plan shall be
deemed not to satisfy the requirements of paragraph (a) of
subsection (1) of this section.
(3) The termination of a proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or
its equivalent is not, of itself, determinative that the
director did not meet the standard of conduct described in
this section.
II-2
<PAGE>
(4) A corporation may not indemnify a director under this
section:
(a) In connection with a proceeding by or in the right of
the corporation in which the director was adjudged liable to
the corporation; or
(b) In connection with any other proceeding charging that
the director derived an improper personal benefit, whether
or not involving action in an official capacity, in which
proceeding the director was adjudged liable on the basis
that he or she derived an improper personal benefit.
(5) Indemnification permitted under this section in
connection with a proceeding by or in the right of the
corporation is limited to reasonable expenses incurred in
connection with the proceeding.
7-109-103. MANDATORY INDEMNIFICATION OF DIRECTORS. Unless
limited by its articles of incorporation, a corporation
shall indemnify a person who was wholly successful, on the
merits or otherwise, in the defense of any proceeding to
which the person was a party because the person is or was a
director, against reasonable expenses incurred by him or her
in connection with the proceeding.
7-109-104. ADVANCE OF EXPENSES TO DIRECTORS.
(1) A corporation may pay for or reimburse the reasonable
expenses incurred by a director who is a party to a
proceeding in advance of final disposition of the proceeding
if:
(a) The director furnishes to the corporation a written
affirmation of the director's good faith belief that he or
she has met the standard of conduct described in section 7-
109-102;
(b) The director furnishes to the corporation a written
undertaking, executed personally or on the director's
behalf, to repay the advance if it is ultimately determined
that he or she did not meet the standard of conduct; and
(c) A determination is made that the facts then known to
those making the determination would not preclude
indemnification under this article.
(2) The undertaking required by paragraph (b) of subsection
(1) of this section shall be an unlimited general obligation
of the director but need not be secured and may be accepted
without reference to financial ability to make repayment.
(3) Determinations and authorizations of payments under
this section shall be made in the manner specified in
section 7-109-106.
7-109-105. COURT-ORDERED INDEMNIFICATION OF DIRECTORS.
(1) Unless otherwise provided in the articles of
incorporation, a director who is or was a party to a
proceeding may apply for indemnification to the court
conducting the proceeding or to another court of competent
jurisdiction. On receipt of an application,
II-3
<PAGE>
the court, after giving any notice the court considers
necessary, may order indemnification in the following
manner:
(a) If it determines that the director is entitled to
mandatory indemnification under section 7-109-103, the
court shall order indemnification, in which case the court
shall also order the corporation to pay the director's
reasonable expenses incurred to obtain court-ordered
indemnification.
(b) If it determines that the director is fairly and
reasonable entitled to indemnification in view of all the
relevant circumstances, whether or not the director met the
standard of conduct set forth in section 7-109-102 (1) or
was adjudged liable in the circumstances described in
section 7-109-102 (4), the court may order such
indemnification as the court deems proper; except that the
indemnification with respect to any proceeding in which
liability shall have been adjudged in the circumstances
described in section 7-109-102 (4) is limited to reasonable
expenses incurred in connection with the proceeding and
reasonable expenses incurred to obtain court-ordered
indemnification.
7-109-106. DETERMINATION AND AUTHORIZATION OF
INDEMNIFICATION OF DIRECTORS.
(1) A corporation may not indemnify a director under
section 7-109-102 unless authorized in the specific case
after a determination has been made that indemnification of
the director is permissible in the circumstances because the
director has met the standard of conduct set forth in
section 7-109-102. A corporation shall not advance expenses
to a director under section 7-109-104 unless authorized in
the specific case after the written affirmation and
undertaking required by section 7-109-104 (1) (a) and (1)
(b) are received and the determination required by section
7-109-104 (1) (c) has been made.
(2) The determinations required by subsection (1) of this
section shall be made:
(a) By the board of directors by a majority vote of those
present at a meeting at which a quorum is present, and only
those directors not parties to the proceeding shall be
counted in satisfying the quorum; or
(b) If a quorum cannot be obtained, by a majority vote of
a committee of the board of directors designated by the
board of directors, which committee shall consist of two or
more directors not parties to the proceeding; except that
directors who are parties to the proceeding may participate
in the designation of directors for the committee.
(3) If a quorum cannot be obtained as contemplated in
paragraph (a) of subsection (2) of this section, and a
committee cannot be established under paragraph (b) of
subsection (2) of this section, or, even if a quorum is
obtained or a committee is designated, if a majority of the
directors constituting such quorum or such committee so
directs, the determination required to be made by subsection
(1) of this section shall be made:
(a) By independent legal counsel selected by a vote of
the board of directors or the committee in the manner
specified in paragraph (a) or (b) of subsection (2) of this
section or, if a quorum of the full board cannot be obtained
and a committee cannot
II-4
<PAGE>
be established, by independent legal counsel selected by a
majority vote of the full board of directors; or
(b) By the shareholders.
(4) Authorization of indemnification and advance of
expenses shall be made in the same manner as the
determination that indemnification or advance of expenses is
permissible; except that, if the determination that
indemnification or advance of expenses is permissible is
made by independent legal counsel, authorization of
indemnification and advance of expenses shall be made by the
body that selected such counsel.
7-109-107. INDEMNIFICATION OF OFFICERS, EMPLOYEES,
FIDUCIARIES, AND AGENTS.
(1) Unless otherwise provided in the articles of
incorporation:
(a) An officer is entitled to mandatory indemnification
under section 7-109-103, and is entitled to apply for court-
ordered indemnification under section 7-109-105, in each
case to the same extent as a director;
(b) A corporation may indemnify and advance expenses to
an officer, employee, fiduciary, or agent of the corporation
to the same extent as to a director; and
(c) A corporation may also indemnify and advance expenses
to an officer, employee, fiduciary, or agent who is not a
director to a greater extent, if not inconsistent with
public policy, and if provided for by its bylaws, general or
specific action of its board of directors or shareholders,
or contract.
7-109-108. INSURANCE. A corporation may purchase and
maintain insurance on behalf of a person who is or was a
director, officer, employee, fiduciary, or agent of the
corporation, or who, while a director, officer, employee,
fiduciary, or agent of the corporation, is or was serving at
the request of the corporation as a director, officer,
partner, trustee, employee, fiduciary, or agent of another
domestic or foreign corporation or other person or of an
employee benefit plan, against liability asserted against or
incurred by the person in that capacity or arising from his
or her status as a director, officer, employee, fiduciary,
or agent, whether or not the corporation would have power to
indemnify the person against the same liability under
section 7-109-102, 7-109-103, or 7-109-107. Any such
insurance may be procured from any insurance company
designated by the board of directors, whether such insurance
company is formed under the laws of this state or any other
jurisdiction of the United States or elsewhere, including
any insurance company in which the corporation has an equity
or any other interest through stock ownership or otherwise.
7-109-109. LIMITATION OF INDEMNIFICATION OF DIRECTORS.
(1) A provision treating a corporation's indemnification
of, or advance of expenses to, directors that is contained
in its articles of incorporation or bylaws, in a resolution
of its shareholders or board of directors, or in a contract,
except an insurance policy, or otherwise, is valid only to
the extent the provision is not inconsistent with sections
7-109-101 to 7-109-108. If the article of incorporation
limit indemnification or advance
II-5
<PAGE>
of expenses, indemnification and advance of expenses are
valid only to the extent not inconsistent with the articles
of incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a
corporation's power to pay or reimburse expenses incurred by
a director in connection with an appearance as a witness in
a proceeding at a time when he or she has not been made a
named defendant or respondent in the proceeding.
7-109-110. NOTICE TO SHAREHOLDER OF INDEMNIFICATION OF
DIRECTOR. If a corporation indemnifies or advances expenses
to a director under this article in connection with a
proceeding by or in the right of the corporation, the
corporation shall give written notice of the indemnification
or advance to the shareholders with or before the notice of
the next shareholders' meeting. If the next shareholder
action is taken without a meeting at the instigation of the
board of directors, such notice shall be given to the
shareholders at or before the time the first shareholder
signs a writing consenting to such action.
* * *
b. Article XII of Registrant's Articles of Incorporation provide
that the corporation may indemnify each director, officer, and any employee or
agent of the corporation, his heirs, executors and administrators, against
expenses reasonably incurred or any amounts paid by him in connection with any
action, suit or proceeding to which he may be made a party by reason of his
being or having been a director, officer, employee or agent of the corporation
to the extent permitted by the law as recited above in subparagraph (a).
c. Article XII of Registrant's Articles of Incorporation provides,
in part:
"e. To the maximum extent permitted by law or by public policy,
directors of this Corporation are to have no personal liability
for monetary damages for breach of fiduciary duty as a director."
d. The Company currently pays for and maintains an insurance policy
in the amount of $2,000,000 that covers directors' and officers' liability.
e. The Registration Rights between the Company and the
Warrantholders provides that the Warrantholders will indemnify and hold harmless
the Company, the directors of the Company, each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act of 1933, as
amended (the "1933 Act"), against any and all losses, claims, demands,
liabilities and expenses (including reasonable legal or other expenses) to which
it may become subject, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, or in any Blue Sky Application, or the omission or alleged omission
to state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, resulting from the use of written
information furnished to the Company by the Warrantholders for use in the
preparation of the Registration Statement, or in any Blue Sky Application.
II-6
<PAGE>
Item 16. EXHIBITS.
a. The following Exhibits are filed as part of this Registration
Statement pursuant to Item 601 of Regulation SK:
EXHIBIT NO. TITLE
4.1 Specimen Common Stock Purchase Warrant
4.2 Subscription Agreement
5.1 Opinion of Neuman & Cobb
24.1 Consent of HEIN + ASSOCIATES, LLP
24.2 Consent of Neuman & Cobb
Item 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel that the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered
II-7
<PAGE>
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
4. To provide, upon effectiveness, certificates in such denominations and
registered in such names as are required to permit prompt delivery to each
purchaser.
The undersigned registrant hereby undertakes to deliver or to cause to be
delivered with the Prospectus to each person to whom the prospectus is sent or
given the latest annual report to securityholders that is incorporated by
reference in the Prospectus and furnish pursuant to and meeting the requirements
of Rule 14a-3 or 14c-3 under the Securities Exchange Act of 1934; and where
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the Prospectus, to deliver or cause to be
delivered to each person to whom the Prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
Prospectus to provide such interim financial information.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized. In the City of Boulder, State of Colorado on the
22nd of September, 1995.
AMERICAN EDUCATIONAL
PRODUCTS, INC., a Colorado corporation
By: /s/ Paul D. Whittle
--------------------------------
Paul D. Whittle, President
Pursuant to the requirements of the Securities Exchange Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities with American Educational Products, Inc. and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Paul D. Whittle President, September 22, 1995
- ------------------------ Chief Executive Officer, Director
Paul D. Whittle
/s/ Frank L. Jennings Chief Financial Officer September 22, 1995
- ------------------------
Frank L. Jennings
/s/ Michael L. Hobbs Vice-President of Business Development, September 22, 1995
- ------------------------ Chief Operating Officer,
Michael L. Hobbs Secretary, Director
/s/ Robert A. Scott Director September 22, 1995
- ------------------------
Robert A. Scott
/s/ Clifford C. Thygesen Director September 22, 1995
- ------------------------
Clifford C. Thygesen
/s/ Clifford L. Neuman Director September 22, 1995
- ------------------------
Clifford L. Neuman
Director September 22, 1995
- ------------------------
Dale LaFrenz
Director September 22, 1995
- ------------------------
Wayne R. Kirschling
</TABLE>
II-9
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
EXHIBITS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. TITLE
4.1 Specimen Common Stock Purchase Warrant
4.2 Subscription Agreement
5.1 Opinion of Neuman & Cobb
24.1 Consent of HEIN + ASSOCIATES, LLP, Independent Certified
Public Accountants
24.2 Consent of Neuman & Cobb
<PAGE>
EXHIBIT 4-1
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR QUALIFIED
UNDER THE SECURITIES LAWS OF ANY STATE, IN RELIANCE UPON EXEMPTIONS
FROM SUCH REGISTRATION AND QUALIFICATION.
COMMON STOCK PURCHASE WARRANT
For the Purchase of
Common Stock, $.01 Par Value
of
AMERICAN EDUCATIONAL PRODUCTS, INC.
(a Colorado corporation)
This certifies that, in consideration of its obligation to exercise this
Warrant upon demand by the Company provided for in Section B below,
_________________________ (the "Holder"), as registered owner of this Warrant,
is entitled to at any time prior to the Expiration Date, as defined in paragraph
A below, but not thereafter, to subscribe for, purchase and receive
____________________ (__________) fully paid and non-assessable shares of Common
Stock, $.01 par value, of AMERICAN EDUCATIONAL PRODUCTS, INC., a Colorado
corporation (the "Company"), at a price of Two Dollars ($2.00) per share (the
"Exercise Price"). The rights granted by this Warrant shall be adjusted as
specified herein. Exercise of this Warrant shall be undertaken by Holder by
presentation and surrender of this Warrant and payment of the Exercise Price to
the Company at the principal office of the Company. The form of election
hereinafter provided for must be duly executed and the instructions for
registration of the Common Stock acquired by such exercise must be completed.
If the subscription rights represented by this Warrant Certificate shall not be
exercised at or before the Expiration Date, this Warrant shall become and be
void without further force or effect, and all rights represented hereby shall
cease and expire.
A. EXPIRATION DATE.
Subject to the provisions of this Warrant Certificate and the
adjustments hereinbelow provided, this Warrant shall be exercisable for a period
commencing on the effective date of the Registration Statement to be filed with
the United States Securities and Exchange Commission (SEC) by the Company
registering for sale the shares of Common Stock issuable upon exercise of this
Warrant and (the "Registration Statement") as more fully described hereinbelow,
and expiring (i) upon the written notice of the Company at 5:00 p.m. Colorado
time on the tenth (10th) business day following the effective date of a
Registration Statement (ii) upon the written notice by Holder in the event the
Registration Statement is not declared effective by the SEC within ninety (90)
days of the date of this Warrant, or (iii) upon the mutual agreement of the
Company and Holder, whichever occurs first (the "Expiration Date"). If the
Expiration Date is a day on which banking institutions are authorized by law to
close, then the Expiration Date shall be the next succeeding day which shall not
be such a day.
<PAGE>
B. DUTY TO EXERCISE.
In consideration of the Company's issuance of this Warrant to Holder,
Holder agrees to be irrevocably and unconditionally obligated to exercise all of
the Warrants evidenced by this Certificate upon demand by the Company at any
time during the Exercise Period, subject to the Registration Statement being
effective on the date of such demand and subject further to the Company's common
stock being listed on NASDAQ on the date of such demand and on the Exercise
Date.
C. MANNER OF EXERCISE.
This Warrant shall be exercisable by the Holder by presentation and
surrender hereof to the Company with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the shares, all of
which must be delivered prior to the Expiration Date. Upon receipt by the
Company of this Warrant at the office or agency of the Company, in proper form
for exercise, the Holder shall be deemed to be the Holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder.
D. RESERVATION OF SHARES.
The Company hereby agrees that at all times there shall be reserved
for issuance and/or delivery upon exercise of this Warrant such number of shares
of its Common Stock as shall be required for issuance or delivery upon exercise
of this Warrant.
E. LOSS OF WARRANT.
Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification from a
financially responsible party, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at
any time enforceable by anyone.
F. RIGHTS OF THE HOLDER.
The Holder shall not, solely by virtue hereof, be entitled to any
rights of a shareholder in the Company, either at law or equity, and the rights
of the Holder are limited to those expressed in the Warrant and are not
enforceable against the Company except to the extent set forth herein.
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<PAGE>
G. ASSIGNMENT.
This Warrant is freely assignable by the holder hereof, subject only
to restrictions on transfer imposed by or on account of federal or state
securities laws.
H. ANTI-DILUTION PROVISIONS.
1. ADJUSTMENTS OF EXERCISE PRICE. If prior to the expiration of
this Warrant by exercise or by its terms, the Company should issue or sell any
shares of Common Stock or declare a stock dividend to shareholders (except
(a) pursuant to warrants, options and securities convertible into common stock
issued by the Company and outstanding on the date of this Common Stock Purchase
Warrant, (b) to officers, directors, or employees of the Company or any
subsidiary, and to certain consultants and contractors who perform substantial
services for the Company, pursuant to a management or key employee bonus or
incentive plan approved by the Board of Directors prior to the date of this
Warrant, or (iii) in consideration for property or services for a consideration
per share less than the Exercise Price in effect immediately prior to the time
of such issue or sale), then forthwith upon such issue or sale, the Exercise
Price shall be reduced to a price (computed to the nearest cent) determined by
multiplying the existing Exercise Price by a fraction, the numerator of which is
the sum of (w) the number of shares of Common Stock outstanding immediately
prior to such issue or sale plus (x) the number of shares which, when multiplied
by the Exercise Price in effect immediately prior to such issue or sale would
equal the consideration received by the Company upon such issue or sale, and the
denominator of which is the sum of (y) the total number of shares of Common
Stock outstanding immediately before such issue or sale plus (z) the number of
additional shares issued.
2. ADJUSTMENT FOR DIVIDENDS. In the event the Company shall make or
issue, or shall have issued, or shall fix a record date for the determination
of holders of common stock entitled to receive a dividend or the distribution
(other than a distribution otherwise provided for herein) payable in
securities of the Company other than shares of common stock or assets
(including cash paid or payable out of capital or capital surplus or surplus
created as a result of a revaluation of property, but excluding the
cumulative dividends payable with respect to an authorized series of
Preferred Stock), then and in each such event provision shall be made so that
the holders of Warrants shall receive upon exercise thereof in addition to
the number of shares of common stock receivable thereupon, the number of
securities or such other assets of the Company which they would have received
had their Warrants been exercised into common stock on the date of such event
and had they thereafter, during the period from the date of such event to and
including the exercise date, retained such securities or such other assets
receivable by them as aforesaid during such period, giving application to all
adjustments called for during such period under this Section H with respect
to Warrant Holders.
3. ADJUSTMENT FOR CAPITAL REORGANIZATION OR RECLASSIFICATION. If
the common stock issuable upon the exercise of the Warrants shall be changed
into the same or different number of shares of any class or classes of stock,
whether by capital reorganization, reclassification or otherwise, then and in
each such event the holder of the Warrants shall have the right thereafter to
exercise such Warrants and receive the kind and amount of shares of stock and
other securities and property receivable upon such reorganization,
reclassification or other change by holders of the
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<PAGE>
number of shares of common stock into which such Warrant might have been
exercised immediately prior to such reorganization, reclassification or change,
all subject to further adjustment as provided herein.
4. CONVERTIBLE SECURITIES. For the purpose of the adjustment
provided for in Section (1) of this paragraph H, if at any time or from time to
time after the date of this Warrant the Company shall issue any rights or
options for the purchase of, or stock or other securities convertible into,
additional shares of common stock (such convertible stock or securities being
hereafter referred to as "convertible securities,") then such event, in the
absence of the exercise or conversion of the convertible securities into
additional shares of common stock, shall not result in any adjustment in the
exercise price of this Warrant. Rather, an adjustment in the exercise price of
this Warrant shall occur if, and only if, the convertible security is converted
or exercised to acquire additional shares of common stock, in which event the
conversion value or exercise price of the convertible securities shall be
treated as the consideration per share received by the Company for such security
for the purposes of determining the adjustment provided for in subsection (1) of
this paragraph H.
5. TREASURY SHARES. For the purpose of this subsection H, shares of
Common Stock at any relevant time owned or held by, or for the account of, the
Company shall not be deemed outstanding.
6. ADJUSTMENT OF NUMBER OF SHARES. Anything in this Certificate to
the contrary notwithstanding, in case the Company shall at any time issue Common
Stock or Convertible Securities by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding shares of Common
Stock, the Exercise Price shall be proportionately decreased in the case of such
issuance (on the day following the date fixed for determining shareholders
entitled to receive such dividend or other distribution) or decreased in the
case of such subdivision or increased in the case of such combination (on the
date that such subdivision or combination shall become effective).
7. NO ADJUSTMENT FOR SMALL AMOUNTS. Anything in this Section H to
the contrary notwithstanding, the Company shall not be required to give effect
to any adjustment in the Exercise Price unless and until the net effect of one
or more adjustments, determined as above provided, shall have required a change
of the Exercise Price by at least five cents, but when the cumulative net effect
of more than one adjustment so determined shall be to change the actual Exercise
Price by at least five cents, such change in the Exercise Price shall thereupon
be given effect.
8. NUMBER OF SHARES ADJUSTED. Upon any adjustment of the Exercise
Price, the Holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase, at the new Exercise Price, the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares of Common Stock initially issuable upon exercise of this Warrant by
the Exercise Price in effect on the date hereof and dividing the product so
obtained by the new Exercise Price.
9. COMMON STOCK DEFINED. Whenever reference is made in this Section
H to the issue or sale of shares of Common Stock, the term "Common Stock" shall
mean the Common
-4-
<PAGE>
Stock of the Company of the class authorized as of the date hereof and any other
class of stock ranking on a parity with such Common Stock. However, subject to
the provisions of Section F hereof, shares issuable upon exercise hereof shall
include only shares of the class designated as Common Stock of the Company as of
the date hereof.
I. OFFICER'S CERTIFICATE.
Whenever the Exercise Price shall be adjusted as required by the
provisions of Section H hereof, the Company shall forthwith file in the custody
of its Secretary or an Assistant Secretary at its principal office, an
officer's certificate showing the adjusted Exercise Price determined as herein
provided and setting forth in reasonable detail the facts requiring such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the Holder and the Company shall, forthwith
after each such adjustment, deliver a copy of such certificate to the Holder.
Such certificate shall be conclusive as to the correctness of such adjustment.
J. NOTICES TO WARRANT HOLDERS.
So long as this Warrant shall be outstanding and unexercised (i) if
the Company shall pay any dividend or make any distribution upon the Common
Stock or (ii) if the Company shall offer to all Holders of Common Stock for
subscription or purchase by them any shares of stock of any class or any other
rights or (iii) if any capital reorganization of the Company, reclassification
of the capital stock of the Company, consolidation or merger of the Company with
or into another corporation, sale, lease or transfer of all or substantially all
of the property and assets of the Company to another corporation, or voluntary
or involuntary dissolution, liquidation or winding up of the Company shall be
effected, then, in any such case, the Company shall cause to be delivered to the
Holder, at least ten (10) days prior to the date specified in (x) or (y) below,
as the case may be (but in no event prior to the date such event is disclosed to
the public by the Company), a notice containing a brief description of the
proposed action and stating the date on which (x) a record is to be taken for
the purpose of such dividend, distribution of rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any, is
to be fixed, as of which the Holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
K. RECLASSIFICATION, REORGANIZATION OR MERGER.
In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock of the Company (other than a change
in par value, or from par value to no par value, or from no par value to par
value, or as a result of an issuance of Common Stock by way of dividend or other
distribution or of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon exercise of this Warrant) or in case of any sale or
conveyance to another corporation of the property of the Company as an entirety
or substantially as an entirety, the
-5-
<PAGE>
Company shall cause effective provision to be made so that the Holder shall have
the right thereafter, by exercising this Warrant, to purchase the kind and
amount of shares of stock and other securities and property receivable upon such
reclassification, capital reorganization or other change, consolidation, merger,
sale or conveyance. Any such provision shall include provision for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Warrant. The foregoing provisions of this Section K shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for or of a security of the Company other than
Common Stock, any such issue shall be treated as an issue of Common Stock
covered by the provisions of subsection D(1) hereof with the amount of the
consideration received upon the issue thereof being determined by the Board of
Directors of the Company, such determination to be final and binding on the
Holder.
L. REGISTRATION RIGHTS.
1. Within thirty (30) days of the date of this Warrant, the Company
shall cause to be prepared and filed with the SEC a Registration Statement on
Form S-3 registering for sale the shares of Common Stock issuable upon exercise
of this Warrant (the "Registration Statement").
2. In connection with the preparation and filing of the Registration
Statement, the Company agrees to (i) use its best efforts to cause such
Registration Statement to become and remain effective; (ii) prepare and file
with the SEC such amendments and supplements to such Registration Statement as
may be necessary to keep such Registration Statement effective for a period of
not less than thirty (30) days; (iii) furnish to the Holder such number of
copies of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Securities Act of 1933, as amended (the "Act"), and such
other documents as Holder may reasonably request in order to facilitate the
disposition of the shares of Common Stock; and (iv) use its best efforts to
register and qualify the shares of Common Stock covered by such Registration
Statement under such other securities or Blue Sky laws of such jurisdictions as
shall be identified by the warrant holders for the distribution of the
securities covered by the Registration Statement.
3. All expenses, including, without limitation, Securities and
Exchange Commission filing fees, Blue Sky filing fees, printing costs,
accounting fees costs, transfer agent fees, and any other miscellaneous costs
and disbursements, including fees and disbursements of legal counsel for the
Company incurred in connection with the preparation and filing of the
Registration Statement shall be borne by the Company. Each Holder participating
in the Registration shall be liable for any and all underwriting discounts,
brokerage commissions or other fees or expenses incurred in connection with the
sale or other disposition by Holder of the shares of Common Stock covered by the
Registration Statement.
4. To the extent permitted by law, Holder will indemnify and hold
harmless the Company, and its directors, officers, employees, agents and
representatives, as well as its controlling persons (within the meaning of the
Act) against any losses, claims, damages, liabilities, or expenses, including
without limitation, attorney's fees and disbursements, which arise out of or are
based upon
-6-
<PAGE>
any violation by Holder of the Act or under the Securities Exchange Act of 1934,
or any rule or regulation promulgated thereunder applicable to Holder, or arise
out of or are based upon any untrue statement or omission of Holder in the
Subscription Agreement between the Company and Holder, or arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only to the extent that such untrue statement or alleged untrue statement or
omission, or alleged omission was made in such Registration Statement in
reliance upon and in conformity with information furnished by Holder in writing,
expressly for use in connection with such Registration Statement.
5. To the extent permitted by law, the Company will indemnify and
hold harmless Holder, including its officers, directors, employees, agents, and
representatives, against any losses, claims, damages, liabilities, or expenses,
including without limitation attorney's fees and disbursements, to which Holder
may become subject under the Act to the extent that such losses, claims, damages
or liabilities arise out of or are based upon any violation by the Company of
the Act or under the Securities Exchange Act of 1934, or any rule or regulation
promulgated thereunder applicable to the Company, or arise out of or are based
upon any untrue or alleged untrue statement of any material fact contained in
the Registration Statement, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or arise out of any
violation by the Company of any rule or regulation promulgated under the Act
applicable to the Company and relating to action or inaction required of the
Company in connection with such Registration Statement; provided, however, that
the indemnity agreement contained in this paragraph shall not apply to any loss,
damage or liability to the extent that same arises out of or is based upon an
untrue statement or omission made in connection with such Registration Statement
in reliance upon and in conformity with information furnished in writing
expressly for use in connection with such Registration Statement by Holder.
6. Holder undertakes to comply with all applicable laws governing
the distribution of securities in connection with Holder's sale of common stock
of the Company acquired pursuant to the exercise of this Warrant, including,
without limitation, Rule 10(b)-6 under the Securities Exchange Act of 1934, and
to notify the Company of any changes in Holder's plan of distribution, including
the determination of the public offering price and any dealer concession or
discount so that the Company can sticker or amend the Registration Statement as
the Company deems appropriate in its sole discretion.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officers and to be sealed with the seal of the Company this ____
day of _____________________, 1995.
AMERICAN EDUCATIONAL PRODUCTS, INC.
By: ___________________________________
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<PAGE>
Attest: ________________________________
Secretary
-8-
<PAGE>
PURCHASE FORM
Dated: __________________, 199___
The undersigned hereby irrevocably elects to exercise the attached Warrant
to the extent of purchasing ____________________________ shares of Common Stock,
and hereby makes payment of $________________________ in payment of the Exercise
Price therefor.
________________________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name _________________________________________________________________
(please typewrite or print in block letters)
Address _________________________________________________________________
_________________________________________________________________
Signature _________________________________________________________________
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, _______________________________________________________
hereby sells, assigns and transfers unto
Name _________________________________________________________________
(please typewrite or print in block letters)
Address _________________________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
__________________ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint
________________________________________________________________________________
attorney, to transfer the same on the books of the Company with full power of
substitution in the premises.
Signature ________________________________________
Dated: _______________________, 19____
<PAGE>
SUBSCRIPTION AGREEMENT
THE SECURITIES IN THE FORM OF THE COMMON STOCK PURCHASE WARRANTS OF
AMERICAN EDUCATIONAL PRODUCTS, INC. HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS.
THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THE COMMON STOCK
PURCHASE WARRANTS ARE BEING REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. SUCH SHARES CANNOT BE SOLD, TRANSFERRED, ASSIGNED, OR
OTHERWISE DISPOSED OF, EXCEPT IN ACCORDANCE WITH THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS.
American Educational Products, Inc.
3101 Iris Avenue, Suite 215
Boulder, Colorado 80301
Gentlemen:
1. ISSUANCE OF COMMON STOCK PURCHASE WARRANTS.
(a) Subject to the terms and conditions of this Subscription
Agreement, American Educational Products, Inc. (the "Company") herewith issues
and delivers to the undersigned ("Subscriber") _____________________ Common
Stock Purchase Warrants (the "Warrants").
(b) Each Warrant shall be exercisable to purchase one (1) share of
the Company's Common Stock, $.01 par value ("Common Stock") for an exercise
price of Two Dollars ($2.00) per share. The Warrants shall be in the form of
Exhibit A attached hereto and incorporated herein by reference. Each Warrant
shall be exercisable for a period commencing upon the effective date of and
expiring at 5:00 p.m. Colorado time on the tenth (10th) business day following
the effective date of a Registration Statement to be filed with the United
States Securities and Exchange Commission ("SEC"), registering for sale the
shares of Common Stock issuable upon exercise of the Warrants (the "Registration
Statement").
2. SUBSCRIPTION.
(a) Subject to the Registration Statement being declared effective
by the SEC, and subject further to the Company's common stock continuing to be
listed on NASDAQ, Subscriber hereby irrevocably and unconditionally agrees to
exercise, upon written demand of the Company, all Warrants herewith issued and
delivered by the Company to Subscriber pursuant to this Subscription Agreement;
provided, however, said exercise to occur within ten (10) business days
following the effective date of such Registration Statement.
(b) The exercise of all Warrants shall be accomplished by tendering
to the Company the sum of Two Dollars ($2.00) times the number of Warrants owned
by Subscriber (the "Subscription Amount") in certified funds or by wire transfer
of immediately available funds.
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<PAGE>
(c) Upon tender and delivery of the Subscription Amount to the
Company, the Company shall issue to Subscriber certificates representing the
shares of the Company's Common Stock so subscribed and paid.
3. REPRESENTATIONS AND WARRANTIES.
Subscriber hereby makes the following representations and warranties:
(a) His or its offer to purchase is based solely upon his or its
own independent evaluation, which may include the counsel of his or its own
advisors;
(b) He or it recognizes that his or its investment is speculative;
(c) He or it has carefully reviewed and understands the various
risks of an investment in the Company, and he or it can afford to bear the risks
of an investment in the Company, including the risk of losing his or its entire
investment;
(d) The undersigned acknowledges that the Company has made
available to him or it the opportunity to obtain additional information to
evaluate the merits and risks of this investment. The undersigned acknowledges
that he or it had the opportunity to ask questions of the Company, and, to the
extent he or it availed himself of such opportunity, he or it received
satisfactory answers from the Company, or its affiliates, associates, or
employees concerning the terms and conditions of the investment.
(e) Based upon the foregoing, Subscriber understands the proposed
use of the funds by the Company, he or it is familiar with the management,
contemplated operations, financial conditions and all other factors regarding
the Company, and has fully satisfied himself with respect to the nature of the
investment, and has received no assurances of any kind whatsoever relative
thereto, nor has there been any other representations made regarding any
potential increment in value of the securities acquired by Subscriber. The
securities purchased by Subscriber are speculative and high risk, all of which
is understood by Subscriber who represents and warrants that he or it has
sufficient knowledge and experience in business and financial matters to
evaluate the merits and risks of an investment of this type.
(f) The Subscriber has either (i) a preexisting personal or
business relationship with the Company, or a director or officer of the Company
or an affiliate of the Company; or (ii) the business or financial experience
necessary to protect the Subscriber's interest in connection with the investment
in securities of the Company.
(g) Subscriber acknowledges that the Warrants have neither been
registered nor is registration thereof under the Securities Act of 1933 or under
any state securities law contemplated.
(h) Subscriber was not organized or reorganized for the specific
purpose of acquiring securities of the Company.
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<PAGE>
(i) If a corporation, Subscriber is a corporation duly organized
and validly existing under the laws of the state of its incorporation or
organization, is authorized and qualified to acquire the securities subject to
the Subscription Agreement, and the securities underlying the Warrants. The
person signing this Agreement on behalf of such entity has been duly authorized
by such entity to do so.
(j) Subscriber is an accredited investor within the meaning of
Rule 501(a) of Regulation D promulgated under the Securities Act of 1933. The
specific category or categories of accredited investor applicable to the
undersigned are as follows:
/__/ Subscriber is an investment company registered under the
Investment Company Act of 1940
/__/ Subscriber is a business development company as defined
in Section 2(a)(48) of the Investment Company Act.
/__/ Subscriber is a natural person whose individual net
worth, or joint net worth with that of Subscriber's
spouse, on the date of this Subscription Agreement
exceeds $1,000,000.
(k) The investment by Subscriber in any of the securities of the
Company and the Subscriber's proposed plan of distribution of such securities is
not inconsistent with and will not violate any fundamental investment
objectives, policies or restrictions applicable to Subscriber.
4. REGISTRATION AND RESTRICTIONS ON TRANSFERABILITY.
The shares of the Company's Common Stock issuable upon exercise of the
Warrants as hereinabove defined, are to be registered for sale by the Company in
a Registration Statement to be filed with the United States Securities and
Exchange Commission not later than thirty (30) days from the execution hereof.
Subscriber's obligation to exercise the Warrants is subject to and contingent
upon such Registration Statement being declared effective by the SEC.
Subscriber agrees that any sales or transfers of the Warrants or shares of
Common Stock issuable upon exercise of either the Warrants shall be made in
compliance with the Securities Act of 1933, as amended, and any and all
applicable state securities laws.
5. MISCELLANEOUS.
(a) This Subscription Agreement shall be governed by and construed
in accordance with the internal laws of the State of Colorado. This Agreement
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and may be amended only by writing executed by all
parties. If any provision of this Subscription Agreement or the application
thereof, any person or any other circumstances shall be determined to be
invalid, unlawful or unenforceable to any extent, then the remainder of this
Subscription Agreement, and the application of such provisions other than the
provisions which are deemed invalid, unenforceable and unlawful shall not be
affected thereby and each remaining provision hereof shall continue to be valid
and may be enforced to the full extent permitted by law.
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<PAGE>
(b) The written demand of the Company on Subscriber provided for in
Section 2(a) and 2(d) of this Subscription Agreement shall be deemed given by
deposit thereof in the United States mails, first class, postage prepaid,
addressed to Subscriber at the following address:
_____________________________________________
Subscriber Name
_____________________________________________
Address
_____________________________________________
Dated: __________________
Name: _________________________________________________________________________
(Typed or Printed)
Signature: _____________________________________________________________________
Social Security I.D. Number: ___________________________________________________
Residence Address: _____________________________________________________________
_____________________________________________________________
Registered Representative: _____________________________________________________
Subscription Amount: ___________________________________________________________
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ACCEPTANCE
The undersigned hereby acknowledges receipt of the Subscription
Agreement, a copy of which is set forth above. The undersigned hereby accepts
the subscription embodied in the Subscription Agreement, all on the terms and
conditions set forth therein.
AMERICAN EDUCATIONAL PRODUCTS, INC.
Dated: _____________________________ By: ____________________________________
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EXHIBIT 5.1
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<PAGE>
[NEUMAN & COBB LETTERHEAD]
September 22, 1995
American Educational Products, Inc.
3101 Iris Avenue, Suite 215
Boulder, Colorado 80301
Re: S.E.C. REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have acted as counsel to American Educational Products, Inc. (the
"Company") in connection with a Registration Statement to be filed with the
United Stated Securities and Exchange Commission, Washington, D.C., pursuant to
the Securities Act of 1933, as amended, covering the registration of 250,000
shares of the Company's $0.01 par value common stock (the "Common Stock"), which
are issuable by the Company pursuant to the exercise of Common Stock Purchase
Warrants (the "Warrants") held by two (2) investors. In connection with such
representation of the Company, we have examined such corporate records, and have
made such inquiry of government officials and Company officials and have made
such examination of the law as we deemed appropriate in connection with
delivering this opinion. In such examination, we have assumed the genuineness
of all signatures, the authenticity of all documents submitted to us as
originals or copies and the conformity to original documents of all copies
submitted to us.
Based upon the foregoing, we are of the opinion as follows:
1. The Company has been duly incorporated and organized under the laws of
the State of Colorado and is validly existing as a corporation in good standing
under the laws of that state.
2. The Company's authorized capital consists of 100,000,000 shares of
Common Stock, $0.01 par value per share, and 50,000,000 shares of Preferred
Stock, $0.01 par value per share.
3. The 250,000 shares of the Company's Common Stock proposed to be issued
pursuant to the exercise of the Warrants shall, upon valid exercise thereof as
more fully described in the Registration Statement, be duly and validly
authorized, legally issued, fully paid and nonassessable.
Sincerely,
/s/ Nathan L. Stone
Nathan L. Stone
NLS\mss
<PAGE>
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in the Registration Statement and
Prospectus of American Educational Products, Inc. of our report dated February
28, 1985, accompanying the consolidated financial statements of American
Educational Products, Inc. also incorporated by reference in such Registration
Statement, and to the use of our name and the statements with respect to us, as
appearing under the heading "Experts" in the Prospectus.
/s/ Hein & Associates LLP
- -------------------------
Hein & Associates LLP
Certified Public Accountants
Denver, Colorado
September 21, 1995
<PAGE>
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EXHIBIT 24.2
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<PAGE>
[NEUMAN & COBB LETTERHEAD]
September 22, 1995
American Educational Products, Inc.
3101 Iris Avenue, Suite 215
Boulder, Colorado 80301
Re: S.E.C. REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We hereby consent to the inclusion of our opinion regarding the legality of
the securities being registered by the Registration Statement to be filed with
the United Stated Securities and Exchange Commission, Washington, D.C., pursuant
to the Securities Act of 1933, as amended, by American Educational Products,
Inc., a Colorado corporation, in connection with its offering of up to 250,000
shares of its Common Stock, as proposed and more fully described in such
Registration Statement.
We further consent to the reference in such Registration Statement to our
having given such opinions.
Sincerely,
/s/ Nathan L. Stone
Nathan L. Stone
NLS\mss
