SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. ______)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
The American Education Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction
applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary material.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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THE AMERICAN EDUCATION CORPORATION
7506 North Broadway Extension, Suite 505
Oklahoma City, Oklahoma 73116
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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To Be Held Friday, July 28, 2000
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To the Shareholders of The American Education Corporation:
The 2000 Annual Meeting of Shareholders of The American
Education Corporation ("AEC" or the "Company") will be held on
July 28, 2000, at 10:00 a.m. (Oklahoma City time), at The National
Cowboy Hall of Fame located at 1700 N.E. 63rd Street, Oklahoma
City, Oklahoma, for the following purposes:
1. To elect five (5) directors to serve until their
successors are duly elected and qualified;
2. To ratify the selection of Steakley, Gilbert & Bozalis,
P.C. as the independent accountants for the Company for the
fiscal year ending December 31, 2000;
3. To consider a proposal to amend the Company's 1998 Stock
Option Plan for Employees to increase the number of shares
authorized for issuance from 1,050,000 to 1,650,000; and
4. To transact such other business as may properly come
before the meeting or any adjournment thereof.
The names of the nominees for director are set forth in the
accompanying Proxy Statement.
The close of business on June 15, 2000 (the "Record Date") has
been fixed by the Board of Directors as the record date for the
determination of the holders entitled to notice of and to vote at
the Annual Meeting. Only holders of reecord of the Company's
common stock as of the close of business on the Record Date will
be entitled to notice of and to vote at the Annual Meeting and
any adjournment thereof.
A complete list of shareholders of record entitled to vote at
the Annual Meeting will be open and available for examination by
any shareholder of the Company during ordinary business hours at
the Company's principal executive office at 7506 North Broadway
Extension, Suite 505, Oklahoma City, Oklahoma 73116, from June
26, 2000 to July 28, 2000 and at the time and place of the Annual
Meeting.
A copy of the Company's Annual Report for 1999, which contains
audited financial statements and other information of interest
with respect to the Company and its shareholders, is enclosed.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND
THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE TO ASSURE
REPRESENTATION OF YOUR SHARES. NO POSTAGE IS REQUIRED IF MAILED
WITHIN THE UNITED STATES. SHOULD YOU ATTEND, YOU MAY, IF YOU
WISH, WITHDRAW YOUR PROXY AND VOTE YOUR SHARES IN PERSON. YOUR
PROXY MUST BE SIGNED AND RETURNED IN ORDER TO BE COUNTED.
By Order of the Board of Directors
/s/ Jeffrey E. Butler
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Jeffrey E. Butler
President and Chief Executive Officer
Oklahoma City, Oklahoma
June 22, 2000
THE AMERICAN EDUCATION CORPORATION
7506 North Broadway Extension, Suite 505
Oklahoma City, Oklahoma 73116
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PROXY STATEMENT
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For Annual Meeting of Shareholders
To Be Held Friday, July 28, 2000
Introduction
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of The American
Education Corporation ("AEC" or the "Company") to be voted at the
2000 Annual Meeting of Shareholders of the Company on July 28,
2000, at 10:00 a.m. (Oklahoma City time), which meeting will be
held at The National Cowboy Hall of Fame located at 1700 N.E. 63rd
Street, Oklahoma City, Oklahoma. Information in this Proxy
Statement is as of June 1, 2000 unless otherwise stated. The
approximate date on which the Proxy Statement and enclosed form
of proxy have been mailed to shareholders is June 22, 2000.
The Company will bear the cost of the solicitation of proxies,
including the charges and expenses of forwarding solicitation
materials to beneficial owners of the Company's common stock.
The Company has arranged for UMB Bank, N.A. to serve as its agent
to mail the proxy materials and coordinate and oversee the return
of proxy cards. The anticipated cost of the services of UMB Bank,
N.A. total approximately $12,000. In addition to soliciting
proxies by mail, directors, executive officers and employees of
the Company, without receiving extra compensation therefor, may
solicit proxies by telephone, by telefacsimile or in person.
Voting Rights and Outstanding Shares
Only holders of record of Common Stock at the close of
business on June 15, 2000 (the "Record Date") will be entitled to
notice of and to vote at the Annual Meeting. Any additional
notice required pursuant to Article 113 of Title 7 of the
Colorado Business Corporation Act will be given or made in
compliance with such statute. On the Record Date, there were
14,083,028 shares of common stock, par value $0.025 per share
(the "Common Stock"), issued and outstanding. Each share of
Common Stock is entitled to one vote on all matters on which
shareholders may vote. There is no cumulative voting in the
election of directors or for any other purpose. Shares of Common
Stock are the only securities of the Company entitled to vote at
the Annual Meeting.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the inspectors of election appointed for the Annual
Meeting. The inspectors of election will determine whether or
not a quorum is present. The presence in person or by proxy of
the holders of one-third of the outstanding shares of Common
Stock entitled to vote will constitute a quorum for the
transaction of business at the Annual Meeting. When a quorum is
present, in the election of directors, those five nominees having
the highest number of votes cast in favor of their election will
be elected to the Company's Board of Directors, even if any one
of such persons did not receive a majority vote. Consequently,
any shares not voted (whether by abstention, broker non-vote or
otherwise) have no impact in the election of directors except to
the extent the failure to vote for an individual results in
another individual receiving a larger number of votes. With
respect to any other matter which may properly come before the
Annual Meeting, unless a greater number of votes is required by
law, a matter is approved by the shareholders if the votes cast
in favor of the matter exceed the votes cast in opposition. Any
shares not voted (whether by abstention, broker non-vote or
otherwise) have no impact on the vote for these other matters, if
any, so long as a quorum is present.
John D. Garber, who beneficially owns approximately 37.6% of
the shares of Common Stock of the Company, has advised the
Company that he intends to vote for each of the director nominees
named herein, as well as for all of the other proposals described
below.
Revocability of Proxies
Any shareholder giving a proxy has the power to revoke the
proxy at any time before it is voted. It may be revoked by (i)
filing with UMB Bank, N.A. in its capacity as transfer agent for
the Company's Common Stock ("Transfer Agent") before the Annual
Meeting, a written notice of revocation bearing a later date than
the proxy; (ii) duly executing a subsequent proxy relating to the
same shares of Common Stock and delivering it to the Transfer
Agent before the Annual Meeting; or (iii) attending the Annual
Meeting and voting in person (although attendance at the Annual
Meeting will not in and of itself constitute a revocation of a
proxy). Any written notice revoking a proxy should be sent to
UMB Bank, N.A., Attention: Securities Transfer Division, P.O. Box
410064, Kansas City, Missouri 64141-0064.
Summary of Proposals
Shareholders will be asked to vote upon the following
proposals at the Annual Meeting:
1. Election of the following five (5) persons to the
Board of Directors: Jeffrey E. Butler, Monty C.
McCurry, Newton W. Fink, Stephen E. Prust, and
Geoffrey Glossop. General information concerning
these persons is found beginning on page 3 of this
Proxy Statement.
2. Ratification of the selection of Steakley, Gilbert
& Bozalis, P.C. as the independent accountants for
the Company in 2000. This proposal is described on
page 15.
3. Approval of an amendment to the Company's 1998 Stock
Option Plan for Employees to increase the number of
shares authorized for issuance from 1,050,000 to
1,650,000. This proposal is described on pages 16-20.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
The names, ages (as of June 1, 2000), positions with the
Company and business experience during the past five years of
each of the five Board of Directors nominees is set forth below.
Each director has served continuously with the Company since his
first election or appointment as indicated below. There are no
family relationships among the directors, the executive officers,
and the Board of Directors nominees.
Current Position Director
Name Age with Company Since
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Jeffrey E. Butler 58 Chief Executive Officer, 1989
President and Chairman
of the Board of Directors
Monty C. McCurry 54 Director 1989
Newton W. Fink 63 Director 1991
Stephen E. Prust 55 Director 1992
Geoffrey Glossop 51 Director 1998
Jeffrey E. Butler became a director of the Company in August
1989 and was elected Chief Executive Officer and President of the
Company in March 1990. From 1985 to 1990, Mr. Butler was a
management consultant to businesses in the biotechnology,
computer science, software, educational and entertainment video
industries. Mr. Butler served as a director of Video Professor
Industries, Inc., a publicly held corporation, from February 1,
1989 to October 31, 1990. Prior to establishing his management
consulting business, Mr. Butler was the Chief Executive Officer
and President of Infomed Corporation, which provided computer
diagnostic equipment and management services to hospitals,
corporations and physicians. Prior to 1985, Mr. Butler was
employed by Sandoz, Ltd., Corning, Inc. and Becton Dickinson
Corporation in middle and senior management positions.
Monty C. McCurry was elected to the Board of Directors in
April 1989. Since 1985, Mr. McCurry has been the President of
Executive Resource Management, an executive search firm
headquartered in Aurora, Colorado. From 1969 to 1985, Mr.
McCurry was employed by Paul M. Riggins and Associates, an
executive search firm where he was associate general manager.
Newton W. Fink, Ed.D. was elected to the Board of Directors in
January 1991. Since September, 1998 Dr. Fink has been the
Superintendent of Schools in Manteno, Illinois. From 1994 to 1998
he was Superintendent of the VIT Schools in Table Grove,
Illinois. Prior to 1994, Dr. Fink was the President of Computer
Instructional Services, Inc., a privately-held corporation
providing computer educational services to individuals, schools,
corporations and institutions. Additionally, he has been employed
as a teacher and an elementary/middle school principal earlier in
his career. Dr. Fink has also published and lectured extensively
on the use of computers in education.
Stephen E. Prust was elected to the Board of Directors in
April 1992. Since 1992, Mr. Prust has provided business
consulting services, including advice on equity and debt
transactions, mergers and acquisitions, to a variety of
companies, ranging from entertainment concerns, Internet start-
ups and industry consolidators. From 1990 to 1992, Mr. Prust was
the President of AVID Home Entertainment, a division of LIVE
Entertainment, Inc. From 1981 to 1990, Mr. Prust was a
consultant to companies in the entertainment industry. In 1975,
Mr. Prust founded Dominion Music, Inc., a joint venture with K-
Tel Records, Inc. He served as President of Dominion Music until
1981.
Geoffrey Glossop was appointed to the Board of Directors in
December 1998. He is the President of Learning Pathways, Limited,
a company he founded in 1997. From 1994 to 1996, Mr. Glossop was
the Research and Development Director for Systems Integrated
Research plc. Prior to 1994, Mr. Glossop was the Managing
Director of Global Learning Systems, Ltd. Mr. Glossop graduated
from the University of Newcastle upon Tyne in 1969 with a B.S. in
Electrical Engineering. He was awarded the M.B.E. for services to
the educational technology industry in the Queen's Birthday
Honours in 1982.
Board of Directors Meetings And Committees
During 1999 the Board of Directors held six meetings of which
three were by written consent. All directors attended at least
75% of the meetings of the Board of Directors . The Board of
Directors does not have standing audit, nominating or
compensation committees or committees performing similar
functions.
Director Compensation
The Company's directors do not receive any cash or other
pecuniary compensation for service on the Board of Directors.
However, Directors may be reimbursed for out-of-pocket expenses
incurred in connection with attendance at Board of Directors
meetings. Three of the non-employee members of the Board of
Directors (namely, Monty C. McCurry, Newton W. Fink and Stephen
E. Prust) were each granted 3,000 stock options in January 1999
and 3,000 stock options in January 2000. The options were
granted at an exercise price of $0.73 per share and were fully
vested on the date of the grant. The options were granted
pursuant to the Directors' Stock Option Plan. In addition,
effective April 1, 1999, Stephen E. Prust was granted 12,000
shares of Common Stock, Monty C. McCurry was granted 7,000 shares
of Common Stock, and Newton W. Fink was granted 7,000 shares of
Common Stock, all pursuant to the Company's Nonqualified Stock
Option Plan.
In May 1998, the Company's shareholders approved the Directors'
Stock Option Plan (the "Director Plan"). The purpose of the
Director Plan is to enable the Company to attract, retain and
motivate independent directors who are not employees of the
Company or its subsidiaries ("Outside Directors"), and to enable
such directors to participate in the long-term growth of the
Company by providing for or increasing the propriety interests of
such persons in the Company, thereby assisting the Company in
achieving its long-range goals.
The Director Plan is administered by the entire Board of
Directors. Under the Director Plan, stock options for a maximum
of 100,000 shares of the Company's Common Stock may be granted,
such number of shares being subject to adjustment in the event of
a merger, consolidation, stock dividend, split-up, combination,
exchange of shares, recapitalization, or a change in
capitalization with respect to the shares of Common Stock.
Participation in the Director Plan is limited to directors of
the Company who are not, and were not during the preceding twelve
(12) months, employees of the Company. During the term of the
Director Plan, each Outside Director will be granted the option
to purchase 5,000 shares of Common Stock when he or she is first
elected or appointed to serve on the Board of Directors. The
Director Plan further provides that, commencing with calendar
year 1999, and continuing for each calendar year thereafter while
the Director Plan is in effect, each Outside Director is
automatically granted an option to purchase 3,000 shares of
Common Stock as of January 1 of such calendar year. Pursuant to
the Director Plan, each of Messrs. McCurry, Fink, and Prust were
granted options to purchase 3,000 shares of Common Stock in January
1999 and again in January 2000.
The exercise price for all stock options granted under the
Director Plan may not be less than 100% of the fair market value
of the underlying Common Stock on the date of the grant. All
stock options granted under the Director Plan will be fully
exercisable on the date of grant. However, no option may be
exercisable more than three (3) years after the date the stock
option is granted or, if earlier, ninety (90) days after the date
the Outside Director ceases to be a director of the Company.
Further, if an Outside Director ceases to be a director because
he or she is removed as a director of the Company for cause, then
all options held by the Outside Director will immediately lapse
and will no longer be exercisable.
Stock options may not be granted under the Director Plan after
March 31, 2008, but then outstanding stock options may be
exercised beyond such date in accordance with their respective
terms.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of the Record Date, there were 14,083,128 shares of Common
Stock issued and outstanding. The following table sets forth
certain information regarding the Company's Common Stock owned by
(i) each shareholder of the Company who is known by the Company
to beneficially own more than 5% of the Company's outstanding
voting securities; (ii) each of the Company's five directors;
(iii) the three executive officers of the Company named in the
Summary Compensation Table; and (iv) all directors and executive
officers of the Company as a group, as of June 1, 2000:
Number of Shares and
Name and Address of Nature of Beneficial Percent of
Beneficial Owner Ownership (1) Common Stock
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John D. and
Clare C. Garber
7530 Navigator Circle
Carlsbad, California 92009 5,288,286 (2) 37.6%
Robert M. Schoolfield
5 Pleasant Cove
Austin, Texas 78746 1,536,517 (3) 10.9%
Jeffrey E. Butler
7506 N. Broadway Extension
Suite 505
Oklahoma City, Oklahoma
73116 1,450,015 (4) 10.0%
Monty C. McCurry
2134 South Eagle Court
Aurora, Colorado 80014 132,400 (5) 0.9%
Newton W. Fink
1093 Lincoln
Manteno, Illinois 60950 100,400 (6) 0.7%
Stephen E. Prust
9025 East Kenyon Ave.
Denver, Colorado 80237 454,768 (7) 3.2%
Geoffrey Glossop
Field House
6 Haley Croft
Duffield, Derbyshire, UK 605,086 (8) 4.3%
Thomas A. Shively
14431-C North Pennsylvania
Oklahoma City, Oklahoma 73120 566,294 (9) 3.9%
Neil R. Johnson
6500 N.W. Grand Blvd.
Oklahoma City, Oklahoma 73116 96,650 (10) 0.7%
The Pennsylvania State University
University Park, Pennsylvania
16802 750,000 (11) 5.3%
All directors and
Executive officers as
a group 3,405,613 22.3%
(1) All shares of Common Stock are held directly unless
indicated otherwise.
(2) Includes 3,177,286 shares of Common Stock held by John D.
Garber and Clare C. Garber as trustees of the John D. Garber and
Clare C. Garber Trust (the "Trust") for which Mr. Garber is the
beneficiary; 440,000 shares of Common Stock held by John D.
Garber and Clare C. Garber, as trustees of the John D. Garber and
Clare C. Garber defined benefit plan; and 1,671,000 shares of
Common Stock owned by a company controlled by the Garber family.
(3) Includes 737,528 shares of Common Stock owned by the
Schoolfield 1994 Charitable Unitrust for which Mr. Schoolfield is
the trustee; 614,607 shares of Common Stock owned by Mr.
Schoolfield individually; and 184,382 shares of Common Stock
owned by the Schoolfield Grandchildren's Trust for which Mr.
Schoolfield is the trustee.
(4) Includes options for 403,440 shares of Common Stock, 316,800
of which are exercisable at $0.50 per share and 86,640 of which
are exercisable at $0.73 per share, all within 60 days of the
Record Date.
(5) Includes options for 86,000 shares of Common Stock, 63,000
of which are exercisable at $0.50 per share, 10,000 of which are
exercisable at $0.75 per share, and 13,000 of which are
exercisable at $0.73 per share, all within 60 days of the Record
Date.
(6) Includes options for 86,000 shares of Common Stock, 63,000
of which are exercisable at $0.50 per share, 10,000 of which are
exercisable at $0.75 per share, and 13,000 of which are
exercisable at $0.73 per share, all within 60 days of the Record
Date.
(7) Includes options for 131,000 shares of Common Stock, 108,000
of which are exercisable at $0.50 per share, 10,000 of which are
exercisable at $0.75 per share, and 13,000 of which are
exercisable at $0.73 per share, all within 60 days of the Record
Date.
(8) Includes 573,784 shares of Common Stock owned by Field House
No. 2 Trust for the benefit of the Glossop family, and options
for 31,302 shares of Common Stock exercisable at $0.73 per share
within 60 days of the record date.
(9) Includes options for 339,906 shares of Common Stock, 233,276
of which are exercisable at $0.50 per share and 106,630 of which
are exercisable at $0.73 per share, all within 60 days of the
Record Date.
(10) Includes options to purchase 91,650 shares of Common Stock
exercisable at $0.73 per share within 60 days of the Record Date.
(11) During 1999, the John D. Garber and Clare C. Garber Trust
donated 750,000 shares of the Company's Common Stock to The
Pennsylvania State University.
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EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION
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A biographical description of the Company's President and
Chief Executive Officer, Jeffrey E. Butler, including age and
business experience during each of the past five years, is set
forth above under the heading "Information Concerning Directors
and Nominees." Set forth below is the applicable table prescribed
by the proxy rules of the Securities and Exchange Commission that
discloses the compensation for the Company's executive officers.
Summary Compensation Table
Annual Compensation Long-Term
Compensation
Name
and Other
Principal Annual Stock Stock
Position Year Salary Bonus Compensation Options Awards
(1) (Shares)
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Jeffrey E. 1999 $100,357 $7,347 -- 40,000 $17,600(2)
Butler 1998 $89,355 $4,158 -- 60,000 $ 5,000(2)
Chairman 1997 $83,878 $0 -- 0 $0
of the
Board,
Chief
Executive
Officer and
President
Thomas A. 1999 $91,204 $7,510 -- 55,000 $12,960(2)
Shively 1998 $83,460 $3,922 -- 70,000 $5,000(2)
Executive 1997 $78,952 $0 $10,637(3) 0 $0
Vice
President
Neil R. 1999 $84,432 $1,157 -- 25,000 $3,650(2)
Johnson, 1998 $26,791 $0 -- 75,000 $0
Vice
President
and Chief
Financial
Officer(4)
(1) The executive officers did not receive any perquisites or
other benefits, the aggregate amount of which exceeded the lesser
of $50,000 or 10% of their compensation. The Company reimbursed
Mr. Butler $11,551 for relocation expenses in 1997.
(2) In April 1999, Mr. Butler was awarded 35,200 shares of
Common Stock and Mr. Shively was awarded 25,919 shares of Common
Stock for services rendered. In March 1999, Mr. Johnson was
awarded 5,000 shares of Common Stock as a stock bonus. In
January 1998, Mr. Butler and Mr. Shively each received 10,000
shares of Common Stock as bonus compensation for their
performance in 1997.
(3) These amounts were paid to Mr. Shively for services rendered
prior to 1996.
(4) Mr. Johnson became an employee of the Company in August,
1998.
Option Grants In 1999(1)
The following table sets forth information concerning the stock
options granted during the last fiscal year to the Company's
executive officers:
Percentage
of Total
Options
Options Granted to Exercise
Granted Employees in Price Expiration
Name (Shares) 1999 (Per Share) Date
- ------------------- -------- ------------ ----------- -----------
Jeffrey E. Butler 40,000 7.3% $0.73 August 1,
2002
Thomas A. Shively 55,000 10.0% $0.73 August 1,
2002
Neil R. Johnson 25,000 4.5% $0.73 August 1,
2002
(1) No stock appreciation rights (SARs) were granted in 1999.
Option Exercises and Fiscal Year-End Values
No executive officer exercised options during 1999. The
following table sets forth, for the Company's executive officers
named in the Summary Compensation table above, the year-end
values of unexercised stock options:
Value of
Unexercised
Number of In-the-Money
Securities Underlying Options at Year End
Unexercised Options Exercisable/
Name at Year End Unexercisable
- ------------------ --------------------- -------------------
Jeffrey E. Butler 416,800 $300,109/$15,541
Thomas A. Shively 358,276 $240,980/$21,369
Neil R. Johnson 100,000 $48,537/$9,713
In May 1998, the Company's shareholders approved the 1998
Stock Option Plan for Employees (the "Option Plan"). The Option
Plan permits the granting of stock options, including incentive
stock options.
The Option Plan is administered by the Board of Directors.
An aggregate of 1,050,000 shares of Common Stock is currently
authorized for issuance pursuant to the Option Plan, such
number of shares being subject to adjustment in the event of a
merger, consolidation, stock dividend, split-up, combination,
exchange of shares, recapitalization, or change in
capitalization with respect to the shares of Common Stock. If
Proposal 3 is approved by the shareholders, an aggregate of
1,650,000 shares of Common Stock would be authorized for
issuance under the Option Plan.
All employees of the Company are eligible to be participants
(there are currently approximately eighty-five employees of the
Company who are eligible to receive options under the Option
Plan). Approximately 53% of the eligible employees have options.
Options which are issuable under the Option Plan may be either
"Incentive Stock Options," as defined in Section 422 of the
Internal Revenue Code (the "Code"), or options not intended to be
so qualified ("Nonstatutory Options"). The Stock Option
Committee may grant more than one option to an employee during
the term of the Option Plan, and such option may be in addition
to an option or options previously granted; provided, however,
that the aggregate fair market value of Common Stock with respect
to which Incentive Stock Options are exercisable for the first
time by such employee during any calendar year (under all stock
option plans of the Company and any subsidiaries) may not exceed
$100,000. All options (both Incentive Stock Options and
Nonstatutory Options) are exercisable at not less than 100% of
the fair market value of the underlying Common Stock on the date
of grant. However, the exercise price for an Incentive Stock
Option granted to an employee who owns more than 10% of the
total combined voting power of all classes of stock of the
Company, actually or constructively under Section 425(d) of the
Code, is at 110% of the fair market value of the Common Stock
subject to the option.
Stock options may not be granted under the Option Plan after
March 31, 2008, but then outstanding stock options may be
exercised beyond such date in accordance with their respective
terms.
Employment Agreements
In December 1998, the Company entered into Executive
Employment Agreements with Jeffrey E. Butler, Thomas A. Shively,
and Neil R. Johnson. These agreements are extended annually unless
notice of non-renewal is given. Following is a summary of the
material terms of those Executive Employment Agreements:
Term Change of
from Annual Control Auto
Name Title 12/1999 Salary Severance Benefits(1) Provided
- ---------- --------- ------- -------- --------- ----------- ---------
Jeffrey E. Chief 2 years $106,845 1 year Yes Yes
Butler Executive
Officer
Thomas A. Executive 2 years $105,000 6 months Yes Yes
Shively Vice
President
Neil R. Vice 2 years $89,890 6 months Yes No
Johnson President
and Chief
Financial
Officer
(1) Each Executive Employment Agreement provides benefits to the
employee upon a "change of control" of the Company. A change of
control would generally include, among other events, any merger
of the Company in which the Company is not the surviving
corporation, any sale of all or substantially all of the assets
of the Company, or any person becomes the beneficial owner of
more than 25% of the Company's then outstanding capital stock.
If a change in control occurs then the employee may, in his sole
discretion, require the Company to purchase up to 50% of the
shares of Common Stock beneficially owned by him.
PROPOSAL 1
Election of Directors
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The Bylaws of the Company provide that the Board of Directors
shall consist of not less than three persons and, subject to such
limitation, that the number of directors be fixed by resolution
of the Board of Directors. The current number of directors is
five (each director is serving until his successor is duly
elected and qualified). Five directors, constituting the entire
existing Board of Directors of the Company, are to be elected at
the Annual Meeting. Management will present as nominees and
recommend to the shareholders that Jeffrey E. Butler, Monty C.
McCurry, Newton W. Fink, Stephen E. Prust, and Geoffrey Glossop,
who are the current directors of the Company, be re-elected to
serve on the Board of Directors until their successors are duly
elected and qualified. Shares represented by the Company proxy
will be voted for the election of Messrs. Butler, McCurry, Fink,
Prust, and Glossop unless otherwise indicated on the proxy.
Should any of these nominees become unable to serve for any
reason, which is not anticipated, the Board of Directors will
designate substitute nominees, in which event the person named in
the enclosed proxy will vote for the election of such substitute
nominee or nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE NOMINEES NAMED HEREIN.
PROPOSAL 2
Ratification of Selection of Independent Public Accountants
- -----------------------------------------------------------
The independent public accounting firm utilized by the Company
during the years ended December 31, 1996, through 1999 was
Steakley, Gilbert & Bozalis, P.C. Management recommends that the
accountants be retained as the principal public accounting firm
to be utilized by the Company throughout the year ending December
31, 2000. The Company anticipates that a representative of the
accountants will attend the Annual Meeting for the purpose of
responding to appropriate questions. At the Annual Meeting, a
representative of the accountants will be afforded an opportunity
to make a statement if the accountants so desire.
Shareholder ratification of the selection of Steakley, Gilbert
& Bozalis, P.C. is not required by the Company's bylaws or
otherwise. The Board of Directors, however, is submitting the
selection of Steakley, Gilbert & Bozalis, P.C. to the
shareholders as a matter of good corporate practice and to
ascertain the views of the shareholders regarding such selection.
If the shareholders fail to ratify the selection, the Board of
Directors will reconsider whether or not to retain such firm.
Even if the selection is ratified, the Board of Directors, in
their discretion, may direct the engagement of a different
independent public accounting firm at any time during the year if
it determines that such a change would be in the best interests
of the Company and its shareholders.
Steakley, Gilbert & Bozalis, P.C. has audited the Company's
financial statements for the years ending December 31, 1994
through 1999. There are no disputes with the independent
accountants regarding matters of accounting or reporting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
RATIFICATION OF THE SELECTION OF STEAKLEY, GILBERT & BOZALIS,
P.C. AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR 2000.
PROPOSAL 3
Amendment to Stock Option Plan for Employees
- --------------------------------------------
The Board of Directors has approved an amendment to the 1998
Stock Option Plan for Employees (the "Option Plan") to increase
the number of shares authorized for issuance from 1,050,000 to
1,650,000.
Stock-based awards have become increasingly important when the
Company seeks to hire the kind of talented executives needed to
drive the Company's business objectives. The Company competes
for executive talent with a number of other companies. These
companies have traditionally utilized aggressive amounts of
stock-based awards to compensate, motivate, and retain executive
talent. The Board of Directors believes that these amendments
will help the Company compete for executive talent.
In May 1998, the Company's shareholders approved the Option
Plan. Under its terms, the Option Plan can be amended by the
Board of Directors at any time and from time to time; provided
that no amendment will be effective unless the approval of the
Company's shareholders has been obtained if (i) the amendment
would alter or impair any of the rights or obligations under any
option previously granted to an employee under the Option Plan;
(ii) approval of the amendment is required for the Option Plan to
continue to be in compliance with Section 422 of the Internal
Revenue Code; (iii) the amendment materially increases the total
number of shares of Common Stock which may be made the subject of
options to be granted under the Option Plan; or (iv) the
amendment materially modifies the requirements as to eligibility
for participation in the Option Plan.
The Board of Directors recommends that the shareholders
approve and ratify the proposed amendment to the Option Plan.
Summary of the Option Plan
A summary description of the Option Plan as proposed to be
amended follows. This description is qualified in its entirety
by reference to the specific provisions of the Option Plan which
have been filed with the Securities and Exchange Commission.
The purpose of the Option Plan is to enhance the performance
of key employees of the Company. By encouraging ownership of the
Common Stock of the Company among those employees who have
significant roles in the Company's success, the Option Plan more
closely aligns the interests of the Company's key employees with
those of its shareholders. The Company believes such unity of
interests benefits its shareholders. Moreover, the Company
believes that the Option Plan has a positive effect on the
Company's ability to attract, motivate and retain employees of
outstanding skill and ability.
The Option Plan permits the granting of stock options,
including incentive stock options.
Administration. The Option Plan is administered by the Board
of Directors. The Option Plan, as amended by a vote at the 1999
Annual Meeting of Stockholders, allows the Company to grant an
aggregate of 1,050,000 shares of Common Stock for issuance
pursuant to the Option Plan, such number of shares being subject
to adjustment in the event of a merger, consolidation, stock
dividend, split-up, combination, exchange of shares,
recapitalization, or change in capitalization with respect to the
shares of Common Stock. If the proposed amendment is approved,
the number of shares of Common Stock that can be issued pursuant
to the Option Plan will be increased from 1,050,000 to 1,650,000.
The shares of stock issuable under the Option Plan may consist in
whole or in part of unissued shares or reacquired shares. If a
grant expires or is canceled, any shares which were not issued or
fully vested under the grant at the time of expiration or
cancellation will again be available for grants.
The Board of Directors has the authority to:
- make grants and determine their terms, subject to the
provisions of the Option Plan;
- interpret the provisions of the Option Plan;
- adopt any rules, procedures and forms necessary for the
operation and administration of the Option Plan; and
- determine all questions relating to the eligibility and
other rights of all persons under the Option Plan.
Eligibility. All key employees of the Company are eligible to
be participants (there are currently approximately eighty-five
employees of the Company who are eligible to receive options
under the Option Plan).
Types of Options. Options which are issuable under the Option
Plan may be either "Incentive Stock Options," as defined in
Section 422 of the Code, or options not intended to be so
qualified ("Nonstatutory Options"). The Board of Directors may
grant more than one option to an employee during the term of the
Option Plan, and such option may be in addition to an option or
options previously granted; provided, however, that the aggregate
fair market value of Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by such employee
during any calendar year (under all stock option plans of the
Company and any subsidiaries) may not exceed $100,000. All
options (both Incentive Stock Options and Nonstatutory Options)
are exercisable at not less than 100% of the fair market value of
the underlying Common Stock on the date of grant. However, the
exercise price for an Incentive Stock Options granted to an
employee who owns more than 10% of the total combined voting
power of all classes of stock of the Company, actually or
constructively under Section 425(d) of the Code, must be at least
110% of the fair market value of the underlying Common Stock as
of the date of grant.
Terms and Conditions. The term during which each option may
be exercised will be determined by the Board of Directors, but in
no event may an option be exercisable after the expiration of ten
years from the date such option was granted (this period is
reduced to five years in the case of Incentive Stock Options
granted to an employee owning more than 10% of the combined
voting power of all classes of stock of the Company). In
addition, if the person to whom options are granted under the
Stock Option Plan ceases to be an employee of the Company for any
reason, options which are not then exercisable shall terminate.
Options that are exercisable at the date of termination will
generally be exercisable for a period of 90 days following such
termination, subject to the following two exceptions:
1. If the termination is due to the death or disability of
the employee, the options then exercisable by the
employee may be exercised for a period of one year
following the employee's death or disability.
2. If the employee is terminated for "cause", all options
will immediately terminate and will not be exercisable.
Options granted under the Option Plan cannot be transferred by
an optionee. However, if the optionee dies, his or her heirs can
receive and exercise options for a period of one year after the
optionee's death.
Except as provided otherwise by the Board of Directors,
payment for shares of Common Stock purchased upon exercise of an
option granted under the Option Plan must be made in full at the
time of such exercise.
Term of the Option Plan. Stock options may not be granted
under the Option Plan after March 31, 2008, but then outstanding
stock options may be exercised beyond such date in accordance
with their respective terms.
Federal Income Tax Consequences. The following is a brief
description of the U.S. Federal income tax treatment that will
generally apply to options issued under the Option Plan, based on
U.S. Federal income tax laws in effect on the date hereof. The
exact U.S. Federal income tax treatment of an option will depend
on the specific nature of the option. Recipients of options
should not rely on this discussion for individual tax advice, as
each recipient's situation and tax consequences of any particular
option will vary depending upon the specific facts and
circumstances involved. Each recipient is advised to consult with
his or her own tax advisor for particular federal, as well as
state and local, income and other tax advice.
The granting of either Incentive Stock Options or Nonstatutory
Options will not result in immediate taxable income to the
optionee. The exercise of a Nonstatutory Option will result in
ordinary income to the optionee in the amount by which the market
price of the shares acquired exceeds the exercise price. Income
tax withholding may be met either through cash payment at the
time of exercise or through share withholding. The Company will
receive a tax deduction in an amount that corresponds to the
optionee's ordinary income. On any subsequent disposition of
stock acquired through the exercise of a Nonstatutory Option, the
gain or loss, measured as the sales price less the fair market
value on the date of exercise, will be capital gain or loss.
The exercise of an Incentive Stock Option will not result in
taxable income to the optionee if the optionee does not dispose
of the stock acquired through such exercise within two years of
the date the option was granted or one year after the option is
exercised. However, the difference between the fair market value
of the shares upon exercise and the exercise price is an item of
tax preference subject to the possible application of the
alternative minimum tax. If the exercise and disposition
requirements are met, any gain realized by the optionee when such
shares are sold will be taxed as capital gain. The Company will
not receive a tax deduction for the resulting gain. If these
holding periods are not met, the option will be treated generally
as a Nonstatutory Option for tax purposes.
Summary of Benefits Provided Under the Option Plan. The
number of and value of options to be granted to employees in the
future is not presently known and will be determined by the Board
of Directors. Since the adoption of the Option Plan in 1998,
options to purchase a total of 1,097,000 shares of Common Stock
have been granted (including both options originally granted and
those that have terminated and have been reissued). Optionees
have exercised options to purchase a total of 144,970 shares and
options to purchase 114,370 shares have terminated. As of the
Record Date, there were outstanding options to purchase 837,660
shares of Common Stock. This number represents 5.9% of the total
number of shares of Common Stock issued and outstanding as of the
Record Date.
From the adoption of the Option Plan through the Record Date,
options to purchase 325,000 shares of Common Stock have been
granted to current executive officers of the Company, and options
to purchase 772,000 shares have been granted to other current and
former employees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT
TO THE 1998 STOCK OPTION PLAN FOR EMPLOYEES.
- ----------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ----------------------------------------------
On December 1, 1998, the Company acquired the business of
Learning Pathways Limited ("LP"), an entity organized under the
laws of the United Kingdom, pursuant to the terms of an Agreement
(the "Purchase Agreement") dated as of November 25, 1998, between
Geoffrey and Teresa Glossop (the "Sellers") and the Company. One
of the Sellers, Geoffrey Glossop, is a current director and is a
nominee for director. Pursuant to the Purchase Agreement, the
Company paid the Sellers 510,030 shares of Common Stock and cash
of U.S. $165,760. The Purchase Agreement further provides that,
if LP meets or exceeds certain financial goals set forth in the
Purchase Agreement, then the Company will pay the Sellers
additional shares of the Company's Common Stock. In May 2000,
63,754 additional shares were paid to the Sellers for their 1999
performance. In connection with the Purchase Agreement, the
Company also granted the Sellers piggy-back registration rights
for the shares of the Common Stock issued to them. Also, LP paid
Editplan Services, Ltd. a consulting fee of $143,290 in 1999 and
$37,000 in 1998 to perform management services for LP. Geoffrey
Glossop is an executive officer of, and owns more than 10% of the
equity ownership in, Editplan Services, Ltd.
Since 1991, John D. Garber has been the holder of a note
issued by the Company which was convertible into Common Stock at
$0.1346 per share. As of September 30, 1998, the principal
amount and accrued interest due under such note was $50,000 and
$11,750, respectively. Effective September 30, 1998, Mr. Garber
sold the principal portion of the amount due under such note to
Jeffrey E. Butler in exchange for $50,000 in cash and notes from
Mr. Butler. Immediately after that transaction, both Mr. Butler
and Mr. Garber converted the respective amounts owed by the
Company under such note into Common Stock of the Company. The
$50,000 owed to Mr. Butler converted into 371,471 shares of
Common Stock, and the $11,750 owed to Mr. Garber converted into
87,296 shares of Common Stock. The Company is indebted to Mr.
Garber for temporary advances of $98,256. Mr. Garber
beneficially owns approximately 37.6% of the Common Stock.
The Company paid $8,833 in 1998 to Executive Resource
Management for recruiting services rendered by that entity to the
Company. Monty C. McCurry, who is a director of the Company (and
a director nominee), is an executive officer of, and owns more
than 10% of the equity ownership interest in, Executive Resource
Management.
The Company paid deferred consulting fees to AMD Corporation
in the amount of $25,556 during 1998 for services rendered and
out-of pocket expenses incurred in prior years. Jeffrey E.
Butler, who is the President and a director of the Company (and a
director nominee), is an executive officer of, and owns more than
10% of the equity ownership in AMD Corporation.
- ----------------------------------
DEADLINE FOR SHAREHOLDER PROPOSALS
- ----------------------------------
Proposals of shareholders for consideration at the 2001 Annual
Meeting of Shareholders must be received by the Company on or
before February 26, 2001, for inclusion in the proxy materials
relating to that meeting. To be considered for presentation at
the Annual Meeting, although not included in the Proxy Statement,
proposals must be received no later than May 9, 2001. Proposals
must adhere to the requirements of the Securities Exchange Act
of 1934, as amended, and should be sent to Jeffrey E. Butler,
Chief Executive Officer, The American Education Corporation, 7506
N. Broadway Extension, Suite 505, Oklahoma City, Oklahoma 73116.
- -----------------------------
COMPLIANCE WITH SECTION 16(A)
- -----------------------------
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's directors, executive officers and
holders of more than 10% of the Common Stock to file with the
Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of the Common Stock. Based
solely upon a review of Forms 3, 4 and 5 furnished to the Company
with respect to the year ended December 31, 1999, to the best of
the Company's knowledge, the Company's directors, executive
officers and holders of more than 10% of its Common Stock timely
filed the reports required by Section 16(a).
- -----------
OTHER ITEMS
- -----------
The Board of Directors does not intend to present further
items of business at the Annual Meeting and knows of no such
items that will or may be presented by others. However, if any
other matter properly comes before the meeting, the persons named
in the enclosed proxy form will vote thereon in such manner as
they may in their discretion determine.
- ---------------------------------------------
FORM 10-KSB AND ANNUAL REPORT TO SHAREHOLDERS
- ---------------------------------------------
A copy of the Company's Annual Report on Form 10-KSB for its
latest fiscal year is available without charge to any shareholder
of the Company who requests a copy in writing from Jeffrey E.
Butler, The American Education Corporation, 7506 North Broadway
Extension, Suite 505, Oklahoma City, Oklahoma 73116.
The 1999 Annual Report of the Company, as filed with the
Commission, is being mailed to the shareholders with this Proxy
Statement. The 1999 Annual Report is not to be considered part
of the soliciting material.
By Order of the Board of Directors
/s/ Jeffrey E. Butler
- ---------------------
Jeffrey E. Butler
President and Chief Executive Officer
Oklahoma City, Oklahoma
June 22, 2000
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING POSTAGE-PAID
ENVELOPE.
PROXY
- -----
THE AMERICAN EDUCATION CORPORATION
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 28, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas A.Shively and Jeffrey
E. Butler, or either of them, as proxies, each with full power to
appoint his substitute, and hereby authorizes them to represent
and to vote, as designated below, all of the shares of Common
Stock of The American Education Corporation held of record by the
undersigned on June 15, 2000, at the Annual Meeting of
Shareholders to be held on July 28, 2000 or any adjournment
thereof.
1. Election of Directors.
[] For all nominees listed below (except as marked to
the contrary below).
[] Withhold authority to vote for all nominees listed
below.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW.)
Jeffrey E. Butler
Monty C. McCurry
Newton W. Fink
Stephen E. Prust
Geoffrey Glossop
2. Ratification of Selection of Steakley, Gilbert & Bozalis, P.C.
[] For [] Against [] Abstain
3. Approval of amendment to the Company's 1998 Stock Option
Plan for Employees.
[] For [] Against [] Abstain
In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL
NOMINEES LISTED ABOVE, FOR THE RATIFICATION OF THE SELECTION OF
STEAKLEY, GILBERT & BOZALIS, P.C. AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS FOR 2000, AND FOR THE AMENDMENT TO THE
COMPANY'S 1998 STOCK OPTION PLAN FOR EMPLOYEES. YOU MAY REVOKE
THIS PROXY AT ANY TIME PRIOR TO THE VOTE THEREOF.
The undersigned hereby acknowledges receipt of the Proxy
Statement and hereby expressly revokes any and all proxies
heretofore given or executed by him with respect to the shares
represented by the proxy.
Dated this ____ day of _____________________, 2000.
____________________________________
Signature
____________________________________
Signature
Please sign exactly as your name appears on your stock
certificate. When shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a corporation,
please sign in full corporate name by President or other
authorized officer. If a partnership or limited liability
company, please sign in the name of the legal entity by
authorized person.
Please complete, sign, date and mail the proxy promptly using
the enclosed postage paid envelope.