SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
AMERICAN EDUCATIONAL PRODUCTS, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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 materials.
/ / 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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AMERICAN EDUCATIONAL PRODUCTS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 3, 1996
The Annual Meeting of Shareholders of American Educational Products, Inc. ("AEP"
or the "Company") will be held at 401 Hickory Street, Fort Collins, Colorado
80522, on June 3, 1996 at 9:00 o'clock a.m. Mountain Daylight Time, for the
purpose of considering and voting upon the following:
1. To elect five (5) Directors to serve until the next Annual Meeting of
Shareholders or until their successors have been duly elected and
qualified.
2. Any other matters properly brought before said meeting or any
adjournment thereof.
Information relating to the above matters is set forth in the accompanying Proxy
Statement. Only holders of outstanding shares of AEP common stock of record at
the close of business on April 22, 1996 will be entitled to vote at the meeting
or any adjournment thereof.
A copy of the Company's Annual Report to Shareholders, including financial
statements for the year ended December 31, 1995, will be mailed to shareholders
concurrently with the mailing of the Proxy Statement.
Shareholders are cordially invited to attend the meeting in person.
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, IT WOULD BE APPRECIATED
IF YOU WOULD PROMPTLY FILL IN, SIGN AND DATE THE ENCLOSED PROXY STATEMENT AND
RETURN IT IN THE ENCLOSED STAMPED ENVELOPE. ANY PROXY MAY BE REVOKED AT ANY
TIME BEFORE IT IS VOTED BY WRITTEN NOTICE MAILED OR DELIVERED TO THE SECRETARY,
BY RECEIPT OF A PROXY PROPERLY SIGNED AND DATED SUBSEQUENT TO AN EARLIER PROXY,
AND BY REVOCATION OF A WRITTEN PROXY BY REQUEST IN PERSON AT THE ANNUAL MEETING
OF SHAREHOLDERS. IF NOT SO REVOKED, THE SHARES REPRESENTED BY THE PROXY WILL BE
VOTED IN ACCORDANCE WITH YOUR INSTRUCTION ON THE PROXY FORM.
AMERICAN EDUCATIONAL PRODUCTS, INC.
--------------------------------------------
Michael L. Hobbs, Secretary
AMERICAN EDUCATIONAL PRODUCTS, INC.
5350 MANHATTAN CIRCLE, SUITE 210
BOULDER, COLORADO 80303
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished to the Shareholders of American
Educational Products, Inc. (respectively, the "Shareholders" and the "Company"
or "AEP") in connection with the solicitation by the Company of proxies to be
used at the Annual Meeting of Shareholders on June 3, 1996 (the "Meeting"), at
the time, place and for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders and at any adjournment thereof. When the
accompanying proxy is properly executed and returned, the shares of common stock
it represents will be voted at the Meeting and, where a choice has been
specified on a proxy, will be voted in accordance with such specification. If
no choice is specified on a proxy, the shares it represents will be voted FOR
the election of five (5) Directors of the Company, and according to the judgment
of the persons named in the enclosed proxies as to any other action which may
properly come before the Meeting or any adjournment thereof.
ANY PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED BY WRITTEN NOTICE
MAILED OR DELIVERED TO THE SECRETARY, BY RECEIPT OF A PROXY PROPERLY SIGNED AND
DATED SUBSEQUENT TO AN EARLIER PROXY, AND BY REVOCATION OF A WRITTEN PROXY BY
REQUEST IN PERSON AT THE ANNUAL MEETING OF SHAREHOLDERS. IF NOT SO REVOKED, THE
SHARES REPRESENTED BY THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS ON THE PROXY FORM.
This Statement is being mailed on or about April 29, 1996, to Shareholders
eligible to vote at the Meeting. Concurrently with the mailing of this
Statement, the Company is furnishing to Shareholders its Annual Report for its
fiscal year ended December 31, 1995.
The Company is bearing all costs of soliciting proxies, and expressly
reserves the right to solicit proxies otherwise than by mail. The solicitation
of proxies by mail may be followed by telephone, telegraph or other personal
solicitations of certain Shareholders and brokers by one or more of the
Directors or by Officers or employees of the Company. The Company may request
banks and brokers or other similar agents or fiduciaries for the voting
instructions of beneficial owners and reimburse the expenses incurred by such
agents or fiduciaries in obtaining such instructions. As of the date of this
mailing, however, the Company has not made any contracts or arrangements for
such solicitations, hence it cannot identify any parties or estimate the cost of
such solicitation.
Only Shareholders of record as of the close of business on April 22, 1996
(the "Record Date"), will be entitled to vote at the Meeting. Representation of
a majority of the Company's shares of common stock outstanding on such date,
either in person or by proxy, constitutes a quorum for the Meeting. When a
quorum is present, the vote by the holders of a majority of the shares
represented at the Meeting shall decide the proposals to be voted upon at the
Meeting. As of the Record Date, the Company had outstanding 4,165,272 shares of
common stock ("shares"), with each share being entitled to one vote.
1. SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS.
The following table sets forth, as of the date of this Proxy Statement, and
as adjusted for the sale of Option Stock, the stock ownership of each person
known by the Company to be the beneficial owner of five (5%) percent or more of
the Company's Common Stock, $.01 par value, all Directors and Officers
individually and all Directors and Officers of the Company as a group. Each
person has sole voting and investment power with respect to the shares shown,
except as noted.
SHARES BENEFICIALLY OWNED
NAME & ADDRESS -----------------------------
OF BENEFICIAL OWNER NUMBER PERCENT(1)
- -------------------- ------- ----------
Paul D. Whittle 339,635 8.2%
5350 Manhattan Circle, Suite 210
Boulder, Colorado 80303
Dr. Robert A. Scott 129,500(2) 3.0%
32 Murray Avenue
Mahwah, N.J. 07430
Michael L. Hobbs 120,745(3) 2.9%
808 Buckeye
Ft. Collins, Colorado 80524
Clifford C. Thygesen 155,029(4) 3.7%
4893 Idylwild Trail
Boulder, Colorado 80301
Clifford L. Neuman 95,000(5) 2.3%
1507 Pine Street
Boulder, Colorado 80302
Frank L. Jennings 31,740(6) 0.8%
1050 Princeton Drive
Longmont, Colorado 80503
Dr. Dale LaFrenz 40,000(7) 1.0%
14842 Hickory Court
Eden Prairie, Minnesota 55346
Wayne R. Kirschling 40,000(8) 1.0%
123 East Adams
Muncie, Indiana 47305
Dimensional Fund Advisers, Inc. 208,900(9) 5.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Heartland Advisors, Inc. 1,035,500(10) 24.9%
790 North Milwaukee
Milwaukee, Wisconsin 53202
All Directors and Officers 951,649 21.1%
As A Group (8 Persons)
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(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them as of the date of this Proxy Statement,
or within 60 days of such date, are treated as outstanding when determining
the percent of the class owned by such individual and when determining the
percent owned by the group.
(2) Includes non-qualified options exercisable to purchase 10,000 shares of
Common Stock at an exercise price of $2.25 per share, granted to Dr. Scott
on May 9, 1991 in recognition of his services to the Company, non-qualified
options exercisable to purchase 4,000 shares of Common Stock at an exercise
price of $2.25 per share, granted November 16, 1993 pursuant to the Formula
Plan for directors, non-qualified options exercisable to purchase 7,500
shares of Common Stock at an exercise price of $2.25 per share granted
May 23, 1994 pursuant to the Formula Plan for directors, non-qualified
options exercisable to purchase 50,000 shares of Common Stock at an
exercise price of $1.80 per share granted June 5, 1995, non-qualified
options exercisable to purchase 17,000 shares of Common Stock at an
exercise price of $1.25 per share granted February 29, 1996 and non-
qualified options exercisable to purchase 30,000 shares of Common Stock at
an exercise price of $1.25 per share granted March 29, 1996.
(3) Includes 31,130 shares of Common Stock owned jointly by Mr. Hobbs and
Pamela A. Turner-Hobbs, Mr. Hobbs' wife.
(4) Includes non-qualified options exercisable to purchase 5,000 shares of
Common Stock at an exercise price of $1.80 per share granted June 5, 1995
pursuant to the Formula Plan for Directors, incentive stock options
exercisable to purchase 29,500 shares of Common Stock at an exercise price
of $1.25 per share granted February 29, 1996 and incentive stock options
exercisable to purchase 50,000 shares of Common Stock at an exercise price
of $1.25 per share granted March 29, 1996.
(5) Includes non-qualified options exercisable to purchase 4,000 shares of
Common Stock at an exercise price of $2.25 per share, granted November 16,
1993 pursuant to the Formula Plan for directors, non-qualified options
exercisable to purchase 5,000 shares of Common Stock at an exercise price
of $2.25 per share granted May 23, 1994 pursuant to the Formula Plan for
directors, incentive stock options exercisable to purchase 1,000 shares of
Common Stock at an exercise price of $2.25 per share granted under the 1990
ISOP, non-qualified options exercisable to purchase 5,000 shares of Common
Stock at an exercise price of $1.80 per share granted June 5, 1995 pursuant
to the Formula Plan for Directors, and non-qualified options exercisable to
purchase 20,000 shares of Common Stock at an exercise price of $1.25 per
share granted March 29, 1996.
(6) Includes incentive stock options exercisable to purchase 24,000 shares of
Common Stock at an exercise price of $2.25 per share granted under the 1990
ISOP.
(7) Includes non-qualified options exercisable to purchase 20,000 shares of
Common Stock at an exercise price of $1.59375 per share, granted February
9, 1995 pursuant to the Formula Plan for directors, and non-qualified
options exercisable to purchase 20,000 shares of Common Stock at an
exercise price of $1.25 per share granted March 29,1996.
(8) Includes non-qualified options exercisable to purchase 20,000 shares of
Common Stock at an exercise price of $1.59375 per share, issued February 9,
1995 pursuant to the Formula Plan for directors, and non-qualified options
exercisable to purchase 20,000 shares of Common Stock at an exercise price
of $1.25 per share granted March 29, 1996.
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(9) Dimensional Fund Advisers, Inc. ("Dimensional"), a Delaware Corporation and
an investment advisor registered under Section 203 of the Investment
Advisors Act of 1940, is deemed to have beneficial ownership of all 208,900
shares of the Company's Common Stock as of December 31, 1995, all of which
are held in portfolios of DFA Investment Dimensions Group Inc., a
registered open-end investment company, or in series of the DFA Investment
Trust Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares. The
foregoing information has been furnished to the Company by Michael T.
Scardina, Vice President & Chief Financial Officer of Dimensional, in a
report of beneficial ownership on Schedule 13G, the accuracy of which has
not been independently verified by the Company.
(10)Heartland Advisors, Inc. is a Wisconsin corporation. Voting and investment
power with respect to securities held by Heartland Advisors, Inc. is
exercised by its Board of Directors. The foregoing information has been
furnished to the Company by Patrick Retzer, a representative of Heartland
Advisors, Inc., in a report of beneficial ownership on Schedule 13G, the
accuracy of which has not been independently verified by the Company.
2. ELECTION OF DIRECTORS.
The Directors have voted to nominate five (5) Directors for election to
hold office until the next Annual Meeting of Shareholders and until their
successors are elected and qualified. Each of the following nominees has
consented to be nominated to serve as a Director of the corporation. All of the
nominees are currently Directors of the Company.
The Company's Articles of Incorporation expressly prohibit cumulative
voting. Therefore, the holders of a majority of the Company's shares could
elect all of the Directors. It is expected that the proxies received by the
Directors' nominees will be voted, except to the extent that authority is
withheld on any proxy as to all or one or more individuals, to elect as
Directors the following nominees, whose principal occupations during the past
five (5) years, directorships and certain other affiliations and information are
set forth below:
Name Age Position
-------------------- --- -------------------------
Dr. Robert A. Scott 56 Director
Clifford C. Thygesen 59 President and Director
Clifford L. Neuman 47 Director
Dr. Dale LaFrenz 58 Director
Dr. Wayne R. Kirschling 53 Director
DR. ROBERT A. SCOTT, director since 1991, and Chairman of the Board
since April, 1995, has been President, Chief Executive Officer and Professor of
Sociology and Anthropology at Ramapo College of New Jersey since 1985. Ramapo
College is a coeducational state-supported residential institution of liberal
arts, sciences and professional studies. From 1979 to 1985, he served as
Assistant Commissioner and Director of Academic Affairs for the Indiana
Commission for Higher Education, where he was responsible for the coordination
of state-wide higher education strategic planning for both public and private
institutions. From 1969 to 1979, he was Associate Dean and Senior Administrator
of the College of Arts and Sciences of Cornell
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University. Dr. Scott is a member of the Board of Advisors of NCO Investors II,
L.P., a leveraged investment partnership, a member of the Executive Committee of
Hillcrest Health Service Systems, Inc., a holding company for the Hackensack
Medical Center Teaching Hospital and four other subsidiaries, and Associate
Director and member of the Business Development and Marketing Advisory Board of
the International Banking Committee of the United Jersey Bank, a component of
UJB Financial, Inc. Dr. Scott is Chairman of the Commission on International
Education of the American Council on Education, a founding member of the
Advisory Board of the New Jersey Center for International Business Education and
Research at Rutgers University, Chairman of the College and University
Educational Satellite Services sponsored by the American Association of State
Colleges and Universities and Public Broadcasting System, Chairman of the Board
of Directors of the New Jersey Association of Colleges and Universities, and a
member of numerous additional professional associations. Dr. Scott received his
B.A. from Bucknell University and his Ph.D. in Sociology and Organizational
Ethnography from Cornell University.
CLIFFORD C. THYGESEN, President of the Company since January 22, 1996 and a
Director since 1986, also served as its Executive Vice-President from 1986 until
January 1992. Mr. Thygesen is also currently a director of Rockies fund, Inc. a
Colorado Springs, Colorado based Business Development Company registered under
the Investment Company Act of 1940. From 1971 to 1973, Mr. Thygesen was Vice-
President of Operations for the Ithaca Gun Company of Ithaca, New York, a
manufacturer of high quality firearms. From 1973 to 1976, Mr. Thygesen served
as President of Alpine Designs Corporation, a company which produces backpacking
equipment, skiwear and hunting apparel. During the period of his employment
with Ithaca Gun Company and Alpine Designs, these two companies were
subsidiaries of General Recreation, Inc. In 1975 and 1976, Mr. Thygesen was
corporate Director of Manufacturing for General Recreation, Inc., and, in this
capacity, assumed responsibility for decentralizing manufacturing operations in
addition to his duties at Alpine Designs. From 1977 to 1981, he served as Vice-
President of Manufacturing for Pure Cycle Corporation, a company that designed
water recycling systems for residential use. From 1981 until February, 1988,
Mr. Thygesen was President, Chief Operating Officer and a Director of Tri Coast
Environmental Corporation, formerly Colorado Venture Capital Corporation. He
received his B.S. degree in Industrial Administration from the University of
Illinois in 1961.
CLIFFORD L. NEUMAN has served as a Director of the Company since November,
1990 and as Secretary from 1992 through 1994. Mr. Neuman is a licensed,
practicing attorney and a partner in the law firm of Neuman & Cobb, located in
Boulder, Colorado. Mr. Neuman has served as legal counsel to the Company and
its subsidiaries since 1986. Mr. Neuman received his Bachelor of Arts degree
from Trinity College in 1970 and his Juris Doctorate degree from the University
of Pennsylvania School of Law in 1973.
DR. DALE LAFRENZ has served as a Director of the Company since February,
1995. Dr. LaFrenz currently serves as President and Chief Executive Officer of
Minnesota Educational Computing Consortium ("MECC"), a publicly held company,
recognized as a leader in the educational software industry. Dr. LaFrenz's
association with MECC began in 1975. From 1975 through 1979, Dr. LaFrenz
progressed from a consultant retained to assist with MECC's start-up activities
to the Acting Executive Director of MECC. During this period, Dr. LaFrenz
planned and directed the implementation of a state-wide organization to provide
and regulate instructional timesharing and management information services for
all educational agencies, developed, planned and directed the building and
running of a large computer center that provided multi-purpose timesharing to
400 concurrent users via 1,000 multiplexed terminals, built a state-wide
organization to provide user services to 400+ educational agencies and planned
the transition from state-wide timesharing services to microcomputers and began
implementation by negotiation of the first bulk purchase of Apple computers. In
1979 Dr. LaFrenz left MECC and joined Scott Foresman & Company, where, from 1979
through 1985 Dr. LaFrenz advanced from Manager to Vice President and General
Manager of the Electronic Publishing division. In 1985 Dr. LaFrenz left Scott
Foresman & Company to join Control Data Corporation. In 1986, Dr. LaFrenz
rejoined MECC as Vice President of Marketing. Shortly after rejoining MECC Dr.
LaFrenz assumed the position of Acting President, and in 1987 was named
President and Chief
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Executive Officer. Since rejoining MECC, Dr. LaFrenz has established MECC as
the leader in the stand-alone educational software industry and positioned MECC
as one of the top four publishers in the consumer software home education
market. Dr. LaFrenz received a B.S. degree in Mathematics in 1961 from Mankato
State university and his Ph.D in Mathematics Education in 1978 from the
University of Minnesota.
DR. WAYNE R. KIRSCHLING was elected as a director in February, 1995. Dr.
Kirschling currently serves as a Corporate Vice President of Ontario
Corporation, a closely held Indiana corporation with corporate headquarters in
Muncie, Indiana. Ontario engages in the manufacture and refurbishment of
components used in jet engines; the manufacture and refurbishment of components
used in semiconductor process equipment; provides metallurgical, chemical and
environmental laboratory testing; develops software and systems for enterprises
involved in collections and accounts receivable management; and is involved in
the development of an industrial park. From 1978-1986, Dr. Kirschling served as
Deputy Commissioner of Higher Education for the Indiana Commission for Higher
Education located in Indianapolis, Indiana, where he was responsible for working
with the Governor, the State Legislature and Indiana's public and private
colleges on operating and capital budget requests, student aid funding and
approval of new institutions, and new academic programs. From 1971-1978, he was
Associate Director of the National Center for Higher Education Management
Systems located in Boulder, Colorado, where he was responsible for working with
public and private colleges throughout the U.S. to develop and implement new
management techniques and for operating a visiting scholars program for scholars
drawn from American and foreign universities, industry and government. From
1964-1969, Dr. Kirschling served as an officer in the U.S. Air Force, including
assignments with the Office of the Secretary of the Air Force in Washington,
D.C. and at the U.S. Air Force Academy located in Colorado. He has taught at a
number of colleges and universities including the University of Colorado, Butler
University, the University of Indianapolis and the U.S. Air Force Academy. He
received his B.S. degree from the U.S. Air Force Academy, an M.S. in Industrial
Engineering from Stanford University and an M.B.A. and D.B.A. in Management
Science from the University of Colorado.
Each Director will be elected to serve until the next Annual Meeting of
Shareholders in 1997 or until a successor is duly elected and qualified.
During the 1995 fiscal year, ten (10) meetings of the Board of Directors
were held, including regularly scheduled and special meetings. All meetings
were attended by 100% of the Board members. Outside Directors were reimbursed
their expenses associated with attendance at such meetings or otherwise incurred
in connection with the discharge of their duties as a Director.
The Company has adopted a Formula Compensation Plan for outside Directors.
For their services, all outside Directors are paid an annual fee of $10,000
each, with the Chairman receiving an additional $12,000. In addition to cash
compensation, each outside Director is entitled to receive non-qualified stock
options exercisable to purchase 10,000 shares of Common Stock at an exercise
price equal to 85% of market value on the date of grant for each of the first
two (2) years of service as an outside Director; beginning with the third year
of service, each outside Director is entitled to receive for each additional
year of service non-qualified options exercisable to purchase 5,000 shares of
Common Stock at an exercise price equal to 85% of the market value of the Common
Stock on the date of grant.
During 1995, the Company had standing Audit, Compensation and Nominating
Committees of the Board of Directors. The members of the Audit Committee were
Clifford L. Neuman, Clifford C. Thygesen and Dr. Wayne R. Kirschling. No member
of the Audit Committee receives any additional compensation for his service as a
member of that Committee. During 1995, the Audit Committee held five (5)
meetings which were attended by all of its members. The Audit Committee is
responsible for providing assurance that financial disclosures made by
Management reasonably portray the Company's financial condition, results of
operations, plan and long-term commitments. To accomplish this, the Audit
Committee oversees the external audit coverage, including the annual nomination
of the independent public accountants, reviews accounting
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policies and policy decisions, reviews the financial statements, including
interim financial statements and annual financial statements, together with
auditor's opinions, inquires about the existence and substance of any
significant accounting accruals, reserves or estimates made by Management,
reviews with Management the Management's Discussion and Analysis section of the
Annual Report, reviews the letter of Management Representations given to the
independent public accountants, meets privately with the independent public
accountants to discuss all pertinent matters, and reports regularly to the Board
of Directors regarding its activities.
During 1995, the Compensation Committee consisted of Dr. Robert A. Scott
and Clifford C. Thygesen and Dr. Dale LaFrenz. No member of the Compensation
Committee receives any additional compensation for his service as a member of
that Committee. During 1995, the Compensation Committee held five (5) formal
meetings which were attended by all of its members. The Compensation Committee
is responsible for reviewing pertinent data and making recommendations with
respect to compensation standards for the executive officers, including the
President and Chief Executive Officer, establishing guidelines and making
recommendations for the implementation of Management incentive compensation
plans, reviewing the performance of the President and CEO, establishing
guidelines and standards for the grant of incentive stock options to key
employees under the Company's Incentive Stock Option Plan, and reporting
regularly to the Board of Directors with respect to its recommendations.
During 1995, the Company's Nominating Committee consisted of Dr. Wayne
Kirschling, Dr. Robert A. Scott and Clifford L. Neuman. No member of the
Nominating Committee receives any additional compensation for his service as a
member of that Committee. During 1995, the Nominating Committee held two (2)
formal meetings which were attended by all of its members. The Nominating
Committee was responsible for recommending a slate of Director nominees to be
considered for election at the Company's 1995 Annual Meeting of Shareholders,
which recommendation was unanimously approved by the Board of Directors. While
the Nominating Committee has not in the past considered nominees recommended by
securityholders outside of Management, if securityholders have recommendations
regarding nominees for the Board of Directors, communication should be addressed
to Mr. Thygesen at the principal executive offices of the Company.
Any transactions between the Company and its officers, directors, principal
shareholders, or other affiliates have been and will be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties
on an arms-length basis and will be approved by a majority of the Company's
independent, outside disinterested directors.
3. EXECUTIVE COMPENSATION.
The following tables and discussion set forth information with respect to
all plan and non-plan compensation awarded to, earned by or paid to the Chief
Executive Officer ("CEO"), and the Company's four (4) most highly compensated
executive officers other than the CEO, for all services rendered in all
capacities to the Company and its subsidiaries for each of the Company's last
three (3) completed fiscal years; provided, however, that no disclosure has been
made for any executive officer, other than the CEO, whose total annual salary
and bonus does not exceed $100,000.
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TABLE 1
SUMMARY COMPENSATION TABLE
Long Term Compensation
------------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------------
Other All
Annual Restricted Other
Name and Compen- Stock Options/ LTIP Compen-
Principal Salary Bonus sation Award(s) SARs Payouts sation
Position Year ($) ($) ($)(1) ($) (#) ($) ($)
- -----------------------------------------------------------------------------------------------------------------------------
Paul D. Whittle, CEO, 1995 170,000 -0- 25,732 -0- 10,000 -0- -0-
President of AEP and
President of Scott 1994 170,000 -0- 25,155 -0- 10,000 -0- -0-
Resources, Inc, Hubbard
Scientific, Inc., Summit 1993 161,619 -0- 19,291 -0- 10,000 -0- -0-
Learning, Inc. and AEP
Media(2)
- -----------------------------------------------------------------------------------------------------------------------------
(1) All executive officers of the Company participate in the Company's group
health insurance plan. In addition, Mr. Whittle has the use of a Company
leased vehicle, and the Company reimburses Mr. Whittle for medical expenses
incurred and not otherwise covered by the Company's group health insurance
plan, except as indicated, no executive officer received perquisites and
other personal benefits which, in the aggregate, exceeded the lesser of
either $50,000 or 10% of the total of annual salary and bonus paid during
the respective fiscal years.
(2) Effective January 22, 1996, Mr. Whittle voluntarily resigned as CEO and
President of AEP. Mr. Whittle was replaced as President of AEP by Clifford
C. Thygesen. (See "TRANSACTIONS WITH MANAGEMENT AND OTHERS").
MANAGEMENT BONUS PLANS
1993. For the fiscal year which ended December 31, 1993, the Company's
Board of Directors again revised the Management Bonus Plan (the "1993 Management
Bonus Plan"). Participants in the 1993 Management Bonus Plan included the
Company's President, Paul D. Whittle and the three subsidiary Presidents
(Messrs. Hobbs, Bond and DiStefano), and Mr. John Panasewicz, the Company's then
Vice-President of Finance. Under the Plan, each participant was able to receive
an annual bonus payment of up to sixty percent (60%) of base salary, based upon
the Company achieving its 1993 Operating Plan. Specifically, the 1993
Management Bonus Plan consists of two distinct bonus pools: a Base Bonus Pool
which is tied to and based upon operating income generated in 1993 in excess of
1992 actual operating income and up to the 1993 Operating Income Plan (the "Base
Bonus Pool"), and an Excess Bonus Pool tied to 1993 operating income in excess
of the 1993 Operating Plan (the "Excess Bonus Pool"). During fiscal 1993, the
Base Bonus Pool accumulated a total of $19,034. Bonuses earned under the 1993
Management Bonus Plan were payable quarterly, with 60% of all bonus earned and
accrued to date paid currently, and 40% accrued and payable at year-end.
1994. For the fiscal year ended December 31, 1994, the terms of the
Management Bonus Plan ("1994 Management Bonus Plan") remained substantially the
same as the 1993 Management Bonus Plan. Participants in the 1994 Management
Bonus Plan included Paul D. Whittle, the Company's President, Michael
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Hobbs, Vice President and Chief Operating Officer, Frank L. Jennings, Vice
President and Chief Financial Officer, George McMahon, General Manager of Summit
Learning and Robert Glore, General Manager of Churchill Media. Because the
Company's results of operations were substantially below forecasts, no bonuses
were earned or paid in fiscal 1994 under the 1994 Management Bonus Plan.
1995. For the fiscal year ended December 31, 1995, the terms of the
Management Bonus Plan ("1995 Management Bonus Plan") remained substantially the
same as the 1993 and 1994 Management Bonus Plans. Participants in the 1995
Management Bonus Plan included Paul D. Whittle, the Company's President, Michael
Hobbs, Vice President and Chief Operating Officer, Frank L. Jennings, Vice
President and Chief Financial Officer, George McMahon, General Manager of Summit
Learning and Robert Glore, General Manager of Churchill Media. Because the
Company's results of operations were substantially below forecasts, no bonuses
were earned or paid in fiscal 1995 under the 1995 Management Bonus Plan.
401(K) SAVINGS PLAN
During the fiscal year ended December 31, 1993, the Company adopted a
401(k) Savings Plan (the "401(k) Plan"). All full-time employees of the Company
who have reached age twenty-one (21) and completed one (1) year of service with
the Company are eligible to participate in the 401(k) Plan.
Under the 401(k) Plan, eligible employees are permitted to defer up to
fifteen percent (15%) (unless deemed highly compensated employees by government
guidelines) of their compensation limited by (i) the maximum amount allowed to
be deferred for federal income tax purposes; (ii) the maximum amount which will
not cause the 401(k) Plan to violate any non-discrimination rules; and (iii) the
amount which would not cause the 401(k) Plan to exceed the maximum amount
allowable as a deduction under Section 404 of the Internal Revenue Code. During
fiscal 1995, the Company matched twenty-five percent (25%) of an employee's
contribution, subject to a maximum contribution by the Company equal to one
percent (1%) of such employee's annual compensation. The maximum allowable
compensation deferral for any one employee in calendar 1995 was $9,240. Subject
to certain restrictions, contributions to the 401(k) Plan will be invested by
the trustees of the 401(k) Plan in accordance with directions of each
participant.
Salary deferral contributions are always 100% vested. Matching
contributions are fully vested after five years of continuous employment;
partial vesting begins after two years of continuous employment. Participants
or their beneficiaries are entitled to payment of benefits (i) upon retirement
at age 65; (ii) upon death or disability; or (iii) upon termination of
employment, if the participant elects to receive a distribution of his account
balance prior to one of the events listed in (i) or (ii) above. In addition,
hardship distributions to participants from the 401(k) Plan are available under
certain conditions. The amount of benefits ultimately payable to a participant
under the 401(k) Plan will depend on the performance of the funds to which
contributions are made on the participant's behalf. During fiscal 1995, the
Company contributed $26,400 to the 401(k) Plan as matching contributions.
EMPLOYEE STOCK PURCHASE PLAN
In 1989, the Company's shareholders ratified and approved a qualified
Employee Stock Purchase Plan ("ESPP") pursuant to Section 423 of the Internal
Revenue Code of 1986, as amended. Pursuant to the ESPP, the Company has been
authorized to offer up to 50,000 shares per year over a three-year term, or a
total of 150,000 shares, to the Company's employees. The term of the ESPP was
subsequently extended for an additional period of three (3) years commencing
upon the initial expiration date and ending on the third anniversary of such
date. The ESPP includes certain restrictions which preclude participation by
part-time employees and employees owning five percent (5%) or more of the
Company's Common Stock. The purchase price for the shares may not be less than
eighty-five percent (85%) of the market value of the stock on either the
Enrollment Date or the Exercise Date as those terms are defined in the ESPP.
The ESPP was first
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implemented in 1991. Employees of the Company are currently participating in
the ESPP pursuant to subscriptions whereby shares are being purchased under a
program of payroll deductions.
INCENTIVE STOCK OPTION PLAN
In 1990, the Board of Directors and the shareholders of the Company adopted
the American Educational Products, Inc. 1990 Incentive Stock Options Plan (the
"ISOP"). Pursuant to the terms of the ISOP, as amended, the Company's Board of
Directors is authorized to issue options for the purchase of up to 1,142,000
shares of the Company's Common Stock to key employees of the Company. Options
granted under the ISOP are incentive stock options within the meaning of Section
422 of the Internal Revenue Code. They are exercisable at prices which were
equal to at least one hundred percent (100%) of the fair market value of the
Company's freely trading Common Stock on the date of grant, or in the case of an
optionee who beneficially owns stock representing more than ten percent (10%) of
the total combined voting power of the Company, the exercise price of the option
is not less than one hundred and ten percent (110%) of the market price of the
shares on the date of grant. Only key management and employees of the Company
are eligible to participate in the ISOP.
The ISOP is administered by the Board of Directors, which determines
eligible employees, the times and numbers of options to be granted, and the
periods for which such options may be granted. There are limitations on the
number of options which may be granted and the aggregate fair market value of
the stock in any given year. All options granted under the ISOP are subject to
vesting over a period of three (3) years from the date of grant.
As of December 31, 1995, incentive stock options to purchase 623,000 shares
of Common Stock were outstanding and unexercised, having an average exercise
price of $2.07 per share. During the Company's fiscal year ended December 31,
1995, 25,500 options were exercised at an average exercise price of $1.00 per
share to purchase shares pursuant to the ISOP.
The following table sets forth certain information concerning the exercise
of incentive stock options during the last completed fiscal year by each of the
named executive officers and the fiscal year-end value of unexercised options on
an aggregated basis:
TABLE 2
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)(2)
------------- ----------------
Shares Acquired Value Realized(1) Unexercisable/
Name on Exercise (#) ($) Exercisable Exercisable
- -------------------------------------------------------------------------------------------------------
Paul D. Whittle -0- -0- 10,000/ $-0-
20,000
- -------------------------------------------------------------------------------------------------------
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(1) Value Realized is determined by calculating the difference between the
aggregate exercise price of the options and the aggregate fair market value
of the Common Stock on the date the options are exercised.
(2) The value of unexercised options is determined by calculating the
difference between the fair market value of the securities underlying the
options at fiscal year end and the exercise price of the options.
There are outstanding common stock purchase warrants exercisable to
purchase 220,000 shares of Common Stock of the Company at an average exercise
price of $4.16 per share, including 100,000 held of record by New Street
Partners and New Street Partners II, general partnerships, of which Terry L.
Nagelvoort, a former director, is controlling general partner. These warrants
were issued as investment banking fees to Nagelvoort & Company, Inc. Also
includes warrants exercisable to acquire 120,000 shares of Common Stock held by
John G. Kinnard & Company, the Company's principal market maker.
4. TRANSACTIONS WITH MANAGEMENT AND OTHERS.
LEGAL COUNSEL
Clifford L. Neuman has served as a member of the Company's Board of
Directors since November 1990 and as Secretary of the Company from February,
1992 through November, 1994.
Mr. Neuman is a partner in the law firm of Neuman & Cobb, which has served
as legal counsel to the Company since its inception in 1986.
During 1994 and 1995, the Company paid Neuman & Cobb approximately $56,233
and $16,347, respectively, for legal services rendered during the respective
fiscal years. The Company was not charged for any of the time which Mr. Neuman
devoted to the Company in his capacity as Secretary, however, during 1994,
Mr. Neuman was given incentive stock options exercisable to purchase 1,000
shares of Common Stock at an exercise price of $2.25 per share granted under the
1990 ISOP and non-qualified options exercisable to purchase 5,000 shares of
Common Stock granted May 23, 1994 pursuant to the Formula Plan for directors,
and, during fiscal 1995, Mr. Neuman was given non-qualified options exercisable
to purchase 5,000 shares of Common Stock granted June 5, 1995 pursuant to the
Formula Plan for directors. Finally, during fiscal 1994 and fiscal 1995, Mr.
Neuman received $10,000 in consideration for his services as a director of the
Company.
TRANSFER OF CORPORATE ASSETS
On January 22, 1996, Paul Whittle voluntarily resigned as President and CEO
of the Company. Under the terms of Mr. Whittle's employment agreement the
Company is required to continue paying Mr. Whittle his base salary until August
31, 1996. In addition, the Company agreed to transfer certain corporate assets
to Mr. Whittle in connection with his resignation, including a computer,
automobile and certain items of office furniture, which assets had an aggregate
value of $29,000.
5. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under the Securities Laws of the United States, the Company's Directors,
its Executive (and certain other) Officers, and any persons holding more than
ten percent (10%) of the Company's common stock are required to report their
ownership of the Company's common stock and any changes in that ownership to the
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Securities and Exchange Commission and the NASDAQ stock market. Specific due
dates for these reports have been established and the Company is required to
report in this Proxy Statement any failure to file by these dates.
Based solely on review of the copies of such reports required by Section
16(a), the Company believes that its officers, Directors, and stockholders
owning greater than 10% of the Common Stock of the Company complied with all
applicable Section 16(a) filing requirements during 1995.
6. INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
Hein + Associates, CPA, served as the Company's principal accountant for
the fiscal year ended December 31, 1995 and is expected to be retained as the
Company's principal accountant for the fiscal year ending December 31, 1996.
Representatives of Hein & Associates, CPA, are not expected to be present at the
Annual Meeting of Shareholders. However, should representatives of Hein &
Associates, CPA attend the Annual Meeting of Shareholders, said representatives
will have an opportunity to make a statement if they so desire or to respond to
appropriate questions.
OTHER MATTERS
The Company's management is not aware of other matters which may come
before the Meeting. The Directors' designees or other persons named in the
accompanying form of proxy will vote said proxy in accordance with their
judgment if any other matter does properly come before the Meeting. A majority
of those votes present at the Meeting cast in favor of any such matter will
result in the passage of such matter.
A copy of Form 10-KSB, the annual report filed by the Company with the
Securities and Exchange Commission, will be furnished without charge to any
person who requests it in writing, from the office of the company at its address
noted on this Proxy Statement.
AMERICAN EDUCATIONAL PRODUCTS, INC.
By: /s/ Michael L. Hobbs
----------------------------------------
Michael L. Hobbs, Secretary
1997 ANNUAL MEETING
No definitive date for the Annual Meeting of Shareholders in 1996 has been
established. Qualifying shareholders may submit proposals that are consistent
with the Company's Bylaws and federal securities laws to the Company for
inclusion in the Company's proxy material relating to the 1996 Annual Meeting.
The Company must receive such proposals at its business address (set forth at
the beginning of this Proxy Statement) no later than February 28, 1997.
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AMERICAN EDUCATIONAL PRODUCTS, INC.
PROXY SOLICITED ON BEHALF OF THE COMPANY
The undersigned hereby constitutes and appoints Clifford C. Thygesen or
Michael L. Hobbs (SEE NOTE BELOW) or either of them acting in the absence of the
other, with full power of substitution the true and lawful attorneys or attorney
and proxies of the undersigned to attend the Annual Meeting of the Shareholders
of American Educational Products, Inc. (the "Company") to be held at 401 Hickory
Street, Fort Collins, Colorado 80522, on June 3, 1996 at 9:00 o'clock a.m.
Mountain Daylight Time, or any adjournment or adjournments thereof, and vote all
the shares of the Company standing in the name of the undersigned with all the
powers the undersigned would possess if present at said meeting.
(1) FOR WITHHOLD AUTHORITY
---------- ----------
To elect all of the nominees listed below:
Clifford C. Thygesen, Dr. Robert A. Scott,
Clifford L. Neuman, Dr. Dale LaFrenz and Dr. Wayne R. Kirschling
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name below)
-----------------------------------------------
(2) Upon such other matters as may properly come before the meeting.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR ITEM 1 AND IN THE
DISCRETION OF THE PERSON HOLDING THE PROXY FOR ANY OTHER BUSINESS.
(NOTE: Should you desire to appoint a proxy other than the management designees
named above, strike out the names of management designees and insert the name of
your proxy in the space provided above. Should you do this, give this proxy
card to the person you appoint instead of returning the proxy card to the
Company.)
(PLEASE DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.)
Receipt is acknowledged of Notice of Annual Meeting and Proxy Statement for the
meeting.
Date , 1996
------------------------------------
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Name (please type or print)
------------------------------------------------
Signature
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Signature, if held jointly
Please sign exactly as name appears to the left. When shares are held by
joint tenants, both should sign. When signing as executor, administrator,
attorney, trustee, or guardian, please give full title as such. If a
corporation, please sign in full corporation name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.