-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IvE5UnyWjxxLgjGBcyTzocQih71ourbued6x/vThA6zhLYPck/AEJo9C0rj2btRI O4NdjvwJ9RWM1WTlYW0tbg== 0001011034-98-000040.txt : 19980318 0001011034-98-000040.hdr.sgml : 19980318 ACCESSION NUMBER: 0001011034-98-000040 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19980317 EFFECTIVENESS DATE: 19980317 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN EDUCATIONAL PRODUCTS INC CENTRAL INDEX KEY: 0000790069 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PUBLISHING [2741] IRS NUMBER: 841012129 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-48113 FILM NUMBER: 98567556 BUSINESS ADDRESS: STREET 1: AMERICAN EDUCATIONAL PRODUCTS, INC. STREET 2: 6550 GUNPARK DRIVE, SUITE 200 CITY: BOULDER STATE: CO ZIP: 80301 BUSINESS PHONE: 303-543-0123 MAIL ADDRESS: STREET 1: 5350 MANHATTAN CR #210 CITY: BOULDER STATE: CO ZIP: 80303 FORMER COMPANY: FORMER CONFORMED NAME: SCOTT CAPITAL RESOURCES INC /CO/ DATE OF NAME CHANGE: 19900228 FORMER COMPANY: FORMER CONFORMED NAME: WTS CAPITAL CORP DATE OF NAME CHANGE: 19870723 S-8 1 As filed with the Securities and Exchange Commission on March 17, 1998 S.E.C. File No. 33- =========================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------------- FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------------------------------- AMERICAN EDUCATIONAL PRODUCTS, INC. -------------------------------- (Name of Small Business Issuer in its Charter) COLORADO 84-1012129 - ------------------------------- -------------------- State or other jurisdiction of I.R.S. Employer incorporation or organization Identification No. 6550 GUNPARK DRIVE, SUITE 200 BOULDER, COLORADO 80301 ------------------------------------------------------------ (Address of principal executive offices, including Zip Code) AMERICAN EDUCATIONAL PRODUCTS, INC. 1997 STOCK INCENTIVE PLAN ------------------------------------ Full title of the plan Clifford C. Thygesen 6550 Gunpark Drive, Suite 200 Boulder, Colorado 80301 --------------------------------------- Name and address of agent for service (303) 527-3230 --------------------------------------- Telephone number, including area code, of agent for service Copy To: Clifford L. Neuman, Esq. Nathan L. Stone, Esq. Neuman & Drennen Temple-Bowron House 1507 Pine Street Boulder, Colorado 80302 (303) 449-2100 ---------------------------------------- Approximate date of commencement of proposed sale to public: As soon as practicable after the effective date of the Registration Statement. =========================================================================== CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------- Title of Proposed Proposed Securities Maximum Maximum Amount to be Amount Offering Aggregate of Registered to be Price Offering Registration Price Registered Per Share Price (1) Fee - --------------------------------------------------------------------------- Common Stock 50,700 Shares $ 3.875 (1) $ 196,462.50 $ 57.96 $.05 par value 98,300 Shares $ 4.500 (1) $ 442,350.00 $ 130.49 10,000 Shares $ 5.375 (1) $ 53,750.00 $ 15.86 2,700 Shares $ 7.125 (1) $ 19,237.50 $ 5.68 10,000 Shares $ 5.625 (1) $ 56,250.00 $ 16.59 14,600 Shares $ 7.66 (2) $ 111,836.00 $ 32.99 Total $ 879,886 $ 259.57 - --------------------------------------------------------------------------- (1) Based on the exercise price of the options in accordance with paragraph (h) of Rule 457. (2) Estimated solely for the purpose of calculating the registration fee in accordance with paragraphs (c) and (h) of Rule 457 on the basis of the average of the bid and asked prices of the Common Stock on March 3, 1998, as quoted on the Nasdaq SmallCap Market.
PROSPECTUS AMERICAN EDUCATIONAL PRODUCTS, INC. 6550 Gunpark Drive, Suite 200 Boulder, Colorado 80301 Telephone: (303) 527-3230 _______________________________________________ 186,300 Shares AMERICAN EDUCATIONAL PRODUCTS, INC. Common Stock ($.05 Par Value) Under AMERICAN EDUCATIONAL PRODUCTS, INC. 1997 STOCK INCENTIVE PLAN _______________________________________________ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. _______________________________________________ The date of this Prospectus is _____________________________________, 1998. TABLE OF CONTENTS Item 1. Plan Information . . . . . . . . . . . . . . . . . . . . . . . -3- Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . -3- The Plan: Adoption. . . . . . . . . . . . . . . . . . . . . . -3- Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . -3- Duration and Modifications . . . . . . . . . . . . . . . . . . -3- Class and Amount of Securities Subject to the Plan . . . . . . -3- Administration . . . . . . . . . . . . . . . . . . . . . . . . -4- Adjustment for Changes in Securities . . . . . . . . . . . . . -4- Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . -5- Granting of Options. . . . . . . . . . . . . . . . . . . . . . -5- Exercise of Options. . . . . . . . . . . . . . . . . . . . . . -6- Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . -6- Death. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7- Termination of Employment. . . . . . . . . . . . . . . . . . . -8- Transferability of Options . . . . . . . . . . . . . . . . . . -8- Resale of Shares Acquired Upon Exercise of Options . . . . . . -9- Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . -9- Outstanding Options. . . . . . . . . . . . . . . . . . . . . .-11- Item 2. Registrant Information and Employee Plan Annual Information. .-11- Item 3. Incorporation of Documents by Reference. . . . . . . . . . . .-12- Item 4. Description of Securities. . . . . . . . . . . . . . . . . . .-12- Item 5. Interests of Named Experts and Counsel . . . . . . . . . . . .-12- Item 6. Indemnification of Directors and Officers. . . . . . . . . . .-13- Item 7. Exemption from Registration Claimed. . . . . . . . . . . . . .-17- Item 8. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . .-19- Item 9. Undertakings . . . . . . . . . . . . . . . . . . . . . . . . .-19- PART I INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS ITEM 1. PLAN INFORMATION. - ------ ---------------- Company ------- American Educational Products, Inc, (hereinafter referred to as "AEP" or the "Company") is a Colorado corporation having its principal executive offices at 6550 Gunpark Drive, Suite 200, Boulder, Colorado 80301 (telephone number: (303) 527-3230) The use of masculine pronouns in this Prospectus is done for convenience only and refers to both males and females. The Plan: Adoption ------------------- The Board of Directors adopted the 1997 Stock Incentive Plan (hereinafter referred to as the "Plan") on June 2, 1997. The Plan was ratified and approved by the Company's shareholders at the Annual Meeting of Shareholders held June 2, 1997. The Plan was created pursuant to Section 422 of the Internal Revenue Code of 1986, as amended, and authorizes the Company to offer its employees up to 186,300 shares of Common Stock. The Plan is not subject to any provisions of the Employee Retirement Income Security Act of 1974; and the Plan is not subject to the qualification requirements under Section 401(a) of the Code. Purpose ------- The general purpose of the Plan is to provide directors, executive officers, and key employees of the Company and of any present or future parent or subsidiary of the Company, who have contributed to the continued growth and development of the Company, with an opportunity to acquire a proprietary interest in the Company and thus to create in such directors, executive officers, and key employees an increased interest in, and a greater concern for, the welfare of the Company. Duration and Modifications -------------------------- Options may be granted under the Plan at any time up to June 1, 2007, when the Plan will expire except as to any options outstanding, which options will remain in effect until they have been exercised or have expired, provided that all such options shall expire no later than June 1, 2012. Class and Amount of Securities Subject to the Plan -------------------------------------------------- Subject to adjustment as described below, an aggregate of up to 186,300 shares of the Company's common stock, $.05 par value, are authorized to be issued upon exercise of options granted under the Plan. Under the terms of the Plan, shares subject to and not issued under an option which expires or terminates or is cancelled for any reason during the term of the Plan are again available for the granting of options under the Plan. Administration -------------- A Committee ("Committee") of the Company's Board of Directors (the "Board") consisting of not less than two (2) "disinterested" members of the Board (within the meaning of Rule 16b-3(c)(2)(1) promulgated under the Securities Exchange Act of 1934, as amended) is responsible for the administration of the Plan. The Committee members may be removed or replaced by a vote of the majority of the Board. Any or all powers and functions of the committee may at any time be exercised by the Board; provided, however, that such exercise by the Board must involve a majority of disinterested Board members (within the meaning of Rule 16b-3(c)(2)(1) promulgated under the Exchange Act. All determinations by the Committee or Board are final and conclusive. The Committee is authorized, subject to the provisions of the Plan, to: (1) Determine the directors, executive officers and key employees to whom Options shall be granted, the time when such Options shall be granted, the number of shares which shall be subject to each Option, the purchase price or exercise price of each share which shall be subject to each Option, the periods during which such Options shall be exercisable (whether in whole or in part) and the other terms and provisions with respect to the Options (which need not be identical); (2) Determine, upon review of relevant information and in accordance with other provisions below, the fair market value of the Common Stock underlying the Options; (3) Construe the Plan and Options granted thereunder; (4) Accelerate or defer (with consent of the Optionee) the exercise of any Option, consistent with other provisions in the Plan; (5) Authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Option; (6) Prescribe, amend and rescind rules and regulations relating to the Plan; (7) Make all other determinations deemed necessary or advisable for the administration of the Plan. Adjustment for Changes in Securities ------------------------------------ The Plan requires the Board to make appropriate adjustments in the number and kind of shares available under the Plan and in the number, price and kind of shares covered by options granted or to be granted under the Plan, in the event of a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of the Company's Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration". The foregoing notwithstanding, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made, with respect to the number or price of shares of Common Stock subject to an Option. The Plan also provides that, upon the dissolution or liquidation of the Company, any outstanding Option will terminate immediately prior to the consummation of such action, unless otherwise provided by the Board. The Board may, in the exercise of its sole discretion in such instances, declare that any Option shall terminate as of a date fixed by the Board and give each Optionee the right to exercise his Option as to all or any part of the Optioned Stock, including shares as to which the Option would not otherwise be exercisable. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, the Option shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless such successor corporation does not agree to assume the Option or to substitute an equivalent Option, in which case the Board shall, in lieu of such assumption or substitution provide for the Optionee to have the right to exercise the Option as to all of the Optioned Stock, including shares as to which the Option would not otherwise be exercisable. If the Board makes an Option fully exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Board shall notify the Optionee that the Option shall be fully exercisable for a period of fifteen (15) days form the date of such notice, and the Option will terminate upon the expiration of such period. If, as a result of accelerating the time period during which all Options are exercisable in full in the event of a merger or asset transaction an Optionee would incur liability under Section 16(b) of the Securities Exchange Act of 1934, such Optionee may request the Company to, and the Company is obligated to, repurchase such Option for cash equal to the excess of the fair market value on the advanced termination date of the shares subject to the Option over the Option exercise price. Eligibility ----------- Except as otherwise provided in the Plan, Non-qualified Options ("NSO's") may be granted to directors, officer, key salaried employees of the Company and consultants and advisors to the Company, or any subsidiary or parent corporation, now existing or hereinafter formed or acquired. Any person who shall have retired from active employment by the Company shall not be eligible to receive a NSO. Incentive Options ("ISO's")may be granted only to salaried officers or key employees of the Company or any subsidiary corporation or parent corporation of the Company now existing or hereafter formed or acquired, and not to any director or officer who is not also an employee. Granting of Options ------------------- The Plan provides that the Committee shall have the authority, in its discretion, to determine the directors, executive officers and key employees to whom Options shall be granted, the time when such Options shall be granted, the number of shares which shall be subject to each Option, the purchase price or exercise price of each share which shall be subject to each Option, the periods during which such Options shall be exercisable (whether in whole or in part) and the other terms and provisions with respect to the Options (which need not be identical). There is no minimum or maximum amount of shares for which any one eligible person may receive NSO's. However, the amount of aggregate fair market value of the stock determined at the time of the grant of an ISO for which any employee may be granted ISO's under the Plan in any calendar year shall not exceed the sum of (i) $100,000 plus (ii) an unused limit carryover amount for any year after the date of the Plan but prior to the calendar year under consideration. The unused limit carryover amount shall be determined as one-half of the amount by which $100,000 exceeds the aggregate fair market value at the time of grant of an ISO under the Plan for which ISO's were granted in any prior year, but carried over for not more than three (3) years. For this purpose, ISO's granted in any year shall be deemed to first use up the $100,000 current year limitation and then the unused limit carryover amount from the earliest available year. Each Option is to be evidenced by a written agreement (an "Option Agreement") containing terms and conditions established by the Board consistent with the provisions of the Plan. Exercise of Options ------------------- Any Option may be exercised by the Participant holding such Option for such period or periods as the Committee shall determine at the date of grant of such Option. In no event shall any ISO granted to a Participant owning more than ten percent (10%) of the voting power of all classes of the Company's Stock, or the stock of any Subsidiary or Parent corporation, be exercisable by its terms after the expiration of five (5) years from the date it is granted, nor shall any other ISO granted under this Plan be exercisable by its terms after ten (10) years from the date it is granted. The Committee shall have the right to accelerate, in whole or in part, the expiration date of any Option; and to the extent that an Option is not exercised within the period of exercisability specified therein, it shall expire as to the then unexercised portion. Although the Company intends to exert its best efforts so that the shares purchasable upon the exercise of an Option, when it first becomes exercisable, will be registered under, or exempt from the registration requirements of, the Securities Act of 1933 (the "Act") and any applicable state securities law, if the exercise of an Option would otherwise result in the violation by the Company of any provision of the Act or of any state securities law, the Company may require that such exercise be deferred until the Company has taken appropriate action to avoid any such violation. An Option holder will not be deemed the holder of any shares subject to an Option until such shares are fully paid and issued to him upon exercise of such Option. Exercise Price -------------- The purchase price for each share purchasable under any NSO granted under the Plan shall be such amount as the Committee shall deem appropriate. The exercise price at which shares may be purchased under each ISO cannot be less than 100% of the fair market value of the stock on the date on which the Option is granted. If the Company's shares are listed on a national securities exchange in the United States on any date on which the fair market value per share is to be determined, the fair market value per share shall be deemed to be the average of the high and low quotations at which such shares are sold on such national securities exchange on such date. If the shares are listed on a national securities exchange in the United States on such date but the shares are not traded on such date, or such national securities exchange is not open for business on such date, the fair market value per share shall be determined as of the closest preceding date on which such exchange shall have been open for business and the shares were traded. If the shares are listed on more than one national securities exchange in the United States on the date any such Option is granted, the Committee shall determine which national securities exchange shall be used for the purpose of determining the fair market value per share. If a public market exists for the shares on any date on which the fair market value per share is to be determined but the shares are not listed on a national securities exchange in the United States, the fair market value per share shall be deemed to be the mean between the closing bid and asked quotations in the over-the-counter market for the shares on such date. If there are no bid and asked quotations for the shares on such date, the fair market value per share shall be deemed to be the mean between the closing bid and asked quotations in the over-the-counter market for the shares on the closest date preceding such date for which such quotations are available. If no public market exists for the shares on any date on which the fair market value per share is to be determined, the Committee shall, in its sole discretion and best judgment, determine the fair market value of a share. For purposes of the Plan, the determination by the Committee of the fair market value of a share shall be conclusive.. If any grantee of an ISO (directly and under attribution rules of the Code) stock possessing more than 10% of the total combined voting power of AEP (or any parent or subsidiary of AEP) the Option price of that ISO shall be not less than 110% of the fair market value of shares subject to the Option and such Option shall not be exercisable after the expiration of five years from its date of grant. The exercise price for shares purchased must be paid in full at the time of exercise; no shares will be issued until full payment is made. Such payment may be made using any lawful consideration, including: (1) cash; (2) check; (3) notes; or (4) in the discretion of the Committee, by delivering shares of the Company's Common Stock, valued at its fair market value determined as of the date of exercise of the Option, or a combination of the foregoing. Cash proceeds from the exercise of Options are added to the general funds of the Company available for its corporate purposes. Death ----- If an Option holder dies while in the employ of the Company or a Subsidiary or Parent, the person or persons to whom the Option is transferred by will or the laws of descent and distribution, may, at any time within one (1) year after the date of death, but no later than the date of expiration of the Option, exercise the Option. Any Options or portions of Options of deceased employees not so exercised will terminate. Termination of Employment ------------------------- Disability ---------- If the employment or service of an Optionee is terminated by reason of disability [defined in Section 22(e)(3) of the Code in the case of an ISO, and determined by the Board of Directors], the Option then held by the Optionee may be exercised, to the extent the Option was exercisable at the time of such termination, within one (1) year after such termination, but not later than the date of expiration of the Option. Any Options, or portions thereof, no so exercised will terminate. Other Termination ----------------- Upon termination of directorship or employment with the Company, or a Subsidiary or Parent, for any reason except death or disability, an Option holder may, at any time within three (3) months after the date of such termination, but not later than the date of expiration of the Option, exercise the Option to the extent he was entitled to do so on the date of such termination; provided, however, that if such director or employee voluntarily terminates his directorship or employment, or is discharged for cause, of which the Board is the sole judge, his Option will expire immediately. An Optionee whose directorship or employment is terminated by retirement in accordance with the Company's normal retirement policies, as determined by the Committee, will be permitted to exercise any Options held by such Optionee, to the extent he was entitled to do so on the date of such retirement, within three (3) months after the date of such termination, but not later than the date on which such Options would otherwise expire. Any Options or portions of Options of terminated employees not so exercised will terminate. A participant on a bona fide leave of absence shall be considered an employee for purposes of the exercise of an Option and shall be entitled to exercise such Option during such leave (but in the case of ISO's, only to the extent that his employment is not determined to be interrupted thereby for purposes of Section 422 of the Code) Also, a transfer from the Company to a Parent or subsidiary or from a Parent or Subsidiary to the Company will not be deemed a termination or interruption of employment for purposes of the Plan. Nothing in the Plan, or in any Option granted thereunder, confers on any person any right with respect to continuation of employment or retention in service in any capacity by the Company or a Parent or Subsidiary, and the grant of an Option under the Plan shall not constitute an employment agreement of any kind. Transferability of Options -------------------------- An Option granted under the Plan may not be transferred except by will or the laws of descent and distribution and, during the lifetime of an Optionee, the Option may be exercised only by him or his legal guardian or legal representative. Resale of Shares Acquired Upon Exercise of Options -------------------------------------------------- Generally, Optionees who are not "affiliates" (controlling persons) of the Company at the time of a proposed resale may sell shares acquired after the date of this Prospectus upon exercise of Options granted under the Plan without regard to securities law registration restrictions, since such shares have been registered under the Securities Act of 1933 and will not be "restricted securities." An "affiliate" is a person having sole power or sharing the power to direct or cause the direction of the management and policies of the Company. Unless a separate resale prospectus is prepared and filed with the Securities and Exchange Commission ("SEC") by the Company, affiliates must make resales of such shares in compliance with SEC Rule 144 (except that the holding period requirement of Rule 144 is not applicable to the resale of such shares), or another available exemption from registration under the Securities Act of 1933. Thus, affiliates are subject generally to the same restrictions with regard to the resale of shares acquired under the Plan as they are with respect to the resale of otherwise-acquired shares of the Company's common stock, including the restrictions resulting from the provisions of Section 16(b) of the Securities Exchange Act of 1934. Section 16(b) of the Securities Exchange Act of 1934 provides for recapture by the Company of "profit" realized by an officer, director or more than 10% shareholder of the Company from any purchase (including the exercise of an Option) and sale, or any sale and purchase, of any equity security of the Company within any period of less than six months. Tax Consequences ---------------- The Company has been advised that under the present provisions of the Code, and subject to all regulations promulgated under Section 422 thereof, the federal income tax consequences with respect to Options which may be granted under the Plan can be summarized as follows: (1) An Optionee will not recognize income nor will the Company be entitled to a deduction at the time an ISO is granted or exercised. Any gain upon the subsequent sale of the shares acquired on exercise of an ISO is subject to tax at capital gains rates; provided that the Optionee makes no disposition of the shares within two (2) years after the ISO is granted or within one year after the shares are transferred to the Optionee, whichever is later. The spread between the ISO price and the fair market value of the shares at the time o exercise is, however, a preference item and must be recognized for purposes of the alternative minimum tax. The Company is not entitled to any tax deduction if the Optionee satisfies the holding period requirements described above. (2) If the Optionee makes a disposition of shares purchased upon exercise of an ISO before the expiration of the requisite holding periods described above, the Optionee will be taxed as if he had received compensation income in the year of disposition and the Company will be entitled to a corresponding deduction in that year; provided it satisfies certain withholding requirements. The holding period requirements are waived in the event of the employee's death. The amount of income (and the Company's deduction) will be equal to the difference between the ISO exercise price and the fair market value of the shares on the date of exercise. Any balance of the Optionee's gain on disposition of the shares will be subject to tax as a capital gain determined under the normal capital asset holding period rules. However, if the Optionee makes a disqualifying disposition of shares before the expiration of the holding periods described above that is a sale or exchange with respect to which a loss (if sustained) would be recognized (i.e. not to a related party), the amount of compensation income recognized by the Optionee (and the Company's deduction) will not exceed the excess, if any, of the amount realized over the adjusted basis of the shares. (3) Shares purchased upon the exercise of an ISO may be paid for in whole or part by delivering previously acquired shares of Common Stock of the Company. However, all stock acquired pursuant to the exercise of an ISO is subject to the holding period rules and disqualifying disposition rules described above, regardless of whether such stock is paid for with cash or previously acquired shares. Furthermore, the exercise of an ISO with previously acquired shares will be deemed to be an exchange to which Section 1036 of the Code applies. The Optionee's basis and holding period in the number of shares of ISO stock that equals the number of previously acquired shares used to exercise the ISO will be the same as the basis and holding period of the previously acquired shares used to exercise the ISO. The Optionee's basis in any remaining shares of ISO stock will be zero and his holding period for those shares will begin on the date he acquires those remaining shares. (4) An Optionee will not recognize taxable income at the time a NSO is granted, but taxable income will be recognized, and the Company will be entitled to a deduction (provided it satisfies certain withholding requirements) at the time of exercise of the NSO. The amount of income (and the Company's deduction) will be equal to the difference between the NSO exercise price and the fair market value of the shares on the date of exercise. The income recognized will be taxed at ordinary income tax rates for federal income tax purposes. On subsequent disposition of the shares acquired upon exercise of a NSO, capital gain or loss, as determined under the normal capital asset holding period rules, will be recognized in the amount of the difference between the proceeds of sale and the fair market value of the shares on the date of exercise. (5) Where the NSO exercise price is paid in previously acquired stock, the exercise is treated as a tax-free exchange of the shares of previously acquired stock (without recognizing any taxable gain with respect thereto) for a like number of new shares (with such new shares having the same basis and holding period as the old). The Optionee's basis in any remaining shares will equal the amount of compensation income recognized upon exercise of the NSO and the holding period for such shares will begin on the day the Optionee acquires them. This mode of payment does not affect the ordinary income tax liability incurred upon exercise of the NSO described above. (6) If "statutory option stock" (stock acquired through the exercise of an ISO and Options issued under an employee stock purchase plan) is transferred to acquire shares offered under an Option, and if the applicable holding periods for such statutory option stock have not been met before such transfer, the transfer is considered a disqualifying disposition and will result in ordinary income with respect to the stock disposed of, but will not affect the tax treatment, as described above, for the stock received. (7) In the case of officers and directors of the Company subject to the short-swing profit provisions of Section 16(b) under the Securities Exchange Act of 1934, the tax consequences of exercise of either an ISO or NSO granted under the Plan will be deferred until at least six months after exercise, unless such persons otherwise elect at the time of exercise. However, the income when recognized will include any appreciation in value of the acquired shares during the period of deferral, and the capital gain holding period will not begin to run until the end of the period of deferral. The foregoing summary description is based upon the presently applicable provisions of the Code, and is subject to change in the event of a change in either the Code or interpretations thereof. Each Optionee is urged to consult his personal legal and tax advisor as to the legal and tax effects of his individual situation and his participation in the Plan. Outstanding Options ------------------- As of March 3, 1998, Options had been granted for 171,700 shares authorized to be issued pursuant to the Plan; and 171,700 Options were outstanding and unexercised. On that date, 14,600 additional shares dedicated to the Plan were available for future Option grant and purchase. ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION. - ------ ----------------------------------------------------------- American Educational Products, Inc. will provide without charge to each person, including any beneficial owner, to whom this Prospectus is delivered, upon written or oral request of such person, a copy of any document referred to herein in Item 3. under the caption "Incorporation of Certain Documents by Reference," which documents are incorporated by reference in American Educational Products, Inc.'s Section 10(a) prospectus, together with a copy of the Plan, and/or a copy of American Educational Products, Inc.'s latest annual report to shareholders. Such a request should be directed to American Educational Products, Inc. American Educational Products, Inc. is subject to the informational reporting requirements of the Securities Exchange Act of 1934 and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). The reports, proxy and information statements and other information filed by American Educational Products, Inc. can be inspected and copied (at prescribed rates) at the Commission's Public Reference Section, Room 1024, 450 Fifth Street, N.W. Judiciary Plaza, Washington, D.C. 20549, as well as at the following Regional Offices: Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of such material also may be obtained at prescribed rates from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and are publicly available through the Commission's website at http:\\www.sec.gov. PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE. - ------ --------------------------------------- The Registrant hereby states that (i) the documents listed in (a) through (c) below are incorporated by reference in this Registration Statement and (ii) all documents subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-effective amendment which indicates that all securities offered hereunder have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the date of filing of such documents. (a) The Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1996, as filed with the Commission on April 11, 1997, SEC File No. 0-16310; (b) All other reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by the Registrant document referred to in (a) above, including: 1. The Registrant's Quarterly Report on Form 10-QSB for the fiscal quarter ended Sept. 30, 1997; as filed with the Commission on November 17, 1997, SEC File No. 0-16310; 2. The Notice of Annual Meeting of Shareholders, Proxy Statement and form of Proxy filed with the Securities and Exchange Commission ("Commission") on April 30, 1997, in connection with the Registrant's Annual Meeting of Shareholders on June 2, 1997; (c) The description of the Registrant's Common Stock, $.05 par value, contained in the Registrant's Amendment No. 1 to Registration Statement on Form S-2, as filed with the Commission on August 20, 1992, SEC File No. 0- 16310, as amended, including any amendment or report filed for the purpose of updating such description. ITEM 4. DESCRIPTION OF SECURITIES. - ------ ------------------------- Not applicable. The class of securities to be offered is registered under Section 12 of the Exchange Act. ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL. - ------ -------------------------------------- Clifford L. Neuman, a partner in the law firm of Neuman & Drennen, LLC, is the beneficial owner of 12,000 shares of Common Stock and 12,000 Options of the Registrant. ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS. - ------ ----------------------------------------- The only statute, charter provision, bylaw, contract, or other arrangements under which any controlling person, director or officers of the Registrant is insured or indemnified in any manner against any liability which he may incur in his capacity as such, are as follows: (a) Sections 7-109-101 through 7-109-110 of the Colorado Corporation Code provide as follows: 7-109-101. Definitions. As used in this article: ---------- (1) "Corporation" includes any domestic or foreign entity that is a predecessor of a corporation by reason of a merger or other transaction in which the predecessor's existence ceased upon consummation of the transaction. (2) "Director" means an individual who is or was a director of a corporation or an individual who, while a director of a corporation, is or was serving at the corporation's request as a director, officer, partner, trustee, employee, fiduciary, or agent of another domestic or foreign corporation or other person or of an employee benefit plan. A director is considered to be serving an employee benefit plan at the corporation's request if his or her duties to the corporation also impose duties on, or otherwise involve services by, the director to the plan or to participants in or beneficiaries of the plan. "Director" includes, unless the context requires otherwise, the estate or personal representative of a director. (3) "Expenses" includes counsel fees. (4) "Liability" means the obligation incurred with respect to a proceeding to pay a judgment, settlement, penalty, fine, including an excise tax assessed with respect to an employee benefit plan, or reasonable expenses. (5) "Official capacity" means, when used with respect to a director, the office of director in a corporation and, when used with respect to a person other than a director as contemplated in section 7-109-107, the office in a corporation held by the officer or the employment, fiduciary, or agency relationship undertaken by the employee, fiduciary, or agent on behalf of the corporation. "Official capacity" does not include service for any other domestic or foreign corporation or other person or employee benefit plan. (6) "Party" includes a person who was, is, or is threatened to be made a named defendant or respondent in a proceeding. (7) "Proceeding" means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal. 7-109-102. Authority to indemnify directors. ---------- (1) Except as provided in subsection (4) of this section, a corporation may indemnify a person made a party to a proceeding because the person is or was a director against liability incurred in the proceeding if: (a) The person conducted himself or herself in good faith; and (b) The person reasonable believed: (I) In the case of conduct in an official capacity with the corporation, that his or her conduct was in the corporation's best interests; and (II) In all other cases, that his or her conduct was at least not opposed to the corporation's best interests; and (c) In the case of any criminal proceeding, the person had no reasonable cause to believe his or her conduct was unlawful. (2) A director's conduct with respect to an employee benefit plan for a purpose the director reasonably believed to be in the interests of the participants in or beneficiaries of the plan is conduct that satisfies the requirement of subparagraph (II) of paragraph (b) of subsection (1) of this section. A director's conduct with respect to an employee benefit plan for a purpose that the director did not reasonably believe to be in the interests of the participants in or beneficiaries of the plan shall be deemed not to satisfy the requirements of paragraph (a) of subsection (1) of this section. (3) The termination of a proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent is not, of itself, determinative that the director did not meet the standard of conduct described in this section. (4) A corporation may not indemnify a director under this section: (a) In connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation; or (b) In connection with any other proceeding charging that the director derived an improper personal benefit, whether or not involving action in an official capacity, in which proceeding the director was adjudged liable on the basis that he or she derived an improper personal benefit. (5) Indemnification permitted under this section in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding. 7-109-103. Mandatory indemnification of directors. ---------- Unless limited by its articles of incorporation, a corporation shall indemnify a person who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the person was a party because the person is or was a director, against reasonable expenses incurred by him or her in connection with the proceeding. 7-109-104. Advance of expenses to directors. ---------- (1) A corporation may pay for or reimburse the reasonable expenses incurred by a director who is a party to a proceeding in advance of final disposition of the proceeding if: (a) The director furnishes to the corporation a written affirmation of the director's good faith belief that he or she has met the standard of conduct described in section 7-109-102; (b) The director furnishes to the corporation a written undertaking, executed personally or on the director's behalf, to repay the advance if it is ultimately determined that he or she did not meet the standard of conduct; and (c) A determination is made that the facts then known to those making the determination would not preclude indemnification under this article. (2) The undertaking required by paragraph (b) of subsection (1) of this section shall be an unlimited general obligation of the director but need not be secured and may be accepted without reference to financial ability to make repayment. (3) Determinations and authorizations of payments under this section shall be made in the manner specified in section 7-109-106. 7-109-105. Court-ordered indemnification of directors. ---------- (1) Unless otherwise provided in the articles of incorporation, a director who is or was a party to a proceeding may apply for indemnification to the court conducting the proceeding or to another court of competent jurisdiction. On receipt of an application, the court, after giving any notice the court considers necessary, may order indemnification in the following manner: (a) If it determines that the director is entitled to mandatory indemnification under section 7-109-103, the court shall order indemnification, in which case the court shall also order the corporation to pay the director's reasonable expenses incurred to obtain court-ordered indemnification. (b) If it determines that the director is fairly and reasonable entitled to indemnification in view of all the relevant circumstances, whether or not the director met the standard of conduct set forth in section 7-109-102 (1) or was adjudged liable in the circumstances described in section 7-109-102 (4), the court may order such indemnification as the court deems proper; except that the indemnification with respect to any proceeding in which liability shall have been adjudged in the circumstances described in section 7-109-102 (4) is limited to reasonable expenses incurred in connection with the proceeding and reasonable expenses incurred to obtain court-ordered indemnification. 7-109-106. Determination and authorization of indemnification of ---------- directors. (1) A corporation may not indemnify a director under section 7-109- 102 unless authorized in the specific case after a determination has been made that indemnification of the director is permissible in the circumstances because the director has met the standard of conduct set forth in section 7-109-102. A corporation shall not advance expenses to a director under section 7-109-104 unless authorized in the specific case after the written affirmation and undertaking required by section 7-109-104 (1) (a) and (1) (b) are received and the determination required by section 7-109-104 (1) (c) has been made. (2) The determinations required by subsection (1) of this section shall be made: (a) By the board of directors by a majority vote of those present at a meeting at which a quorum is present, and only those directors not parties to the proceeding shall be counted in satisfying the quorum; or (b) If a quorum cannot be obtained, by a majority vote of a committee of the board of directors designated by the board of directors, which committee shall consist of two or more directors not parties to the proceeding; except that directors who are parties to the proceeding may participate in the designation of directors for the committee. (3) If a quorum cannot be obtained as contemplated in paragraph (a) of subsection (2) of this section, and a committee cannot be established under paragraph (b) of subsection (2) of this section, or, even if a quorum is obtained or a committee is designated, if a majority of the directors constituting such quorum or such committee so directs, the determination required to be made by subsection (1) of this section shall be made: (a) By independent legal counsel selected by a vote of the board of directors or the committee in the manner specified in paragraph (a) or (b) of subsection (2) of this section or, if a quorum of the full board cannot be obtained and a committee cannot be established, by independent legal counsel selected by a majority vote of the full board of directors; or (b) By the shareholders. (4) Authorization of indemnification and advance of expenses shall be made in the same manner as the determination that indemnification or advance of expenses is permissible; except that, if the determination that indemnification or advance of expenses is permissible is made by independent legal counsel, authorization of indemnification and advance of expenses shall be made by the body that selected such counsel. 7-109-107. Indemnification of officers, employees, fiduciaries, and ---------- agents. (1) Unless otherwise provided in the articles of incorporation: (a) An officer is entitled to mandatory indemnification under section 7-109-103, and is entitled to apply for court-ordered indemnification under section 7-109-105, in each case to the same extent as a director; (b) A corporation may indemnify and advance expenses to an officer, employee, fiduciary, or agent of the corporation to the same extent as to a director; and (c) A corporation may also indemnify and advance expenses to an officer, employee, fiduciary, or agent who is not a director to a greater extent, if not inconsistent with public policy, and if provided for by its bylaws, general or specific action of its board of directors or shareholders, or contract. 7-109-108. Insurance. ---------- A corporation may purchase and maintain insurance on behalf of a person who is or was a director, officer, employee, fiduciary, or agent of the corporation, or who, while a director, officer, employee, fiduciary, or agent of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, fiduciary, or agent of another domestic or foreign corporation or other person or of an employee benefit plan, against liability asserted against or incurred by the person in that capacity or arising from his or her status as a director, officer, employee, fiduciary, or agent, whether or not the corporation would have power to indemnify the person against the same liability under section 7-109-102, 7-109-103, or 7-109-107. Any such insurance may be procured from any insurance company designated by the board of directors, whether such insurance company is formed under the laws of this state or any other jurisdiction of the United States or elsewhere, including any insurance company in which the corporation has an equity or any other interest through stock ownership or otherwise. 7-109-109. Limitation of indemnification of directors. ---------- (1) A provision treating a corporation's indemnification of, or advance of expenses to, directors that is contained in its articles of incorporation or bylaws, in a resolution of its shareholders or board of directors, or in a contract, except an insurance policy, or otherwise, is valid only to the extent the provision is not inconsistent with sections 7-109-101 to 7-109-108. If the article of incorporation limit indemnification or advance of expenses, indemnification and advance of expenses are valid only to the extent not inconsistent with the articles of incorporation. (2) Sections 7-109-101 to 7-109-108 do not limit a corporation's power to pay or reimburse expenses incurred by a director in connection with an appearance as a witness in a proceeding at a time when he or she has not been made a named defendant or respondent in the proceeding. 7-109-110. Notice to shareholder of indemnification of director. ---------- If a corporation indemnifies or advances expenses to a director under this article in connection with a proceeding by or in the right of the corporation, the corporation shall give written notice of the indemnification or advance to the shareholders with or before the notice of the next shareholders' meeting. If the next shareholder action is taken without a meeting at the instigation of the board of directors, such notice shall be given to the shareholders at or before the time the first shareholder signs a writing consenting to such action. * * * (b) Article XI of the Amended and Restated Articles of Incorporation of the Registrant provides, in pertinent part: a. A director of this Corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that such an exemption from liability or limitation thereof is not permitted under the General Corporation Laws of the State of Colorado as the same exists or may hereafter be amended. b. Any repeal or modification of the foregoing paragraph a. by the stockholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification. (c) Article VIII of the Amended and Restated Articles of Incorporation of the Registrant provides: The Corporation may and shall indemnify each Director, Officer and any employee or agent of the Corporation, his heirs, executors and administrators, against any and all expenses and liability reasonably incurred by him in connection with any action, suit or proceeding to which he may be a party by reason of his being or having been a director, officer, employee or agent of the Corporation to the full extent required or permitted by the Colorado Corporation Code, as amended. ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED. - ------ ----------------------------------- Not applicable. No Restricted Securities are to be reoffered or resold pursuant to this Registration Statement. ITEM 8. EXHIBITS. - ------ -------- Exhibit Description - ------- ----------- 4.1 American Educational Products, Inc. 1997 Stock Incentive Plan, as amended 5.0 Opinion of Neuman & Drennen, LLC 23.1 Consent of Neuman & Drennen, LLC (contained in Exhibit 5.0) 23.2 Consent of Hein & Associates, LLP, Certified Public Accountants ITEM 9. UNDERTAKINGS. - ------ ------------ (a) The undersigned Registrant hereby undertakes: (1) To file, during any period in which it offers or sells securities, a post-effective amendment to this Registration Statement to: (i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and (iii) Include any additional or changed material information on the plan of distribution. (2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. (3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. Insofar as indemnification for liabilities arising under the Securities Act of 1933 ("Act") may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a Director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boulder, Colorado, on March 17, 1998. AMERICAN EDUCATIONAL PRODUCTS, INC. By: /s/ Clifford C Thygesen ------------------------------------------ Clifford C. Thygesen, President and Chief Executive Officer POWER OF ATTORNEY ----------------- Each of the directors of the Registrant and each other person whose signature appears below, by his execution hereof, authorizes Clifford C. Thygesen to act as his attorney in fact to sign, on his behalf individually and in each capacity stated below, and file all amendments and post-effective amendments to, the Registration Statement, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission and such other applicable governmental/regulatory agencies, hereby ratifying and confirming all that Clifford C. Thygesen or his substitute or substitutes, may do or cause to be done by virtue hereof, and the Registrant hereby confers like authority to sign and file on its behalf. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dated indicated. SIGNATURE TITLE DATE --------- ----- ---- /s/ Clifford C. Thygesen President, Director 3/17/98 - --------------------------- -------- Clifford C. Thygesen /s/ Frank L. Jennings Vice President, 3/17/98 - --------------------------- Chief Financial Officer, -------- Frank L. Jennings Chief Accounting Officer /s/ Robert A. Scott Secretary, Director 3/17/98 - --------------------------- -------- Robert A. Scott /s/ Clifford L. Neuman Assistant Secretary, 3/17/98 - --------------------------- Director -------- Clifford L. Neuman EX-4.1 2 EXHIBIT 4.1 ----------- AMERICAN EDUCATIONAL PRODUCTS, INC. 1997 STOCK INCENTIVE PLAN I. PURPOSE. -------- A. This Stock Incentive Plan (the "Plan") is adopted by the Board of Directors of American Educational Products, Inc., a Colorado corporation (the "Company"), on June 2,1997 to enable the Company to afford certain of its directors, executive officers and key employees and the directors, executive officers and key employees of any subsidiary corporation or parent corporation of the Company who are responsible for the continued growth of the Company, an opportunity to acquire a proprietary interest in the Company and thus to create in such directors, executive officers and key employees and increased interest in, and a greater concern for, the welfare of the Company. B. The stock options ("Options") offered pursuant to the Plan are a matter of separate inducement and are not in lieu of any salary or other compensation for the services of such directors, executive officers or key employees. C. The Options granted under the Plan are intended to be either incentive stock options ("Incentive Options") within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or Options that do not meet the requirements for Incentive Options ("Non-Qualified Options"), but the Company makes no warranty as to the qualification of any Option as an Incentive Option. II. ADMINISTRATION OF THE PLAN. --------------------------- A. Procedure. ---------- The Plan shall be administered by the Board of Directors of the Company or a Committee of the Board of Directors. 1. Subject to subparagraph (2), the Board of Directors may appoint a Committee consisting of not less than two members of the Board of Directors to administer the Plan on behalf of the Board of Directors, subject to such terms and conditions as the Board of Directors may prescribe. Once appointed, the Committee shall continue to serve until otherwise directed by the Board of Directors. All members of the Committee shall be "disinterested persons" within the meaning of Rule 16b-3(c)(2)(i) (or any successor rule or regulation) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). A majority of the members of the Committee shall constitute a quorum, and the act of a majority of the members of the Committee shall be the act of the Committee. Any member of the Committee may be removed at any time, either with or without cause, by resolution adopted by the Board of Directors, and any vacancy on the Committee may at any time be filled by resolution adopted by the Board of Directors. 2. Any or all powers and functions of the Committee may at any time, and from time to time, be exercised by the Board of Directors; provided, however, that with respect to the participation in the Plan by members of the Board of Directors, such powers and functions of the Committee may be exercised by the Board of Directors only if, at the time of such exercise, a majority of the members of the Board of Directors, as the case may be, and a majority of the directors acting in a particular matter, are "disinterested persons" within the meaning of Rule 16b-3(c)(2)(i) (or any successor rule or regulation) promulgated under the Exchange Act. Any reference in the Plan to the Committee shall be deemed also to refer to the Board of Directors, to the extent that the Board of Directors is exercising any of the powers and functions of the Committee. No action of the Board of Directors under the Plan shall act to invalidate the Plan or any benefits granted hereunder. 3. Subject to the foregoing subparagraphs (1) and (2), from time to time the Board of Directors may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies however caused, or remove all members of the Committee and thereafter directly administer the Plan. B. Powers of the Committee. ------------------------ Subject to the provisions of the Plan, the Committee shall have the authority, in its discretion: 1. to determine the directors, executive officers and key employees to whom Options shall be granted, the time when such Options shall be granted, the number of shares which shall be subject to each Option, the purchase price or exercise price of each share which shall be subject to each Option, the periods during which such Options shall be exercisable (whether in whole or in part) and the other terms and provisions with respect to the Options (which need not be identical); 2. to determine, upon review of relevant information and in accordance with Article IX hereof, the fair market value of the Common Stock underlying the Options; 3. to construe the Plan and Options granted thereunder; 4. to accelerate or defer (with the consent of the Optionee) the exercise of any Option, consistent with the provisions of the Plan; 5. to authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an option; 6. to prescribe, amend and rescind rules and regulations relating to the Plan; 7. to make all other determinations deemed necessary or advisable for the administration of the Plan. C. Agreements With Optionee. ------------------------- Without limiting the foregoing, the Committee shall also have the authority to require, in its discretion, as a condition to the granting of any Option, that the Participant agree not to sell or otherwise dispose of shares acquired pursuant to the Option for a prescribed period following the date of acquisition of such shares and that in the event of termination of a directorship or employment of such Participant, other than as a result of dismissal without cause, the Participant will not, for a period to be fixed at the time of the grant of the Option, enter into any employment or participate directly or indirectly in any business or enterprise which is competitive with the business of the Company or any subsidiary corporation or parent corporation of the Company, or enter into any employment in which such employee or director will be called upon to utilize special knowledge obtained through his or her directorship or employment with the Company or any subsidiary corporation or parent corporation thereof. D. Effect of Committee's Decision. ------------------------------- All decisions, determinations and interpretations of the Committee shall be final and binding on all Optionees and any other holders of any Options granted under the Plan. III. ELIGIBILITY. ------------ A. Non-Qualified Options may be granted to directors, officers, other salaried key employees or consultants of the Company, or any subsidiary corporation or parent corporation of the Company now existing or hereafter formed or acquired, except as hereafter provided. Any person who shall have retired from active employment by the Company, although such person shall have entered into a consulting contract with the Company, shall not be eligible to receive an Option. B. An Incentive Option may be granted only to salaried officers or key employees of the Company or any subsidiary corporation or parent corporation of the Company now existing or hereafter formed or acquired, and not to any director or officer who is not also an employee. IV. AMOUNT OF STOCK. ---------------- A. The total number of shares of Common Stock of the Company which may be purchased pursuant to the exercise of Options granted under the Plan shall not exceed, in the aggregate, 186,300 shares of the authorized Common Stock, $.05 par value per share, of the Company (the "Shares"). Shares which are subject to Options shall be counted only once in determining whether the maximum number of shares which may be purchased or acquired under the Plan has been exceeded. B. Shares which may be acquired under the Plan may either be authorized but unissued Shares, Shares of issued stock held in the Company's treasury, or both, at the discretion of the Company. If and to the extent that Options granted under the Plan expire or terminate without having been exercised, new Options may be granted with respect to the Shares covered by such expired or terminated Options, provided that the grant and the terms of such new Options shall in all respects comply with the provisions of the Plan. V. EFFECTIVE DATE AND TERM OF THE PLAN. ------------------------------------ A. The Plan shall become effective on the date (the "Effective Date") on which it is adopted by the Board of Directors of the Company. B. The Company may, from time to time during the period beginning on the Effective Date and ending on June 1, 2007 (the "Termination Date") grant to persons eligible to participate in the Plan, Options under the terms of the Plan. Options granted prior to the Termination Date may extend beyond that date, in accordance with the terms thereof. In no event shall the expiration date be later than June 1, 2012 five (5) years following the Termination Date. C. As used in the Plan, the terms "subsidiary corporation" and "parent corporation" shall have the meanings ascribed to such terms, respectively, in Sections 425(f) and 425(e) of the Code. D. An employee, executive officer or director to whom Options are granted hereunder may be referred to herein as a "Participant". VI. LIMITATION ON INCENTIVE OPTIONS. -------------------------------- The amount of aggregate fair market value of the stock determined at the time of the grant of the Incentive Option for which any employee may be granted Incentive Options under this Plan in any calendar year shall not exceed the sum of (i) $100,000.00 plus (ii) an unused limit carryover amount for any year after the date of this Plan but prior to the calendar year under consideration. The unused limit carryover amount shall be determined as one- half of the amount by which $100,000.00 exceeds the aggregate fair market value at the time of grant of an Incentive Option under this Plan for which Incentive Options were granted in any prior year, but carried over for not more than three (3) years. For this purpose, Incentive Options granted in any year shall be deemed to first use up the $100,000.00 current year limitation and then the unused limit carryover amount from the earliest available year. VII. TERMS OF OPTIONS. ----------------- Stock Options granted pursuant to this Plan shall be evidenced by written agreements which shall comply with the following terms and conditions: A. Time of Exercise. ----------------- Any Option may be exercised by the Participant holding such Option for such period or periods as the Committee shall determine at the date of grant of such Option. In no event shall any Incentive Option granted to a Participant owning more than ten percent (10%) of the voting power of all classes of the Company's stock, or the stock of any subsidiary corporation or parent corporation, be exercisable by its terms after the expiration of five (5) years from the date it is granted, nor shall any other Incentive Option granted under this Plan be exercisable by its terms after ten (10) years from the date it is granted. The Committee shall have the right to accelerate, in whole or in part, the expiration date of any Option; and to the extent that an Option is not exercised within the period of exercisability specified therein, it shall expire as to the then unexercised portion. B. Transferability. ---------------- Any Option granted under this Plan shall not be transferrable by the director, executive officer or key employee holding same and may be exercised by the director, executive officer or key employee only during his lifetime, except that the Option may be exercisable after the death of such director, executive officer or key employee in accordance with the laws of descent and distribution. C. Option Price. ------------- 1. The purchase price for each Share purchasable under any Non-Qualified Option granted hereunder shall be such amount as the Committee shall deem appropriate. 2. The purchase price for shares of stock subject to any Incentive Option under this Plan, shall not be less than the fair market value of the stock on the date of the grant of the Incentive Option, which fair market value shall be determined in good faith at the time of the grant of the Incentive Option by the Committee administering this Plan. In the event that any Incentive Option is granted to an employee owning more than ten percent (10%) of the voting power of all classes of the Company's stock, the purchase price per share of the stock subject to such an Incentive Option shall not be less than 110% of the fair market value of the stock on the date of the grant of such Incentive Option determined in good faith by the Committee. D. Consideration for Shares. ------------------------- The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Committee and may consist entirely of cash, check, other shares of common stock of the Company which have a fair market value on the date of surrender equal to the aggregate exercise price of the shares as to which said Option shall be exercised, or any combination of such methods of payment, or such other consideration and method of payment for issuance of shares to the extent permitted under applicable provisions of the Colorado Corporation Code and the Company's Articles of Incorporation and Bylaws. E. Vesting. -------- Any Options granted pursuant to this Plan may be made subject to vesting by the Committee in its discretion. VIII. SHAREHOLDER APPROVAL. --------------------- This Plan shall not be valid unless it shall be approved by the shareholders of the Company at a regular or special meeting of shareholders. which shall be held within the period of twelve (12) months following the effective date of this Plan set forth above. The Company's shareholders approved the Plan at an Annual Meeting held June 2, 1997. IX. METHOD OF DETERMINATION OF FAIR MARKET VALUE. --------------------------------------------- A. If the Shares are listed on a national securities exchange in the United States on any date on which the fair market value per Share is to be determined, the fair market value per Share shall be deemed to be the average of the high and low quotations at which such Shares are sold on such national securities exchange on such date. If the Shares are listed on a national securities exchange in the United States on such date but the Shares are not traded on such date, or such national securities exchange is not open for business on such date, the fair market value per Share shall be determined as of the closest preceding date on which such exchange shall have been open for business and the Shares were traded. If the Shares are listed on more than one national securities exchange in the United States on the date any such Option is granted, the Committee shall determine which national securities exchange shall be used for the purpose of determining the fair market value per Share. B. If a public market exists for the Shares on any date on which the fair market value per Share is to be determined but the Shares are not listed on a national securities exchange in the United States, the fair market value per Share shall be deemed to be the mean between the closing bid and asked quotations in the over-the-counter market for the Shares on such date. If there are no bid and asked quotations for the Shares on such date, the fair market value per Share shall be deemed to be the mean between the closing bid and asked quotations in the over-the-counter market for the Shares on the closest date preceding such date for which such quotations are available. C. If no public market exists for the Shares on any date on which the fair market value per Share is to be determined, the Committee shall, in its sole discretion and best judgment, determine the fair market value of a Share. For purposes of this Plan, the determination by the Committee of the fair market value of a Share shall be conclusive. X. TERMINATION OF DIRECTORSHIP OR EMPLOYMENT. ------------------------------------------ A. Upon termination of the directorship or employment of any Participant with the Company and all subsidiary corporations and parent corporations of the Company, any Option previously granted to the Participant, unless otherwise specified by the Committee in the Option, shall, to the extent not theretofore exercised, terminate and become null and void, provided that: 1. if the Participant shall die while serving as a director or while in the employ of such corporation or during either the three (3) or one (1) year period, whichever is applicable, specified in clause A.2 below and at a time when such Participant was entitled to exercise an Option as herein provided, the legal representative of such Participant, or such person who acquired such Option by bequest or inheritance or by reason of the death of the Participant, may, not later than one (1) year from the date of death, exercise such Option, to the extent not theretofore exercised, in respect of any or all of such number of Shares as specified by the Committee in such Option; and 2. if the directorship or employment of any Participant to whom such Option shall have been granted shall terminate by reason of the Participant's retirement (at such age or upon such conditions as shall be specified by the Committee), disability (as described in Section 22(e)(3) of the Code) or dismissal by the employer other than for cause (as defined below), and while such Participant is entitled to exercise such Option as herein provided, such Participant shall have the right to exercise such Option, to the extent not theretofore exercised, in respect of any or all of such number of Shares as specified by the Committee in such Option, at any time up to and including (i) three (3) months after the date of such termination of directorship or employment in the case of termination by reason of retirement or dismissal other than for cause, and (ii) one (1) year after the date of termination of directorship or employment in the case of termination by reason of disability. In no event, however, shall any person be entitled to exercise any Option after the expiration of the period of exercisability of such Option as specified therein. B. If a Participant voluntarily terminates his directorship or employment, or is discharged for cause, any Option granted hereunder shall, unless otherwise specified by the Committee in the Option, forthwith terminate with respect to any unexercised portion thereof. C. If an Option shall be exercised by the legal representative of a deceased Participant, or by a person who acquired an Option or by bequest or inheritance or by reason of the death of any Participant, written notice of such exercise shall be accompanied by a certified copy of letter testamentary or equivalent proof of the right of such legal representative or other person to exercise such Option. D. For the purposes of the Plan, the term "for cause" shall mean: 1. with respect to an employee who is a party to a written agreement with, or, alternatively, participates in a compensation or benefit plan of the Company or a subsidiary corporation or parent corporation of the Company, which agreement or plan contains a definition of "for cause" or "cause" (or words of like import) for purposes of termination of employment thereunder by the Company or such subsidiary corporation or parent corporation of the Company, "for cause" or "cause" as defined in the most recent of such agreements or plans; or 2. in all other cases, as determined by the Board of Directors, in its sole discretion, (i) the willful commission by an employee of a criminal or other act that causes or probably will cause substantial economic damage to the Company or a subsidiary corporation or parent corporation of the Company or substantial injury to the business reputation of the Company or a subsidiary corporation or parent corporation of the Company; (ii) the commission by an employee of an act of fraud in the performance of such employee's duties on behalf of the Company or a subsidiary corporation or parent corporation of the Company; (iii) the continuing willful failure of an employee to perform the duties of such employee to the Company or a subsidiary corporation or parent corporation of the Company (other than such failure resulting from the employee's incapacity due to physical or mental illness) after written notice thereof (specifying the particulars thereof in reasonable detail) and a reasonable opportunity to be heard and cure such failure are given to the employee by the Board of Directors; or (iv) the order of a court of competent jurisdiction requiring the termination of the employee's employment. For purposes of the Plan, no act, or failure to act, or the employee's part shall be considered "willful" unless done or omitted to be done by the employee not in good faith and without reasonable belief that the employee's action or omission was in the best interest of the Company or a subsidiary corporation or parent corporation of the Company. E. For the purposes of the Plan, an employment relationship shall be deemed to exist between an individual and a corporation if, at the time of the determination, the individual was an "employee" of such corporation for purposes of Section 422(a) of the Code. If an individual is on maternity, military, or sick leave or other bona fide leave of absence, such individual shall be considered an "employee" for purposes of the exercise of an Option and shall be entitled to exercise such Option during such leave if the period of such leave does not exceed ninety (90) days, or if longer, so long as the individual's right to reemployment with his employer is guaranteed either by statute or by contract. If the period of leave exceeds ninety (90) days, the employment relationship shall be deemed to have terminated on the ninety-first (91) day of such leave, unless the individual's right to reemployment is guaranteed by statute or contract. F. A termination of employment shall not be deemed to occur by reason of (i) the transfer of a Participant from employment by the Company to employment by a subsidiary corporation or a parent corporation of the Company, or (ii) the transfer of a Participant from employment by a subsidiary corporation or a parent corporation of the Company to employment by the Company or by another subsidiary corporation or parent corporation of the Company. XI. RIGHT TO TERMINATE EMPLOYMENT. ------------------------------ The Plan shall not impose any obligation on the Company or on any subsidiary corporation or parent corporation thereof to continue the employment of any Participant; and it shall not impose any obligation on the part of any Participant to remain in the employ of the Company or of any subsidiary corporation or parent corporation thereof. XII. PURCHASE FOR INVESTMENT. ------------------------ Except as hereafter provided, a Participant shall, upon any exercise of an Option or Right, execute and deliver to the Company a written statement, in form satisfactory to the Company, in which such Participant represents and warrants that such Participant is purchasing or acquiring the Shares acquired thereunder for such Participant's own account, for investment only and not with a view to the resale or distribution thereof, and agrees that any subsequent offer for sale or sale or distribution of any of such Shares shall be made only pursuant to either (a) a Registration Statement on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act"), which Registration Statement has become effective and is current with regard to the Shares being offered or sold; or (b) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption the holder shall, if so requested by the Company, prior to any offer for sale or sale of such Shares, obtain a prior favorable written opinion, in form and substance satisfactory to the Company, from counsel for or approved by the Company, as to the applicability of such exemption thereto. The foregoing restriction shall not apply to (i) issuances by the Company so long as the Shares being issued are registered under the Securities Act and a prospectus in respect thereof is current, or (ii) reofferings of Shares by affiliates of the Company (as defined in Rule 405 or any successor rule or regulation promulgated under the Securities Act) if the Shares being reoffered are registered under the Securities Act and a prospectus in respect thereof is current. XIII. EXCHANGE, S.E.C. OR OTHER GOVERNMENTAL REQUIREMENTS. ---------------------------------------------------- If any law or regulation of the Securities and Exchange Commission, any stock exchange, NASDAQ, or any governmental body having jurisdiction shall require any action to be take in connection with the issuance of shares pursuant to an Option under this Plan before shares can be delivered to an Optionee, then the date for issuance of these shares shall be postponed until such action can be taken. XIV. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. ----------------------------------------------------- Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration". Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option. In the event of the proposed dissolution or liquidation of the Company, the Option will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. The Board may, in the exercise of its sole discretion in such instances, declare that any Option shall terminate as of a date fixed by the Board and give each Optionee the right to exercise his Option as to all or any part of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, the Option shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless such successor corporation does not agree to assume the Option or to substitute an equivalent option, in which case the Board shall, in lieu of such assumption or substitution provide for the Optionee to have the right to exercise the Option as to all of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. If the Board makes an Option fully exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Board shall notify the Optionee that the Option shall be fully exercisable for a period of fifteen (15) days from the date of such notice, and the Option will terminate upon the expiration of such period. If, as a result of accelerating the time period during which all Options are exercisable in full in the event of a merger or asset transaction, any Optionee would incur liability under Section 16(b) of the Securities Exchange Act of 1934 as a result of the exercise of an accelerated Option, such Optionee may request the Company to, and the Company shall be obligated to repurchase such Option for cash equal to the excess of the fair market value on the advanced termination date of the shares subject to the Option over the Option exercise price. XV. ORDER OF EXERCISE OF OPTIONS. ----------------------------- No Option issued pursuant to this Plan shall be exercisable so long as there is any outstanding Option issued at an earlier date with respect to such Employee; Options must be exercised in the order in which they are granted. Notwithstanding anything in this Plan to the contrary in connection with any corporate transaction to which Section 425(a) of the Code is applicable, there may be a substitution of a new Option for an old Option granted under this Plan, or an assumption of an old Option granted under this Plan. Any Optionee who has a new Option submitted for an old Option granted under this Plan shall, in connection with the corporate transaction, lose his rights under the old Option. Nothing in the terms of the assumed or substituted Option shall confer upon the Optionee more favorable benefits than he had under the old Option. XVI. CHANGE IN CONTROL. ------------------ A. For purposes of the Plan, a "change in control" of the Company occurs if (i) any "person" (defined as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act, as amended) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company's outstanding securities then entitled to vote for the election of directors; or (ii) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors cease for any reason to constitute at least a majority thereof; or (iii) the Board of Directors shall approve the sale of all or substantially all of the assets of the Company or any merger, consolidation, issuance of securities or purchase of assets, the result of which would be the occurrence of any event described in clause (i) or (ii) above. B. In the event of a change in control of the Company (defined above), the Committee, in its discretion, may determine that, upon the occurrence of a transaction described in the preceding paragraph, each Option outstanding hereunder shall terminate within a specified number of days after notice to the holder, and such holder shall receive, with respect to each Share subject to such Option, an amount of cash equal to the excess of the fair market value of such Share immediately prior to the occurrence of such transaction over the exercise price per Share of such Option. The provisions contained in the preceding sentence shall be inapplicable to an Option granted within six (6) months before the occurrence of a transaction described above if the holder of such Option is a director or officer of the Company or a beneficial owner of the Company who is described in Section 16(a) of the Exchange Act, unless such holder dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to the expiration of such six-month period.) C. Alternatively, the Committee may determine, in its discretion, that all then outstanding Options shall immediately become exercisable upon a change of control of the Company. XVII. WITHHOLDING TAXES. ------------------ The Company may require an employee exercising a Non-Qualified Option granted hereunder, or disposing of Shares acquired pursuant to the exercise of an Incentive Option in a disqualifying disposition (within the meaning of Section 421(b) of the Code), to reimburse the corporation that employs such employee for any taxes required by any government to be withheld or otherwise deducted and paid by such corporation in respect of the issuance or disposition of such Shares. In lieu thereof, the employer corporation shall have the right to withhold the amount of such taxes from any other sums due or to become due from such corporation to the employee upon such terms and conditions as the Committee shall prescribe. The employer corporation may, in its discretion, hold the stock certificate to which such employee is entitled upon the exercise of an Option as security for the payment of such withholding tax liability, until cash sufficient to pay that liability has been accumulated. XVIII. AMENDMENT OF THE PLAN. ---------------------- The Board of Directors or the Committee may, from time to time, amend the Plan, provided that, notwithstanding anything to the contrary herein, no amendment shall be made, without the approval of the shareholders of the Company, that will (i) increase the total number of Shares reserved for Options under the Plan (other than an increase resulting from an adjustment provided for in Article X, Termination of Directorship or Employment), (ii) reduce the exercise price of any Incentive Option granted hereunder below the price required by Article IX, Method of Determination of Fair Market Value; (ii) modify the provisions of the Plan relating to eligibility, or (iv) materially increase the benefits accruing to participants under the Plan. The Board of Directors or the Committee shall be authorized to amend the Plan and the Options granted thereunder to permit the Incentive Options granted thereunder to qualify as "incentive stock options" within the meaning of Section 422A of the Code. The rights and obligations under any Option granted before amendment of the Plan or any unexercised portion of such Option shall not be adversely affected by amendment of the Plan or the Option without the consent of the holder of the Option. XIX. TERMINATION OR SUSPENSION OF THE PLAN. -------------------------------------- The Board of Directors or the Committee may at any time and for any or no reason suspend or terminate the Plan. The Plan, unless sooner terminated under Article V, Effective Date and Term of the Plan, or by action of the Board of Directors, shall terminate at the close of business on the Termination Date. An Option may not be granted while the Plan is suspended or after it is terminated. Options granted while the Plan is in effect shall not be altered or impaired by suspension or termination of the Plan, except upon the consent of the person to whom the Option was granted. The power of the Committee under Article II to construe and administer any Options granted prior to the termination or suspension of the Plan shall continue after such termination or during such suspension. XX. GOVERNING LAW. -------------- The Plan, such Options as may be granted thereunder, and all related matters shall be governed by, and construed and enforced in accordance with, the laws of the State of Colorado from time to time obtaining. XXI. PARTIAL INVALIDITY. ------------------- The invalidity or illegality of any provision herein shall not be deemed to affect the validity of any other provision. XXII. The foregoing Stock Incentive Plan of American Educational Products, Inc. was approved by a majority of the Board of Directors of the Company by unanimous consent in writing on June 2, 1997. AMERICAN EDUCATIONAL PRODUCTS, INC. By: -------------------------------- Robert A. Scott, Secretary The foregoing Stock Incentive Plan American Educational Products, Inc. was approved by a majority of the shareholders of the Company at the Annual Meeting of Shareholders on June 2, 1997. By: -------------------------------- Robert A. Scott, Secretary EX-5.0 3 EXHIBIT 5.0 ----------- March 16, 1998 American Educational Products, Inc. 6550 Gunpark Drive, Suite 200 Boulder, Colorado 80301 Re: S.E.C. Registration Statement on Form S-8 Ladies and Gentlemen: We have acted as counsel to American Educational Products, Inc. (the "Company") in connection with a Registration Statement to be filed with the United States Securities and Exchange Commission. Washington, D.C., pursuant to the Securities Act of 1933, as amended, covering the registration of an aggregate of 186,300 shares of the Company's $.05 par value Common Stock (the "Common Stock") which may be issued from time to time by the Company pursuant to the 1997 Stock Incentive Plan (the "Plan"). In connection with such representation of the Company, we have examined and relied upon the original, or copies certified to our satisfaction, of (I) the Articles of Incorporation and the Amended and Restated By-Laws of the Company; (ii) certain minutes and records of the corporate proceedings of the Company; (iii) the Registration Statement and exhibits thereto; (iv) the Plan; and such other documents and instruments as we have deemed necessary for the expression of the opinions contained herein. In making the foregoing examinations, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals, and the conformity to original documents of all documents submitted to us as certified or photostatic copies. As to various questions of fact material to this opinion, we have relied, to the extent we deem reasonably appropriate, upon representations or certificates of officers or directors of the Company, and upon other documents, records and instruments of the Company. Based upon the foregoing, we are of the opinion as follows: 1. The Company has been duly incorporated and organized under the laws of the State of Colorado and is validly existing as a corporation in good standing under the laws of that state. 2. The Company is authorized to issue up to 100,000,000 shares of $.05 par value Common Stock and up to 50,000,000 shares of $.001 par value Preferred Stock. 3. The 186,300 shares of Common Stock which may be issued from time to time by the Company in accordance with appropriate actions taken by the Board of Directors, have been duly authorized, and when so issued and sold at prices equal to or in excess of the par value per share of the Common Stock and in accordance with the provisions of the Plan, will be validly issued, fully paid and nonassessable. We hereby consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. Sincerely. Clifford L. Neuman CLN:ms EX-23.1 4 EXHIBIT 23.1 ------------ March 16, 1998 American Educational Products, Inc. 6550 Gunpark Drive, Suite 200 Boulder, Colorado 80301 Re: S.E.C. Registration Statement on Form S-8 Ladies and Gentlemen: We hereby consent to the inclusion of our opinion regarding the legality of the securities being registered by the Form S-8 Registration Statement to be filed with the United States Securities and Exchange Commission, Washington, D.C., pursuant to the Securities Act of 1933, as amended, by American Educational Products, Inc., a Colorado corporation (the "Company"), in connection with the offering by the Company of up to 186,300 shares of Common Stock, $.05 par value, under the 1997 Stock Incentive Plan as proposed and more fully described in such Registration Statement. We further consent to the reference in such Registration Statement to our having given such opinions. Sincerely, Clifford L. Neuman CLN:ms EX-23.2 5 EXHIBIT 23.2 ------------ INDEPENDENT AUDITOR'S CONSENT We consent to the incorporation by reference of our report dated February 6, 1997 accompanying the financial statements of American Educational Products, Inc. and Subsidiaries in the Form S-8 Registration Statement of American Educational Products, Inc. /s/Hein + Associates LLP - ------------------------ Hein + Associates, LLP Denver, Colorado March 13, 1998 -----END PRIVACY-ENHANCED MESSAGE-----