<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 17, 1996
AMERICAN EDUCATIONAL PRODUCTS, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
COLORADO 0-16310 84-1012129
- - ---------------- ------------------------ -----------------
(State or other (Commission file number) (Employer Identi-
incorporation fication No.)
5350 Manhattan Circle, Suite 210, Boulder, Colorado 80303
-----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 543-0123
--------------------------------------------------------------------
------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
<PAGE>
ITEM 2: DISPOSITION OF ASSETS
- - --------------------------------
On June 17, 1996, AEP Media Corp., d/b/a Churchill Media, ("AEP Media"), a
wholly-owned subsidiary of American Educational Products, Inc. (the "Company")
completed the sale of substantially all of its assets to New SVE, Inc. an
Illinois corporation ("New SVE").
The assets consisted of substantially all of the assets used by AEP Media
in connection with its educational audio visual materials production and
distribution business operating under the name Churchill Media, including
inventory, accounts receivable, furniture, fixtures and equipment, service
rights, licenses, service marks, proprietary titles, copyrights, customer
lists, contracts and general intangible assets, including the trademark
"Churchill Media."
In consideration for the Churchill Media assets, New SVE paid to AEP Media
$1 million at closing. In addition, New SVE has agreed to pay AEP Media an
amount equal to ten percent (10%) of New SVE's future net sales of AEP Media's
proprietary titles made at any time during the four (4) year period after
closing. Future payments to AEP Media will not be less than $50,000 per year,
and are subject to a $750,000 aggregate maximum during the four (4) year
period. The Company utilized the proceeds of the sale to reduce certain
indebtedness, including accounts payable attributable to the Churchill Media
operations prior to closing, and outstanding balances under the term loan with
its primary lender.
The effective date of the sale was June 17, 1996.
New SVE is a wholly-owned subsidiary of Society For Visual Education, an
Illinois corporation.
Following the closing, the Company will continue to act as a holding
company for AEP Media and the Company's remaining operating subsidiaries:
Scott Resources, Inc. and Hubbard Scientific, Inc.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
- - ------------------------------------------
(a) Financial Statements of Business Acquired
-----------------------------------------
Not applicable.
(b) Pro Forma Financial Information
-------------------------------
Included herewith is the Pro Forma Financial Information required
pursuant to Article 11 of Regulation SB.
(c) Exhibits
--------
1.0 Asset Purchase Agreement dated as of June 12, 1996.
<PAGE>
<PAGE>
AMERICAN EDUCATIONAL PRODUCTS, INC.
PROFORMA BALANCE SHEET
as of March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
PROFORMA ADJUSTMENTS
---------------------------
Consolidated, Assets As
As Reported Sold Adjustments Adjusted
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
- - ------
CURRENT ASSETS
Cash $220,000 $220,000
Trade receivables, net 1,747,000 $394,000 1,353,000
Royalties receivable $168,000 C. 168,000
Inventories 2,618,000 207,000 2,411,000
Prepaid advertising cost 280,000 136,000 144,000
Other 75,000 4,000 71,000
------------ ------------ ------- ------------
TOTAL CURRENT ASSETS 4,940,000 741,000 168,000 4,367,000
PROPERTY AND EQUIPMENT, net 4,233,000 217,000 4,016,000
VIDEO LIBRARY, net 1,390,000 773,000 617,000
INTANGIBLE ASSETS, net 474,000 474,000
OTHER ASSETS 149,000 88,000 267,000 C. 328,000
------------ ------------ ------- ------------
TOTAL ASSETS $11,186,000 $1,819,000 $435,000 $9,802,000
=========== ========== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
CURRENT LIABILITIES
Note payable $1,345,000 $1,345,000
Current maturities of long-term
debt 1,412,000 (400,000) A. 1,012,000
Accounts payable 1,193,000 (305,000) B. 888,000
Accrued expenses 586,000 (95,000) B. 491,000
------------ ------- ------------
TOTAL CURRENT LIABILITIES 4,536,000 (800,000) 3,736,000
LONG TERM DEBT, less current maturities 1,990,000 (200,000) A. 1,790,000
<PAGE>
<PAGE>
STOCKHOLDERS' EQUITY
Common stock and paid in capital 6,112,000 6,112,000
Retained earnings (1,452,000) (384,000) D. (1,836,000)
------------ --------- ------------
TOTAL STOCKHOLDERS' EQUITY 4,660,000 (384,000) 4,276,000
------------ --------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $11,186,000 ($1,384,000) $9,802,000
=========== ============ ==========
<FN>
FOOTNOTES
A. The Company's primary lender has reserved the right to use the proceeds from sale to reduce certain
borrowings under term notes in proportions and amounts to be determined by the lender at a later date.
B. Proceeds from sale will be used to pay all accounts payable and accrued expenses related to Churchill
Media.
C. A portion of the purchase price is payable over the next four years based on future sales of Churchill
Media product. The receivable is based upon estimates of future sales and has been discounted for the time
value of money. The significant estimates used in the calculation may differ from actual future results.
D. Proforma loss on sale.
</FN>
</TABLE>
<PAGE>
<PAGE>
AMERICAN EDUCATIONAL PRODUCTS, INC.
PROFORMA STATEMENT OF OPERATIONS
for the Year ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION> PROFORMA ADJUSTMENTS
--------------------------
Consolidated, Operations As
As Reported Sold Adjustments Adjusted
------------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
INCOME:
Net sales $20,333,000 $2,391,000 $44,000 A. $17,986,000
Cost of goods sold 11,985,000 1,119,000 28,000 A. 10,894,000
------------ ------------ ------- ------------
Gross profit 8,348,000 1,272,000 16,000 7,092,000
OPERATING EXPENSES:
Advertising and catalog costs 2,915,000 89,000 2,826,000
Other marketing 2,824,000 1,198,000 1,626,000
------------ ------------ ------------
Total marketing 5,739,000 1,287,000 4,452,000
General and administrative 3,210,000 571,000 2,639,000
Impairment of assets 3,297,000 3,027,000 270,000
------------ ------------ ------------
Total Operating Expenses 12,246,000 4,885,000 7,361,000
------------ ------------ ------------
OPERATING INCOME (LOSS) (3,898,000) (3,613,000) 16,000 (269,000)
OTHER INCOME (EXPENSE):
Gain on sale of assets 1,092,000 0 1,092,000
Other income 84,000 1,000 83,000
Interest expense (874,000) (5,000) 69,000 B. (800,000)
------------ ------------ ------- ------------
Net other income (expense) 302,000 (4,000) 69,000 375,000
------------ ------------ ------- ------------
INCOME (LOSS) BEFORE INCOME TAXES (3,596,000) (3,617,000) 85,000 106,000
Income tax benefit 620,000 620,000 0
------------ ------------ ------------
NET INCOME (LOSS) ($2,976,000) ($2,997,000) $85,000 $106,000
------------ ------------ ------- ------------
Earnings (loss) per common share ($0.72) $0.03
======= =====
Average number of common
shares outstanding 4,122,000 4,122,000
========= =========<PAGE>
<PAGE>
<FN>
FOOTNOTES
A. Sales to Churchill Media from other divisions of American Educational Products, previously eliminated in
consolidation.
B. Estimated interest savings after application of sale proceeds to reduce certain borrowings.
</FN>
</TABLE>
<PAGE>
<PAGE>
AMERICAN EDUCATIONAL PRODUCTS, INC.
PROFORMA STATEMENT OF OPERATIONS
for the Three Months ended March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
PROFORMA ADJUSTMENTS
--------------------------
Consolidated, Operations As
As Reported Sold Adjustments Adjusted
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
INCOME:
Net sales $2,047,000 $502,000 $1,545,000
Cost of goods sold 1,196,000 218,000 978,000
------------ ------------ ------------
Gross profit 851,000 284,000 567,000
OPERATING EXPENSES:
Advertising and catalog costs 24,000 19,000 5,000
Other marketing 534,000 252,000 282,000
------------ ------------ ------------
Total marketing 558,000 271,000 287,000
General and administrative 357,000 67,000 290,000
------------ ------------ ------------
Total Operating Expenses 915,000 338,000 577,000
------------ ------------ ------------
OPERATING INCOME (LOSS) (64,000) (54,000) (10,000)
OTHER INCOME (EXPENSE):
Other income 0 0 0
Interest expense (137,000) (1,000) $17,250 A. (118,750)
------------ ------------ ------- ------------
Net other income (expense) (137,000) (1,000) 17,250 (118,750)
------------ ------------ ------- ------------
INCOME (LOSS) BEFORE INCOME TAXES (201,000) (55,000) 17,250 (128,750)
Income tax 0 0 0
------------ ------------ ------- ------------
NET INCOME (LOSS) ($201,000) ($55,000) $17,250 ($128,750)
========== ========= ======= ==========
Earnings (loss) per common share ($0.05) ($0.03)
======= =======
Average number of common
shares outstanding 4,155,000 4,155,000
========= =========
<PAGE>
<PAGE>
<FN>
FOOTNOTES
A. Estimated interest savings after application of sale proceeds to reduce certain borrowings.
</FN>
</TABLE>
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN EDUCATIONAL PRODUCTS, INC.
Dated: July 2, 1996 By: /s/ Clifford C. Thygesen
-------------------- -----------------------------------
Clifford C. Thygesen, President
<PAGE>
SALE OF ASSETS OF
AEP MEDIA, CORP. d/b/a CHURCHILL MEDIA
----------------------------------------
This Agreement made and entered into this ____ day of June, 1996, by and
between NEW SVE, INC., an Illinois corporation ("Purchaser"), and AEP MEDIA,
CORP. d/b/a CHURCHILL MEDIA, a Colorado corporation, (hereinafter referred to
as "Seller" or "Company").
WHEREAS, Seller owns and operates a business which produces and
distributes educational audio visual materials; and
WHEREAS, Seller is currently operating said business, and in that respect
owns machinery, equipment, trade fixtures, vehicles, inventory, catalogues,
trademarks and other miscellaneous assets (hereinafter referred to as the
"Assets"); and
WHEREAS, Purchaser has agreed to purchase the Seller's Assets, free and
clear of any liens or encumbrances; and
WHEREAS, Seller has agreed to sell same, and the parties hereto wish to
reduce their agreement to writing.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
Purchaser and Seller hereto agree as follows:
ARTICLE 1
ASSETS TO BE SOLD
------------------
1.1 ASSETS INCLUDED. Subject to the terms and conditions of this
Agreement, Seller agrees to sell, and Purchaser agrees to purchase, the
following property and assets owned, operated and used by Seller in Seller's
business except as may be expressly excluded under the terms hereof.
(a) All machinery, equipment, tools, fixtures, vehicles, catalogues
and other tangible personal property and assets owned, operated and used
by Seller in the conduct of its business located at 6917 Valjean Avenue,
Van Nuys, California 91406 listed in Schedule 1.1(a) attached hereto;
(b) All accounts receivable listed in Schedule 1.1(b);
(c) All service rights, licenses, service marks listed in Schedule
1.1(c);
(d) All proprietary titles and copyrights listed in Schedule 1.1(d)
attached hereto ("Proprietary Titles"), and related masters and programs
in progress together with customer lists, tradenames, service marks,
logos, trade secrets, phone number(s) and facsimile transmission number(s)
and such other intangible property owned by, used in, or
associated with Seller's business, and all rights of Seller,
except as otherwise provided in this Agreement, in and to the name
CHURCHILL MEDIA, and any variations thereof;
(e) All inventory, supplies, appurtenant components and parts listed
in Schedule 1.1(e);<PAGE>
<PAGE>
(f) All files, documents, business records (reasonably necessary or
useful to the continuing conduct by the Purchaser of the Seller's
business) and contracts related to the operation and business of Seller,
including, without limitation, contracts, customer sales, vendor files,
sales files, acknowledgments, invoices, telephone numbers, sales,
marketing and promotional literature;
(g) The property sold hereunder shall not include cash on hand of
Seller, any leased assets of Seller and Seller's pension or profit sharing
accounts.
For convenience of reference, all of the assets and properties to be purchased
by the Purchaser pursuant to this Section 1.1 are hereinafter collectively
called the "Assets").
ARTICLE 2
DEFINITIONS
-----------
2.1 "CLOSING DATE" shall mean on or before 3:00 p.m., then current
Pacific Daylight time, on June 17, 1996, or such other time or date as the
parties may mutually agree upon in writing.
ARTICLE 3
CLOSING LOCATION
-----------------
The Closing hereunder shall take place at the offices of Company, 6917
Valjean Avenue, Van Nuys, California 91406.
ARTICLE 4
PAYMENT/PURCHASE PRICE
-----------------------
4.1 PURCHASE PRICE. The purchase price is One Million and 00/100ths
($1,000,000.00) Dollars and it shall be paid by Purchaser as follows:
(a) The payment of One Million and 00/100ths ($1,000,000.00) Dollars
in cash at the Closing, by certified or cashier's check, payable to Seller
or its order.
(b) The allocation of the purchase price is as follows:
<TABLE>
<S> <C>
Inventory $ 270,000.00
Machinery & Equipment 90,000.00
Accounts Receivable 375,000.00
Prepaid Royalties 75,000.00
Program in Process 65,000.00
Catalogues 125,000.00
-------------
TOTAL $1,000,000.00
</TABLE>
(c) Seller shall calculate the amount and price of the Inventories sold
hereunder in accordance with its inventory, purchase and sales records.
4.2 ACCOUNTS RECEIVABLE. At the Closing, Seller shall transfer to
Purchaser all of its right, title and interest in all of its receivable as of
the start of business on June 17, 1996 (the "Accounts Receivable"). As soon
<PAGE>
<PAGE>
thereafter as practicable, but not later than two (2) weeks after the Closing
Date, Seller shall deliver to Purchaser a trial balance detailing each Account
Receivable. Purchaser shall use reasonable efforts to collect the Accounts
Receivable, but shall not be required to employ counsel or any collection
agency or to initiate any litigation or to use any extraordinary means of
collection. On the thirtieth, sixtieth, ninetieth, one hundred-twentieth, one
hundred-fiftieth and one hundred-eightieth days after the Closing Date,
Purchaser shall furnish Seller with a list of Accounts Receivable collected
within the first 30 days, 60 days, 90 days, 120 days, 150 days and 180 days
respectively. Purchaser shall not have the right to compromise, settle or
adjust the amounts of any of the Accounts Receivable without Seller's prior
written consent. In the event that an Account Receivable debtor notifies
Purchaser of a dispute by such debtor concerning an Account Receivable,
Purchaser shall promptly notify Seller of such dispute and all monies received
from such debtor shall be applied to the undisputed portion, if any, of
Seller's account with such debtor until such undisputed portion is fully paid
before any monies are applied to Purchaser's account with such debtor. At the
conclusion of the 180-day period following the Closing Date, Purchaser shall
provide a list to Seller of all uncollected Accounts Receivable of Seller (said
list shall also detail any unpaid amounts due as a result of returns or
credits). Within thirty (30) days thereafter, Seller shall remit to Purchaser
an amount equal to the uncollected Accounts Receivable of Seller in exchange
for Purchaser's assignment to Seller of said uncollected Accounts Receivable.
If Seller fails to pay Purchaser within such time period, Purchaser shall
deduct the amount of the uncollected Accounts Receivable from the next royalty
payment due Seller under Article 5 hereof.
4.3 CUSTOMER ORDERS. At Closing and at all times thereafter, Seller
agrees to assign to Purchaser, without recourse, and, Purchaser agrees to
accept and assume performance of, all customer orders for Proprietary Titles
and Non-Proprietary Titles which Seller has on hand at the Closing for the sale
of proprietary and Non-Proprietary Titles, or which Seller thereafter receives
and refers to Purchaser. Seller agrees that it will turn over to Purchaser at
closing any deposits received with respect to such assigned orders. Subject to
Closing, Seller shall transmit promptly to Purchaser by first class mail all
customer orders received by it after the Closing.
ARTICLE 5
CONTINGENT PAYMENT/USE OF TRADEMARK
------------------------------------
Purchaser agrees to pay to Seller for the use of its CHURCHILL MEDIA
trademark for the four (4) year period after closing a royalty in quarterly
payments as hereinafter set forth equal to ten (10%) percent of Purchaser's Net
Sales (as hereinafter defined) of components of Seller's Proprietary Titles
("Net Sales") made at any time during the four (4) year period after closing.
For the purposes hereof, the term "Proprietary Titles" shall include any
revised or new titles using substantially all of the material included in the
Proprietary Titles set forth in Schedule 1.1(d) hereof. Purchaser shall use
its commercially reasonable best efforts to effect Net Sales during the
trademark use period. Net Sales shall include, but not be limited to, all
revenues from Proprietary Titles and shall mean the invoiced price, net of
sales taxes, delivery charges and customary discounts, if any, and less
returns. Net Sales shall be deemed to have been made when invoiced or shipped,
whichever earlier. Purchaser shall bear the credit risk for Net Sales.
Royalties shall be payable quarterly within thirty (30) days after the end of
each quarter in which the Net Sales are made. A detailed statement of Net
Sales and royalties (if any) for all Net Sales for each quarter by Title,
certified by the President of the Purchaser to be true and complete, shall be
delivered to Seller within thirty (30) days after the end of each of the
quarters during the four (4) years following the Closing whether any royalties
are due. <PAGE>
<PAGE>
In the event royalty payments do not total Fifty Thousand and 00/100ths
($50,000.00) Dollars in any of the four (4) years, Purchaser agrees to pay to
the Seller the difference within thirty (30) days, resulting in annual minimum
payments of Fifty Thousand and 00/100ths ($50,000.00) Dollars for the use of
the Churchill Media trademark by Purchaser. However, royalty payments shall
not exceed Seven Hundred Fifty Thousand and 00/100ths ($750,000.00) Dollars
during the four (4) year use period.
If Purchaser sells substantially all of the assets or the business it is
acquiring herein during the four (4) year period after closing, Purchaser
agrees to pay Seller an amount equal to the difference between Seven Hundred
Fifty Thousand and 00/100ths ($750,000.00) Dollars less any offsets hereunder
and the amounts paid to Seller by Purchaser under this Article 5 within thirty
(30) days after the closing of the sale of said assets and business. Subsequent
to the four (4) year period after closing, Seller agrees not to transfer or to
allow anyone else to use said trademark.
ARTICLE 6
NON-ASSUMPTION OF LIABILITIES
------------------------------
The Purchaser shall not assume any liabilities of the Seller, of any
nature whatsoever, by reason of this Agreement or any of the transactions
contemplated hereby. The Seller hereby agrees to defend, indemnify and hold
the Purchaser harmless from and against any and all claims, demands, damages,
liabilities, costs and expenses (including reasonable attorneys' fees) of every
kind and nature whatsoever, which may be asserted by anyone against the
Purchaser or sustained or suffered by the Purchaser based upon or related to
the existence of any and all liabilities and obligations of Seller.
After closing, Purchaser hereby agrees to defend, indemnify and hold the
Seller harmless from and against any and all claims, demands, damages,
liabilities, costs and expenses (including reasonable attorneys' fees) of every
kind and nature whatsoever, which may be asserted by anyone against the Seller
or sustained or suffered by the Seller based upon or related to the existence
of any and all liabilities and obligations of Purchaser.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
OF THE SELLER
-------------------------------
7.1 Seller represents and warrants to Purchaser as follows:
(a) ORGANIZATION AND STANDING. The Company is a corporation duly
organized and existing and in good standing under the laws of the State of
Colorado, is entitled to own or lease its properties and to carry on its
business as and in the places where such properties are now owned, leased
or operated, or such business is now conducted.
(b) CORPORATE APPROVALS. Seller agrees to cause this transaction
to be approved by its Shareholder(s) in accordance with the laws of the
State of Colorado.
(c) NO OTHER AGREEMENTS OR LIMITATIONS. There are no other
Agreements or Limitations, created by law or agreement, which in any way
prohibit Seller from entering into the transaction contemplated herein.
(d) FINANCIAL STATEMENTS AND RELATED DOCUMENTS. Seller has
delivered to Purchaser true and complete copies of documents listed on
Schedule 7.1(d), all of which present fairly the results of operations and
financial positions of the Seller in accordance with generally accepted
accounting principles consistently followed throughout the periods
indicated.
<PAGE>
<PAGE>
(e) SUBSIDIARIES. Seller does not own or control other corporations
which could be classified as subsidiaries, and no other corporation,
association, or business organization has any rights with respect to
Seller's Assets.
(f) AUTHORITY. The Seller has full corporate power and authority to
execute and deliver this Agreement and to perform all of its obligations
hereunder in accordance with the terms hereof; all necessary corporate
action to authorize this Agreement and the consummation of the
transactions contemplated hereby on the part of the Seller has been duly
and effectively taken, including without limitation, the approval thereof
by the Board of Directors of the Seller and by the requisite number of
shareholders of the Seller at a special meeting of Shareholders called for
the purpose of considering this Agreement; and this Agreement constitutes
the valid and binding obligation of the Seller enforceable in accordance
with its terms.
(g) INTELLECTUAL PROPERTY RIGHTS.
(i) To the best of Seller's knowledge, Seller has acquired all
necessary rights, titles, permissions, and licenses which are
required to permit Purchaser to exploit the rights as listed in
Schedule 1.1(d) attached hereto, and there are no infringements of
intellectual property rights or any claims or facts which could form
the basis for any claims that the Proprietary Titles infringe on the
rights of others.
(ii) All rights listed in Schedule 1.1(d) attached hereto and
Seller's Trademark are free and clear of all liens, claims, and
encumbrances.
(iii) There exist valid and enforceable intellectual property rights
in the Proprietary Titles and Trademark, which rights shall permit
Seller to exploit the rights as listed in Schedule 1.1(d) attached
hereto, and to use the Trademark in the ordinary course of business,
and which shall prevent any third party from lawfully exercising any
rights which are contrary to the Seller's rights.
(h) CONTRACTS. The Company is not and as of the Closing Date will
not become, as it relates to this transaction only, a party to any written
or oral:
(i) employment, consulting or management contract or arrangement
which is not by its terms terminable at will without penalty to the
Seller;
(ii) contract, agreement or understanding with any labor union;
(iii) license or franchise agreement, either as licensor or licensee
or franchisor or franchisee, or distributor or sales agency contract,
agreement or understanding;
(iv) pension, profit-sharing, bonus, deferred compensation,
retirement or stock option or stock purchase plan in effect with
respect to employees or others;
(v) contract or agreement granting to any person the right to use
any property or property right of the Company, including any
trademark or patent licensing agreement, contract or understanding;
(vi) plan or contract or other arrangement providing for insurance
for any officer, director or employee or member of their families;\
<PAGE>
<PAGE>
(vii) contract or agreement containing covenants by the Company (but
not including Shareholder) not to compete in any line of business or
with any person;
(viii) joint venture contract or arrangement or other agreement
involving a sharing of profits; or
(ix) other material contract, agreement or understanding.
The Company has performed all obligations required to be performed by it to
date, and is not in default, under any document, contract, agreement, lease or
other commitment to which it is a party.
(i) INSURANCE. The assets, properties and business of the Company are
covered by policies of insurance against loss by casualty and fire and other
insurance of a type in an amount which is customary for the type of business
operated, and assets owned by, the Company. The Company will continue such
insurance in full force and effect through the Closing Date.
(j) LITIGATION. Except as listed in Exhibit "C" attached hereto, there
are no actions, suits, proceedings or investigations (whether or not
purportedly on behalf of the Company) pending or threatened against or
affecting the Company or the rights of the Seller at law or in equity or
admiralty or before or by any federal, state, municipal or other governmental
department, commission, board, agency or instrumentality, domestic or foreign,
nor has any such action, suit, proceeding or investigation been pending during
the 12-month period preceding the date hereof; and the Company is not operating
under or subject to, or in default with respect to, any order, writ, injunction
or decree of any court or federal, state, municipal or other governmental
department, commission, board, agency or instrumentality, domestic or foreign.
(j) COMPLIANCE WITH LAWS. The Company has complied with all laws,
regulations and orders applicable to its business in any material respect, and
the present uses by the Company of its properties do not violate any such laws,
regulations and orders in any material respect.
(k) NO CONFLICT OF INTEREST. Except for the normal rights of a
stockholder, no stockholder, director, officer or employee of the Company has
any interest in any of the assets.
(m) CONDUCT OF BUSINESS. Until the Closing Date, the Company will not
have:
(i) mortgaged, pledged or subjected to any lien, charge or other
encumbrance, any Assets or properties, tangible or intangible;
(ii) sold or transferred any tangible assets, except in the ordinary
course of business;
(iii) sold, assigned or transferred any inventions, patents,
trademarks, trade names, copyrights, license agreements, or other
intangible assets;
(iv) suffered any damage, destruction or loss, whether or not so
covered by insurance, materially and adversely affecting the Assets
or the business of the Seller;
(v) entered into any transaction, contract or commitment other than
in the ordinary course of business.
(n) MATERIAL CHANGE. There will be no material change through and
including the Closing Date, in the condition, financial or otherwise of
<PAGE>
<PAGE>
the Company, except the changes occurring in the ordinary course of
business, which changes have not materially adversely affected the
organization, business, properties, or otherwise.
(o) PAYABLES. To the extent the Seller has unpaid payables existing
as of the Closing Date, the Company agrees to pay same when due, and does
hereby indemnify and agree to hold Purchaser harmless of and from any
claims or damages resulting therefrom.
(p) EXECUTION OF THE AGREEMENT. Neither the execution of this
agreement, the consummation of the transactions contemplated hereby nor
the compliance with or fulfillment of the terms and conditions hereof
will: (a) violate or conflict with any provision of the Articles of
Incorporation or By-laws of the Seller; (b) violate or conflict with any
law, regulation, judgment, order, writ, injunction or decree of any court
or governmental body of any jurisdiction as such law or regulation is
related to the Seller, the Assets or the business of the Seller; or (c)
result in a breach or violation of any contract to which the Seller is a
party. The Seller is not a party to, subject to or bound by any agreement
or any judgment, order, writ, injunction or decree of any court or
governmental body that prevents the making of, or the consummation of the
transactions contemplated by, this Agreement.
(Q) STATE BULK SALES COMPLIANCE. As and at the Closing, Seller
shall deliver to the Purchaser an affidavit which states that in the event
any claims are made against the Purchaser with respect to any prior
obligations of the Seller, Seller does hereby agree to indemnify and hold
Purchaser harmless of and from any claim, loss, damage or expense,
including reasonable attorneys' fees, resulting from any such claim.
To the extent any such claims are made prior to the full payment of the
royalties due Seller under Article 5 hereof, Purchaser shall have the right to
offset same against any of such royalty payments due Seller.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES BY PURCHASER
--------------------------------------------
8.1 NO CONFLICT. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated herein will conflict with
or result in the breach of the terms, conditions or provisions of any agreement
or instrument to which Purchaser is a party, nor constitute a default under any
such agreement or instrument.
8.2 AUTHORIZATION. Purchaser has taken all necessary action to approve
the agreement, and when executed, it shall constitute a valid, binding and
enforceable obligation of the Purchaser.
ARTICLE 9
NATURE AND SURVIVAL OF REPRESENTATIONS
FURTHER ASSURANCES
---------------------------------------
All statements contained in any certificate or other instrument delivered
by or on behalf of the Seller or Purchaser pursuant to this Agreement or in
connection with the transactions contemplated hereby shall be deemed
representations and warranties by the Seller or Purchaser hereunder. All
representations and warranties and agreements made by the Seller or Purchaser
in this Agreement or pursuant hereto shall survive the Closing hereunder.
<PAGE>
<PAGE>
Each party shall, at any time and from time to time after the Closing,
upon the request of the other party, do, execute, acknowledge, deliver and
file, or shall cause to be done, executed, acknowledged, delivered or filed,
all such further acts, deeds, transfers, conveyances, assignments or
assurances, and security instruments, as may be required, in the reasonable
opinion of the other party's counsel to carry out the intent of this Agreement
and the agreements and instruments delivered pursuant thereto.
ARTICLE 10
CONDUCT OF BUSINESS PRIOR TO THE CLOSING;
ACCESS TO RECORDS
-----------------------------------------
10.1 CONDUCT OF BUSINESS PRIOR TO CLOSING NEGATIVE COVENANTS. The Seller
represents, warrants and covenants that from the date of this Agreement to the
Closing, the Seller has carried on and shall carry on its business in the
normal and ordinary course in a manner consistent with the conduct of its
business in prior years, and, except as permitted by prior written consent of
the Purchaser, the Seller has not done and will not do any of the following:
(a) Enter into any contract without the prior consent of the
Purchaser;
(b) Encumber any Assets or enter into any transaction or make any
commitment relating to its Assets, or the business of the Seller otherwise
than in the ordinary course of business;
(c) Make any offer or commitment or incur any obligation to enter
into any contract, arrangement or transaction described in subsections (a)
and (b) of this Article 10.1; or
(d) Take any action or make any payment except in a bona fide
transaction entered into in the ordinary course of business and for full
and valid consideration.
10.2 CONDUCT OF BUSINESS PRIOR TO CLOSING; AFFIRMATIVE COVENANTS; POST-
CLOSING OBLIGATIONS. The Seller represents and warrants that from the date of
this Agreement to the Closing, the Seller has done and shall do the following:
(a) Advise the Purchaser in writing promptly of the assertion,
commencement or threat prior to the Closing of any
claim, litigation, or proceeding the Seller has been or may be made a
party;
(b) Maintain its respective books, accounts and records in the
usual, regular and ordinary manner, in accordance with generally accepted
accounting principles, on a consistent basis;
(c) Maintain all of the Assets in customary repair, order and
condition, reasonable wear and use excepted;
(d) Comply in all material respects with the provisions of all laws,
regulations, ordinances and judicial decrees applicable to it or the
conduct of its business;
(e) Refrain from doing anything that would cause its representations
and warranties herein to become untrue; and
(f) The Seller will promptly advise the Purchaser in writing of any
problems of which the Seller becomes aware which could adversely affect
the ability of the Seller to transfer any of the Assets to the Purchaser
or which could adversely affect the ongoing business of the Seller in the
event there is no Closing.<PAGE>
<PAGE>
ARTICLE 11
COVENANTS OF THE SELLER
-----------------------
11.1 ACTION BY SELLER. The Seller will not take or permit to be taken
any action or do or permit to be done anything in the conduct of the business
of the Company or otherwise, which would be contrary to or in breach of any of
the terms, conditions or provisions of this Agreement, or which would cause any
of the representations and warranties of the Seller to be untrue as of the
Closing Date or any time thereafter.
11.2 FEES. The Seller shall pay its fees and disbursements of counsel and
accountants for the Seller of the Company arising in connection with this
Agreement and the transactions contemplated hereby.
11.3 FURTHER ASSURANCES. The Seller shall, at any time and from time to
time after the Closing, upon the request of the Purchaser, do, execute,
acknowledge, deliver and file, or shall cause to be done, executed,
acknowledged, delivered or filed, all such further acts, deeds, transfers,
conveyances, assignments or assurances as may be required, in the reasonable
opinion of Purchaser's counsel, for the better transferring, conveying,
assigning and assuring to the Purchaser, or for aiding and assisting in the
reduction to possession by the Purchaser, of any of the Assets.
ARTICLE 12
CONDITIONS PRECEDENT OF PURCHASER
---------------------------------
The obligations of Purchaser hereunder are subject to the conditions that,
on or before the Closing Date:
12.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The representations
and warranties of the Seller contained in this Agreement or in any certificate
or document delivered pursuant to the provisions hereof or in connection with
the transactions contemplated hereby shall be true on and as of the Closing
Date as though such representations and warranties were made at and as of such
date;
12.2 COMPLIANCE WITH THE AGREEMENT. The Seller shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date;
12.3 OPINION OF COMPANY'S COUNSEL. Purchaser shall have received an
opinion of counsel to the Company and Seller, dated the Closing Date, in form
and substances satisfactory to Purchaser to the effect that:
(a) The Company is a corporation duly organized and existing and in
good standing under the laws of Colorado and is entitled to own or lease
its properties and to carry on its business as and in the places where
such properties are now owned, leased or operated or such business is now
conducted and is duly qualified as a foreign corporation in good standing
in each jurisdiction in which the nature of its business or character of
its properties makes qualification necessary;
(b) That appropriate Shareholder approval has been obtained.
(c) This Agreement constitutes a valid and binding obligation of the
Seller and this Agreement and the transactions contemplated hereby will
not result in a violation of any of the terms and provisions of any
indenture or other agreement to which any Seller or the company may be a
party or by which any of them may be bound.<PAGE>
<PAGE>
12.4 INJUNCTION. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction directing that the transactions
provided for herein or any of them not be consummated as herein provided.
12.5 CASUALTY. There shall not have occurred any material casualty or
other damage to any of the Assets nor shall there have occurred any material
adverse changes in the business of the Seller.
12.6 ADVERSE DEVELOPMENT. There shall have been no developments in the
business of the Company between the date of this Agreement and the Closing Date
which would have a materially adverse effect on the value of such business or
on the Assets, properties or goodwill of the Company.
ARTICLE 13
CONDITIONS PRECEDENT OF THE SELLER
-----------------------------------
The obligations of the Seller hereunder are made subject to the conditions
that, on or before the Closing Date:
13.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The representations
and warranties of Purchaser contained in this Agreement or in any certificate
or document delivered pursuant to the provisions hereof or in connection with
the transactions contemplated hereby, shall be true on and as of the Closing
Date as though such representations and warranties were made at and as of such
date.
13.2 PURCHASER'S COMPLIANCE WITH THE AGREEMENT. Purchaser shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing
Date.
13.3 INJUNCTION. There shall be no effective injunction, restraining
order or order of any nature issued by a court of competent jurisdiction which
shall direct that this Agreement, or any of the transactions provided for
herein, not be consummated as herein provided.
ARTICLE 14
DELIVERIES BY SELLER
--------------------
On the Closing Date, subject to the terms and conditions set forth in this
Agreement, Seller shall deliver to Purchaser the following types of title
documents sufficient to convey and assign all of the subject assets, including
the following:
14.1 CERTIFICATE. A certificate executed by the chief executive officer
of the Seller to the effect that (i) all the representations and warranties of
the Seller and Shareholder as set forth in this Agreement remain true as of the
Closing, and (ii) all covenants and agreements to be performed by the Seller
prior to the Closing have been performed (and evidence of such performance
shall accompany such certificate);
14.2 BOOKS AND RECORDS. All of the Seller's books and records
(reasonably necessary or useful to the continuing conduct by the Purchaser of
the Seller's business) and other data in tangible form relating to the past and
current business of the Seller.
14.3 RESOLUTIONS. A copy, certified as of the date of the Closing by the
secretary of the Seller, of the resolutions of the Seller's Board of Directors
and the Seller's shareholder(s), respectively, authorizing the execution,
delivery and performance of this Agreement.<PAGE>
<PAGE>
14.4 INCUMBENCY CERTIFICATES. Incumbency certificates, dated the date of
Closing, executed by the Secretary of the Seller, which shall certify by name
and title and bear the signature of the officers of the Seller, respectively,
authorized to sign this Agreement.
14.5 TRANSFER DOCUMENT. Such bills of sale, deeds, endorsements,
assignments, and other instruments of transfer, conveyance and assignment that
shall be necessary, in the reasonable opinion of Purchaser's counsel, to
transfer the Assets to the Purchaser including, but not limited to, the
following:
(a) Assignments of the United States Copyright Registrations for
Proprietary Titles registered in the name of Seller or its dissolved
subsidiaries;
(b) Assignments of Trademarks and Tradenames; and
(c) Assignments of third party agreements and customer orders, if
any.
14.6 PROPERTY -- DUPLICATIONS. A list of all property at duplicators or on
order or in process. Seller represents and warrants that the masters to be
delivered by Seller to Purchaser include duplicate or original masters of all
masters at the duplicators. Seller will send a letter to all duplicators on
the date of the Closing, notifying them that Purchaser is now the owner of the
property held by the duplicator and that the duplicator is to follow Purchasers
instructions regarding same. Seller agrees to cooperate with Purchaser to
ensure the cooperation of the duplicators, including, but not limited to, the
payment by Seller of any monies Seller might owe a duplicator.
14.7 BULK SALES AFFIDAVIT. Bulk Sales Affidavit referred to in Article
6(q) herein.
14.8 UCC SEARCHES. UCC Searches (State and County) including Federal tax
lien searches.
14.9 TERMINATED EMPLOYEES. Copies of notices to all non-retained
employees providing for termination of their employment and also providing for
a severance payment to them by the Company in accordance with the Company's
established and existing practice.
14.10 OPINION OF COMPANY COUNSEL. The Opinion of the Company Counsel as
referenced and detailed in Article 12.3 hereof.
14.11 EXCISE TAXES. The assets being sold hereunder shall be
delivered by Seller to Purchaser at Purchaser's office located at 6465 North
Avondale, Chicago, Illinois 60631 with title to said assets passing to
Purchaser at such location. As a result, Seller will not collect Sales (Use)
Tax from Purchaser at closing.
14.12 DELIVERY AND SHIPPING EXPENSES. All of the Assets being sold
hereunder shall be delivered to and title shall pass to Purchaser at 6465 North
Avondale, Chicago, Illinois 60631. Delivery of the assets shall be made by
Seller promptly after closing. Seller shall pay all shipping expenses for the
delivery of the Assets, including insurance, packing and handling, and Seller
shall bear the risk of the loss until delivery to the Purchaser as aforesaid.
ARTICLE 15
DELIVERIES BY PURCHASER
------------------------
<PAGE>
<PAGE>
The Purchaser agrees to deliver to the Seller at the Closing the following
documents which shall be in form and substance satisfactory to the Seller, and
its counsel:
15.1 CERTIFICATE. A certificate of the Purchaser to the effect that the
representations and warranties of the Purchaser set forth in Article 8 hereof
remain true as of the Closing.
15.2 PURCHASE PRICE. Payment of One Million and 00/100ths
($1,000,000.00) Dollars by certified or cashier's check payable to Seller or
its order.
ARTICLE 16
PRE-CLOSING ACCESS AND POST-CLOSING REQUIREMENTS
-------------------------------------------------
16.1 BOOKS AND RECORDS. Until the Closing, Seller agrees to permit
Purchaser to examine and copy its copyright records, sales and purchase
records, inventories and inventory records and the agreements disclosed in the
various schedules hereto pertinent to the transaction contemplated herein.
Subject to Closing, Seller agrees to maintain such records for a period of one
(1) year following the Closing and to permit Purchaser to examine and copy the
same. Nothing herein shall require Seller to give Purchaser broad access to
its books or records or to deliver same to Purchaser after the Closing unless
Seller, in its sole discretion, determines that it no longer requires the same
for its purposes.
16.2 CHANGE OF NAME. Seller agrees that, within six (6) months after
Closing, it will change its corporate name to a name which is not similar to
its present name. During such six (6) month period, Seller may continue to use
its current corporate name and trade names to wind up its audio visual
business, to rent or sell its premises and other non-audio visual business
activities. Purchaser shall not attempt to form a corporation under Seller's
current name or any name similar thereto in the State of California or to
qualify any such corporation in the State of California until expiration of
such six (6) month period. During such six (6) month period and thereafter,
Purchaser may use a name similar to Seller's corporate names and tradenames,
provided it notifies third parties that Seller is not liable for its debts and
liabilities.
ARTICLE 17
DISPUTES
--------
Any controversy or dispute arising from or related to this Sale of Assets
Agreement shall be determined by arbitration in the City of Chicago, Illinois
in accordance with the rules of the American Arbitration Association, and the
judgment upon any such determination or award may be entered in any Court
having jurisdiction. The prevailing party shall be entitled to recover all
costs and expenses, including reasonable attorneys' fees, incurred on account
of such action or proceeding.
ARTICLE 18
FORM 8594
---------
Purchaser and Seller shall jointly prepare and sign at closing IRS Form
8594, Asset Acquisition Statement, pursuant to Section 1060 of the Internal
Revenue Code.
<PAGE>
<PAGE>
ARTICLE 19
BROKERS OR FINDERS
-------------------
In addition, Seller and Purchaser represent and warrant that no person,
corporation or partnership is entitled to a broker's commission, finder's fee
or similar compensation upon the consummation of the transactions contemplated
herein. If this representation and warranty is breached by either Seller or
Purchaser, the breaching party shall indemnify and hold harmless the other
party from any and all claims, demands, liabilities and obligations (and any
and all expenses and costs incurred in connection with or in defending against
the same), which may arise due to any third party's claim as a broker or finder
other than the broker stated herein.
ARTICLE 20
INDEMNIFICATION
---------------
Each of the parties hereto agree that notwithstanding the Closing, the
delivery of instruments of conveyance, and regardless of any investigation at
any time made by or on behalf of any party hereto or of any information any
party hereto may have in respect thereof, they will save and hold the other
harmless from and against any damage, liability, loss or deficiency (including,
without limitation, resulting attorneys' fees and other costs and expenses
incident to any suit, action or proceeding) arising out of or resulting from
same, and will pay the other or the party entitled thereto the amount of
damages suffered thereby together with any amount which they or either of them
may pay or become obligated to pay on account of:
(a) the breach of any warranty or representation herein or any
misstatement of a fact or facts herein made by either party hereto;
(b) the failure of either party hereto to state or disclose a
material fact herein necessary in order to make the facts herein or
disclosed not misleading;
(c) any failure of either party hereto or any of their officers or
directors to perform or observe any term, provision, covenant or condition
hereunder on the part of any of them to be performed or observed; or
(d) any act performed, transaction entered into, or statement of
facts suffered to exist by either party hereto and/or of its officers or
directors in violation of the terms of this Agreement.
Each party shall give the party against whom any claim is intended to be
asserted under this Agreement detailed written notice of such claim promptly
after becoming aware of such claim. Such notice shall be accompanied by true
copies of relevant third party notices of claim, summons, complaint and other
material documents.
If such claim pertains to a third party claim, the indemnifying party
shall have the right to defend such claim through counsel of its own choice or
to settle or compromise the same without the approval or consent of the
indemnified party. The indemnified party may have its own counsel, at its own
expense, participate in such proceedings but the proceedings shall be
controlled by the indemnifying party and its counsel. The indemnified party
shall reasonably cooperate in such defense, settlement or compromise, provided,
however, no such compromise or settlement shall require the indemnified party
to consent to the imposition of any personal obligation on the indemnified
party or to waive any material right. If the indemnifying party shall fail
promptly to defend such claim or to settle or compromise the same as permitted
<PAGE>
<PAGE>
hereunder, the indemnified party may, but shall have not obligation to, defend,
settle or compromise the same.
In the event of any claim by either party hereto pursuant to this Article
said injured party shall be entitled to exercise all remedies provided by law
and/or equity with respect thereto.
ARTICLE 21
NOTICES
-------
All notices, requests, demands, and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered or
mailed by certified or registered mail, postage prepaid, addressed:
(a) To the Seller:
AEP Media, Corp. d/b/a Churchill Media
c/o Cliff Thygesen
5350 Manhattan Circle, #210
Boulder, Colorado 80303
with a copy thereof to:
Clifford L. Neuman
Neuman & Cobb
1507 Pine Street
Boulder, Colorado 80302
(b) To Purchaser:
New SVE, Inc.
c/o Mark E. Ventling
6465 North Avondale
Chicago, Illinois 60631
with a copy thereof to:
James J. Riebandt
Riebandt & DeWald, P.C.
3025 Salt Creek Lane
Arlington Heights, Illinois 60005
Notices shall be deemed given when delivered or mailed as aforesaid.
ARTICLE 22
MODIFICATION
------------
This Agreement contains the entire agreement between the parties hereto
with respect to the transactions contemplated herein and shall not be modified
or amended except by an instrument in writing signed by or on behalf of the
parties hereto.
ARTICLE 23
EXPENSES
--------
If the transactions contemplated hereby shall not be consummated, the
parties hereto shall each pay their own expenses incident to preparation for
carrying out this Agreement and consummating said transactions.
<PAGE>
<PAGE>
ARTICLE 24
ASSIGNMENT
----------
This Agreement shall not be assignable by any party hereto except that
Purchaser may, at its election, convey, transfer, assign and deliver to a
substantially-owned subsidiary of Purchaser, provided that Purchaser shall
continue to be responsible for the performance of all of its obligations under
this Agreement. However, either party hereto may assign this Agreement upon
the prior written approval of the other party which approval shall not be
unreasonably withheld. Nothing in this Agreement is intended to confer upon
any persons, other than the parties hereto and any such subsidiary, their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
ARTICLE 25
ILLINOIS LAW TO GOVERN
----------------------
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Illinois.
ARTICLE 26
COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall constitute
one and the same instrument.
ARTICLE 27
HEADINGS
--------
The headings in this Agreement are for convenience of reference only and
shall not be deemed to alter or affect any provision thereof. Reference to
numbered "sections," "paragraphs" and "subparagraphs", and to lettered
"Exhibits" refer to sections, paragraphs and subparagraphs of this Agreement
and Exhibits annexed thereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first hereinabove written.
ACCEPTED:
SELLER: PURCHASER:
AEP MEDIA, CORP. d/b/a NEW SVE, INC.
CHURCHILL MEDIA
By: /s/ Clifford C. Thygesen By: /s/ Mark E. Ventling
----------------------------- ---------------------------------
, President Mark E. Ventling, President
Attest: /s/ Frank L. Jennings Attest: /s/ James J. Riebandt
----------------------- -----------------------------
, Secretary James J. Riebandt, Secretary
