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UNITED STATES
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): August 7, 1997
UNITED SHIELDS CORPORATION
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(Exact name of registrant as specified in its charter)
Colorado 33-11062-D 84-1049047
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) file number) Identification No.)
655 Eden Park Drive, Cincinnati, Ohio 45202
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(Address of principal executive offices)
Registrant's telephone number, including area code (513)241-7470
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 7, 1997, United Shields Corporation (the "Company") signed a
definitive agreement (the "Agreement") to acquire all of the stock of Master
Molders, Inc. ("Master Molders"), a South Carolina-based manufacturer of
plastic industrial parts pursuant to a merger (the "Merger") of Master Molders
with and into a wholly-owned subsidiary of the Company. The principal assets of
Master Molders include machinery, three trucks, one automobile, two computers
and office furnishings and fixtures, which will continue to be used as at
present. The Agreement provides for payments to Master Molders' shareholders of
140,000 shares (the "Shares") of the Company's common stock and cash in the
amount of $840,000. The Agreement requires that the Shares be issued and that
$25,000 of the total cash be paid effective upon execution of the Agreement.
The Shares were issued on August 15, 1997 and the $25,000 was paid on August 8,
1997. The issuance of the Shares and the $25,000 payment are non-refundable if
the Company voluntarily terminates, or defaults in its obligations under, the
Agreement. The remaining $815,000 is to be paid on or before November 30, 1997,
the closing date of the Merger (the "Closing Date"). The Agreement provides
that Master Molders, which has elected to be taxed as a subchapter S
corporation, will distribute its earnings and profits from the period of
January 1, 1997 through the Closing Date to its shareholders. The Agreement
further provides that Master Molders will transfer to each shareholder the
automobile owned by it and used by the shareholder. The $25,000 down payment
was provided by loans from Ramsay-Hughes, Inc. ("Ramsay-Hughes"). Ramsay-Hughes
owns beneficially approximately 16.5% of the outstanding common stock of the
Company (including approximately 2.2% which is owned individually by the
directors and executive officers of Ramsay-Hughes).
The amount of consideration was determined through arm's-length
negotiations between the parties and is based on Master Molders' total revenues
and total assets and includes a premium to induce the shareholders of Master
Molders to approve the Merger. The Company's obligation to consummate the Merger
is contingent upon approval of the Merger by holders of 90% of Master Molder's
common stock. The Merger is expected to be consummated in the fourth quarter of
fiscal 1997. Master Molders had annual revenues for 1996 of approximately
$750,000, and revenues of approximately $700,000 for the first five months of
1997.
In connection with the Agreement, the Company entered into a Management
Agreement (the "Management Agreement") with Master Molders for the period from
the execution of the Agreement to the Closing Date, unless terminated earlier as
provided in the Management Agreement. The Management Agreement provides that the
current management of Master Molders will continue to conduct the day-to-day
operations of the business. However, the Company's written consent is required
prior to Master Molders taking any of certain specified actions such as payment
of dividends; certain increases in compensation of employees and various other
actions which would be outside the ordinary course of business of Master
Molders. Furthermore, Master Molders must notify the Company of certain
significant events as defined in the Management Agreement and is required to
provide monthly financial statements to the Company and submit to an audit, upon
the Company's request and at the Company's expense, by the Company's independent
auditor. In the event of a breach of the Management Agreement by Master Molders,
the Company, upon 5 days' notice, has the right to terminate the Management
Agreement and the Agreement.
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The Company has also entered into a letter of intent to acquire an
Ohio-based manufacturer and packager of electrochemical heaters and packaged
food products with annual revenues for 1996 of approximately $4.8 million. The
Company is currently in negotiations to enter into a definitive agreement with
this company.
The Company is currently engaged in negotiations to acquire six other
manufacturers of plastic containers and products and anticipates that letters of
intent may be signed during the third quarter of fiscal 1997. The Company
intends to continue to identify and evaluate other potential acquisition
candidates whose product or product lines could benefit the operations of the
Company. The Company anticipates that such acquisition candidates would be
involved in plastics manufacturing, production, packaging, distribution and/or
production of various consumer beverage products. There can be no assurance that
the Company will be successful in consummating the acquisition of candidates or
in integrating acquired companies.
ITEM 5. OTHER EVENTS.
On July 15, 1997, the Company appointed four officers and one director
to its management team. Richard E. Hughes (age 51), appointed President of the
Company, has 25 years of administrative and business experience. Most recently,
he served as the superintendent of public schools in Montgomery County,
Kentucky and as a director at Ramsay-Hughes, a Cincinnati based merchant
banking firm. Mr. Hughes is the father of Rick Hughes, a principal, director
and officer of Ramsay-Hughes. Beverley R. Gill (age 48), appointed Chief
Financial Officer, has 23 years of experience in financial and accounting
management, budgeting and business administration. Mr. Gill most recently held
the position of Controller at Cincinnati Concrete Pipe Company. E. Will Smetana
(age 48), appointed the Vice President of Production, has 18 years of
experience in project management. Most recently he served as the President of
Master Molders. Prior to that time, he was project manager of Mexican
operations for Pacific Coast Mills, Los Angeles. Edward Bonin (age 53),
appointed Vice President of Engineering and Quality Control, has worked in the
plastics industry for 33 years, including 21 years at Tupperware Company where
he managed budgeting, operations, production, quality control and research and
development for an 80 machine injection molding department with over 400
employees. Messrs. Smetana and Bonin are the sole shareholders, officers and
directors of Master Molders.
The Company added John R. Pierce (age 33) to its board of directors
which consisted of T. J. Tully (age 68), the Chairman and CEO of the Company,
James J. Carroll (age 51) and Anthony Covatta (age 53). Mr. Pierce has ten years
of business and financial experience and has been a Senior Financial Consultant
with Merrill Lynch for the past five years.
As previously reported, the Company's subsidiary ("Subsidiary") holds
the exclusive worldwide marketing rights for a patented collapsible plastic
bottle (the "Bottle") for retail/consumer sale of water and water-based
beverages and pre-packed powdered instant drink mixes. Subsidiary acquired the
rights to the Bottle by assignment from Diverse Products Incorporated
("Diverse") pursuant to an Assignment of Sales Agreement dated May 9, 1995 (the
"Assignment"). Diverse acquired its rights to market the Bottle pursuant to a
Sales Agreement dated May 5, 1995, as amended (the "Sales Agreement") between
Diverse and a predecessor of Inflo North America Limited. An Addendum to
Assignment of Sales Agreement dated August 8, 1996 provided for a
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payment of $250,000 to Diverse on or before December 31, 2001 as consideration
for the assignment. In a Second Addendum to Assignment of Sales Agreement dated
April 10, 1997, the consideration for the assignment was modified to $0.05 per
Bottle for the first 5,000,000 Bottles sold with a maximum of $250,000.
Subsidiary has recently entered into a Third Addendum to Assignment of Sales
Agreement dated as of July 29, 1997 (the "Third Addendum"), which reduces the
per Bottle consideration to $0.04 per Bottle with a maximum of $200,000. In
consideration for this reduction, the Company agreed to prepay (on behalf of
Subsidiary) $40,000 of the $200,000 total, payable at the rate of $5,000 per
month for eight months beginning on July 30, 1997. The Third Addendum was
approved by the Company's and Subsidiary's boards of directors effective July
29, 1997.
T. J. Tully and his brother James F. Tully are the sole shareholders,
directors and officers of Diverse. T. J. Tully is a director, Chairman of the
Board and CEO of the Company and he and his brother beneficially own
approximately 41% of the Company's common stock.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
It is not practical to file the required financial statements at
this time. The required financial statements will be filed on or
before October 21, 1997.
(b) Pro Forma Financial Information
It is not practical to file the required pro form financial
information at this time. The required pro forma information will
be filed on or before October 21, 1997.
(c) Exhibits
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Incorporated by Reference to:
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10.1 Agreement dated August 7, 1997 between Exhibit 10(i)(a)(14) to the
Master Molders, Inc. and the Company Company's Form 10-QSB
for the period ending June 30,
1997
10.2 Management Agreement dated August 7, Exhibit 10(i)(a)(15) to the
1997 between Master Molders, Inc. and Company's Form 10-QSB
the Company for the period ending June 30,
1997
10.3 Third Addendum to Assignment of Sales E-1 to E-2
Agreement dated as of July 29, 1997
between Diverse Products Incorporated
and United Shields Corporation (Subsidiary)
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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, thereunto duly authorized.
UNITED SHIELDS CORPORATION
By: /s/ T. J. Tully
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T. J. Tully, Chairman of the Board and CEO
Date: August 21, 1997
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THIRD ADDENDUM
TO
ASSIGNMENT OF SALES AGREEMENT
WHEREAS, In-Flo Liquid Dispensing Corporation ("In-Flo LDC"), a corporation
organized and existing under the laws of Canada, and Diverse Products
Incorporated ("Diverse"), a corporation organized and existing under the laws of
State of Ohio, did enter into a Sales Agreement (the "Sales Agreement") dated
the 5th day of May, 1995, in which Diverse as Master Marketer and In-Flo LDC
agreed to the acquisition, sale and distribution of certain products to be
provided by In-Flo LDC; and
WHEREAS, Diverse and Health Shields Corporation ("HSC"), a Nevada corporation,
executed an Assignment of Sales Agreement (the "Assignment") on the 9th day of
May, 1995, as Assignor and Assignee respectively, acknowledged and accepted by
In-Flo LDC; and
WHEREAS, the Agreement provided for, but did not recite all consideration paid
or to be paid by Assignee to Assignor; and
WHEREAS, HSC has changed its name to United Shields Corporation ("USC"); and
WHEREAS, In-Flo LDC and In-Flo North America Limited, formed under the laws of
the Province of Ontario, executed an Assignment of Sales Agreement on the 22nd
day of January, 1996, wherein In-Flo LDC assigned its interest in the Sales
Agreement to In-Flo North America Limited, which assignment has been
acknowledged and accepted by HSC; and
WHEREAS, Diverse and HSC/USC executed an Addendum to Assignment of Sales
Agreement ("Addendum") dated the 8th day of August, 1996, wherein HSC/USC as
Assignee agreed to pay Diverse as Assignor a contract amount ($250,000.00), with
said amount to be paid on or before December 31, 2001; and
WHEREAS, Diverse and HSC/USC, further agreed to modify the terms of the amount
due Diverse, as Assignor, in the Second Addendum to Assignment of Sales
Agreement, to pay said contract amount ($250,000.00) at a rate of Five Cents
($0.05) for each bottle, as more fully set forth therein; and
WHEREAS, HSC/USC has agreed to provide advances to Diverse in a total amount
equal to Forty Thousand Dollars ($40,000.00) to be made in eight equal
installments of Five Thousand Dollars ($5,000.00) commencing on or about July
30, 1997 and to continue on the last day of each of the seven consecutive months
with the final payment due on February 28, 1998: and
WHEREAS, Diverse as Assignor and HSC/USC as Assignee, wish to further modify and
clarify the terms and provisions of the Assignment as amended and modified;
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NOW, THEREFORE, the undersigned modify the Agreement, Assignment, Addendum, and
Second Addendum to provide that Section 6 as set forth in the Addendum and the
Second Addendum shall be replaced in its entirety by the following:
6. Assignee will pay to Assignor, for the assignment of the rights,
title and interest in and to the Sales Agreement, an amount equal to
Four Cents ($.04) (U.S. Dollars) for each bottle sold by or through
HSC/USC. Said amount (Four Cents [$.04] per bottle) shall be paid on
the first five million (5,000,000) bottles sold by HSC/USC, a maximum
of Two Hundred Thousand Dollars ($200,000.00). The obligation
hereunder shall bear no interest to and including the due date.
Assignee may prepay, in whole or in part, any amount due hereunder
without penalty, any part payments ( advances) to be applied to the payments
first due for bottles sold hereunder.
IN WITNESS WHEREOF, the parties hereunder set their hands on this
29th day of July, 1997.
Diverse Products Incorporated United Shields Corporation
a Nevada corporation
By: /s/ T. J. Tully By: /s/ T. J. Tully
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Title: Vice President Title: CEO
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