<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission file number: 33-11062-D
CAPITAL 2000, INC.
----------------------------------------------
(Name of small business issuer in its charter)
Colorado 84-1049047
- --------------------------- -------------------------------
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
602 Main Street, Suite 1102, Cincinnati, Ohio 45202
------------------------------------------------------------
(Address of principal executive offices, including zip code)
(513) 241-7470
--------------
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act: NONE
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
---
Check if disclosure of delinquent filers pursuant to Item 405 of Regulations S-B
is not contained in this form, and no disclosure will be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were $-0-.
<PAGE> 2
The aggregate market value of voting stock of the Registrant held by
non-affiliates was $11,370,403 as of April 11, 1997.
As of April 14, 1997, 10,590,100 shares of common stock, no par value per share,
were outstanding.
Documents incorporated by reference:
Part of Form 10-KSB Into Which
Document Portions of Documents are Incorporated
-------- --------------------------------------
Definitive Proxy Statement for the 1997 Part III
Annual Meeting of Stockholders
to be Filed with the Securities and
Exchange Commission prior to
April 30, 1997
Transitional Small Business Disclosure Format: Yes No X
---- ----
2
<PAGE> 3
Special Cautionary Notice Regarding Forward-Looking Statements
--------------------------------------------------------------
Certain of the matters discussed under the caption "Description of
Business" may constitute forward-looking statements for purposes of the
Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, and
as such may involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from future results, performance or achievements
expressed or implied by such forward-looking statements. Important factors that
could cause the actual results, performance or achievement of the Company to
differ materially from the Company's expectations are disclosed in this document
including, without limitation, those statements made in conjunction with any
forward-looking statements under "Description of Business". All written or oral
forward-looking statements attributable to the Company are expressly qualified
in their entirety by such factors.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Capital 2000, Inc. (the "Registrant" or the "Company") was incorporated
under the laws of the State of Colorado on October 22, 1986 under the name
O.T.C. Capital Corporation. On March 15, 1995, the name of the Company was
changed to Capital 2000, Inc. The Company was originally formed for the primary
purpose of seeking out acquisitions of properties, businesses, or merger
candidates, without limitation as to the nature of the business operations or
geographic area of the acquisition candidate. From inception through the date of
completion of its initial public offering of securities, the Company's
activities were directed toward the acquisition of operating capital.
The Company completed its initial public offering in June, 1987,
receiving net proceeds of $140,726 from the sale of 40,000,000 shares of the
Company's common stock, $.001 par value per share (the "Common Stock"). During
1987 most of the offering proceeds were expended and during February 1988 all of
the officers and directors resigned and new officers and directors were
appointed. From that date until February, 1997, the Company had virtually no
assets or liabilities and no business operations. On March 24, 1995, the Company
completed a 1 for 250 reverse stock split.
Effective February 12, 1997, the Company acquired all of the
outstanding shares of United Shields Corporation ("USC") in exchange for
restricted shares of Common Stock (the "Exchange") pursuant to a Share Exchange
Agreement between the Company and USC. After the Exchange, USC's shareholders
own approximately 90% of the of the outstanding Common Stock. As part of the
Exchange, seven shareholders of the Company agreed to cancel a total of 849,900
shares of Common Stock and to transfer 45,000 shares to a new corporate
3
<PAGE> 4
shareholder. After the cancellation and transfer of 894,900 shares of Common
Stock, the seven shareholders own 504,120 shares of Common Stock.
In connection with the Exchange, the directors and officers of USC
became the directors and officers of the Company. The directors and officers of
USC, and the Company as of the effective date of the Exchange, are T. J. Tully,
Anthony G. Covatta and James J. Carroll. All references to the Company herein
include its wholly-owned subsidiary, USC, unless otherwise stated.
DESCRIPTION OF BUSINESS
The Company is seeking to acquire one or more businesses which will
complement the business of its wholly-owned subsidiary, USC. The Company is
currently engaged in discussions with potential acquisition candidates. See
"Management's Plan of Operations."
USC 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. The Bottles
are filled with liquid by consumers or retailers using a manually operated
spigot, filling through a flip top cap. The compressed plastic Bottle expands as
filled and remains semi-rigid. When filled, the Bottle stands on its own; when
empty, it folds into a compressible flat package approximately four inches by
five inches by two inches. USC also has the right to use a patented bottle
processing unit (integrator) that can prepack concentrates, and evacuate, cap,
label and fold the Bottles.
The rights to the Bottle were purchased pursuant to a Sales Agreement,
as amended (the "Sales Agreement") dated May 5, 1995 between a predecessor of
USC and a predecessor of Inflo North America Limited ("Inflo"), the current
parties to the Sales Agreement. The Sales Agreement provides that USC will
purchase a minimum number of Bottles during the term of the Sales Agreement
ranging from 2.5 million in the first contract year to 400 million in the sixth
contract year and thereafter. The Company will either purchase the Bottles at an
estimated price per Bottle of CDN$0.2246 plus a margin component ranging from
CDN$0.07 to CDN$0.015, depending on the number of Bottles purchased, or cause
the Bottles to be produced and pay to Inflo the amount of the margin component.
Based on the exchange rate as of December 31, 1996, the purchase price of the
Bottles in U.S. dollars is $0.1718 plus a margin component ranging from $0.05
to $0.011.
While the Bottles may be filled using a robotic or automatic filling
system, the Company is prohibited from using or marketing such systems under the
terms of the Sales Agreement. The Company is also prohibited from using or
marketing the Bottles for any purpose other than the retail/consumer sale of
water and other water-based beverages and pre-packed instant drink mixes. This
prohibition includes the retail/consumer sale of non-food uses.
The Sales Agreement provides for an initial term of six years expiring
on January 31, 2001, with successive automatic one year renewals thereafter. The
Sales Agreement may be terminated by either party upon 30 days notice if the
other party defaults and fails to remedy the
4
<PAGE> 5
default (or take actions to remedy the default) within the 30 day notice period.
Either party may terminate the Sales Agreement immediately upon giving notice of
termination if the other party attempts to assign its rights under the Sales
Agreement. The Sales Agreement may be terminated by either party without notice
in the event the other party becomes bankrupt or insolvent, makes an assignment
for the benefit of creditors or has a receiver appointed which appointment is
not vacated within 30 days thereafter.
COMPETITION
The Company believes the Bottles are a different type of product from
that which currently exists in the marketplace and cannot be duplicated because
the Bottles are protected by patents. Consequently, the Company believes it has
no specific competitors with respect to the Bottles. However, the food and
beverage industry is highly competitive and is dominated by many competitors who
are substantially larger and have greater financial resources than the Company.
The Company will compete with other beverage manufacturers for a share of the
beverage market. In addition, the Company will compete with numerous
manufacturers of water and beverage products for extremely limited grocery shelf
space.
PATENTS
The Bottle and bottle processing equipment are protected by patents in
the United States, Canada, France, Spain, Austria, Germany, Switzerland,
Belgium, Sweden, Great Britain and Australia. The U.S. Patent and Trademark
Office and the European Patent Office have conducted patent searches and have
not identified any prior art which would serve to invalidate or otherwise limit
the issued patents. The patents will expire in approximately 14 years.
EMPLOYEES
The Company's officers are T. J. Tully and James J. Carroll.
Currently Mr.Tully serves on a full-time basis without compensation and Mr.
Carroll serves on a part-time basis without compensation. The Company
anticipates that it will compensate its officers during fiscal 1997. The Company
has no other employees.
ITEM 2. DESCRIPTION OF PROPERTY
The Company owns no real property. The Company leases its executive
office located in Cincinnati, Ohio.
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings, and the Company is not aware of
any threatened legal proceedings to which it may be a party.
5
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended December 31, 1996.
6
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) MARKET INFORMATION
The following table sets forth, for the periods indicated, the high and
low bid price for the Common Stock for the quarters indicated as reported on the
Nasdaq Bulletin Board. The high and low bid prices were provided by a market
maker for the Company, and reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions. The following
prices have been adjusted to reflect a 1 for 250 reverse stock split effected on
March 24, 1995. The common stock did not trade in 1995 or the first two quarters
of 1996.
<TABLE>
<CAPTION>
1996 1997
--------------------------- ---------------------
High Low High Low
------ ---- ------ -----
<S> <C> <C> <C> <C>
First Quarter -- -- $2.75 $0.75
Second Quarter -- -- 2.75 2.00(1)
Third Quarter $1.00 $0.75
Fourth Quarter 1.00 0.75
</TABLE>
- ----------------
(1) through April 14, 1997.
(b) HOLDERS
As of April 14, 1997, the Company had approximately 123
shareholders of record.
(c) DIVIDENDS
The Company has never paid a cash dividend on the Common Stock
and does not expect to pay a cash dividend in the foreseeable future.
ITEM 6. MANAGEMENT'S PLAN OF OPERATIONS
The following description of "Management's Plan of Operation"
constitutes forward-looking statements for purposes of the Securities Act of
1933 and the Securities Exchange Act of 1934, as amended, and as such involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be materially
different from future results, performance or achievements expressed or implied
by such forward-looking statements. Important factors that could cause the
actual results, performance or achievement of the Company to differ materially
from the Company's expectations include the factors discussed in connection with
the particular statements contained in the Plan of Operations and the following
factors: 1) the Company's inability to obtain financing for acquisitions and for
general operations including the marketing of the Bottle;
7
<PAGE> 8
2) the Company's inability to establish a successful alliance with a major
marketer to the supermarket and convenience store markets; 3) the Company's
inability to obtain significant shelf space in supermarkets and convenience
stores due to competition for space by all food products, requirements to sell
through specific distributors, commission or other rate structures which prevent
the Company from achieving adequate profit margins and other similar factors; 4)
the product is not accepted in the marketplace due to costs or other reasons;
(5) the Company's inability to supply the product to meet market demand; (6)
generally unfavorable economic conditions which would adversely affect
purchasing decisions by retailers or consumers; (7) development of a similar
competing product which is not an infringement of the patent on the Bottle; (8)
inability of the owner of the patent for the Bottle to protect against
infringement; and (9) the Company's inability to successfully complete and
integrate acquisitions. All forward-looking statements attributable to the
Company are expressly qualified in their entirety by such factors.
The Company's principal focus is to make one or more acquisitions. The
Company believes that acquisitions are a means of increasing its asset and
revenue base, adding expertise and diversifying its product offerings. The
consummation of one or more acquisitions would likely have the effect of
significantly increasing the number of employees of the Company. Acquisitions
may involve a number of risks including, without limitation, diversion of
management's attention, dependence on retaining, hiring and training key
personnel, adverse short-term effects on operating results, unanticipated
problems or legal liabilities and amortization of acquired intangible assets,
some of which could have a material adverse effect on the Company's operations
and financial results. The success of any acquisition requires that the Company
be able to successfully integrate the operations of the acquired company with
the operations of the Company without substantial costs, delays or other
problems and to manage the acquired company profitably or achieve levels of
profitability that justify the investment made by the Company in the acquired
company. There can be no assurance that the Company will be successful in
consummating the acquisition of acquisition candidates or integrating acquired
companies.
The Company has entered into a letter of intent to acquire an
Ohio-based manufacturer of plastic bottle injection molded pre-forms with annual
revenues for 1996 of approximately $14.5 million. The Company is currently in
negotiations to enter into a stock purchase agreement with this manufacturer and
to obtain financing for this acquisition.
The Company is currently in the process of evaluating, and 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.
The Company has acquired from Inflo the exclusive world-wide marketing
rights for the Bottle for use in the retail/consumer sale of water and other
water based beverages. The
8
<PAGE> 9
marketing of the Bottle is expected to be funded by either an additioanl equity
investment in the Company or from operating revenues, if the Company is
successful in acquiring an existing business, as described above. The inability
of the Company to meet sales volume and other requirements of the Sales
Agreement with Inflo could have a material adverse effect on the results of the
Company. See "Description of Business."
The Company believes that the marketing potential for the Bottle is
that it would significantly reduce the costs associated with manufacturing,
distributing and marketing bottled beverages. The primary benefit of the Bottle
is derived from the fact that the Bottle can be shipped and stored in its
collapsible state; water can be added to it manually, without the use of special
equipment. The Company believes that the convenience of being able to add water
to the Bottle at any stage in the sales and distribution chain enables the
Company to market the Bottle for a variety of uses. For example, the Company
believes that there is a segment of the consumer market (e.g., homemakers,
hikers, campers, daycare centers, etc.) that would have access to water and
would desire the Bottle and related products for drinks without transporting the
weight of a bottle pre-filled with liquid. The Company also believes that there
are distributors and retailers who would benefit from the convenience of being
able to control when and where the Bottles are filled in order to reduce
transportation and/or storage costs.
The Company, through USC, intends to market the Bottle for the sale of
filtered bottle water and for use with various powdered instant drink mixes and
bottled water-based flavored drinks. USC's initial marketing efforts will be
directed to the following: 1) contracting with a food broker to develop one or
more private label products for sale to manufacturers of retail/consumer water
or water based beverages; and 2) forming one or more alliances with major
marketers to supermarket and convenience store markets. Actual results could
differ materially from the Company's expectations because the developing and
marketing of any new product in a new market, particularly a new beverage
product is intensely competitive. Most new products are not successful. Even if
successful, the success may not be achieved without incorporating numerous
changes or refinements to the product and/or its packaging.
The Company may manufacture and distribute the Bottle although it is
not required to manufacture the Bottle under the Sales Agreement. USC will
coordinate the production and shipping of the Bottle in cooperation with Inflo.
It is expected that the actual distribution of the product will be handled by
existing food brokers, marketing companies, copackers and other suppliers to,
and distributors of, food and grocery products (collectively referred to as
"distributors"). In other words, it is contemplated that the distributors will
actually generate sales to supermarket and convenient stores, service accounts,
invoice sales and collect receivables.
USC borrowed from Ramsay-Hughes, Inc. the principal amount of $85,000
on December 12, 1995, and the principal amount of $66,568.70 on December 1,
1996, pursuant to two promissory notes. As of December 31, 1996, USC had paid
$71,640.70 of the total principal amount of $151,568.70. The $85,000 note bears
interest at a rate of 8% per annum; both notes were due and payable on March 31,
1997. The unpaid balance is now due on demand and as of April 15, 1997,
Ramsay-Hughes, Inc. had not made a demand for payment of the balance due.
Ramsay-Hughes, Inc. 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, Inc.).
The Company believes that it will be required to seek additional equity
financing in order to fulfill its plan of operations as described above.
Management is currently investigating the possibility of a registered stock
offering to raise additional equity financing.
9
<PAGE> 10
ITEM 7. FINANCIAL STATEMENTS
Please see pages F-1 through F-23
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
10
<PAGE> 11
PART III
ITEMS 9-12.
The Registrant hereby incorporates the information required by Form
10-KSB, Items 9-12 by reference to the Company's definitive proxy statement for
its 1997 Annual Meeting of Stockholders which will be filed with the Commission
prior to April 30, 1997.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1996 Form
10-KSB Page
-----------
1. Financial Statements:
Report of Independent Certified Public F-3
Accountants
Balance Sheet of Capital 2000, Inc., F-4
December 31, 1996
For each of Capital 2000, Inc.'s two fiscal years
in the period ended December 31, 1996
Statements of Operations F-5
Statements of Changes in Stockholders' (Deficit) F-6
Statements of Cash Flows F-8
Notes to Financial Statements F-10
Report of Independent Certified Public F-16
Accountants
Balance Sheet of United Shields Corporation, F-17
December 31, 1995 and December 31, 1996
For each of United Shield Corporation's
two fiscal years in the period
ended December 31, 1996
11
<PAGE> 12
<TABLE>
<S> <C>
Statements of Operations F-18
Statements of Deficit & Stockholders' Equity F-19
Statements of Cash Flows F-20
Notes to Financial Statements F-21
<CAPTION>
2. Exhibits
-------- Filed Herewith
(Page #) or
Incorporated by
Reference to:
---------------
<S> <C> <C>
2 Plan of Acquisition, Reorganization,
Arrangement, Liquidation or Succession
(1) Share Exchange Agreement between the Exhibit 10.1 to the
Company and USC dated February 12, Company's Form 8-K
1997 filed on April 1, 1997
3(a)
(1) Articles of Incorporation Exhibit 3.1 to the
Company's Registration
Statement
(No. 33-11062-D)
(2) Articles of Amendment to the Articles of Exhibit 3.1(a) to the
Incorporation dated March 15, 1995 Company's Form 10-K
for the year ended
December 31, 1995
(3) Articles of Amendment to the Articles of Exhibit 3.1(b) to the
Incorporation dated February 26, 1996 Company's Form 10-K
for the year ended
December 31, 1995
3(b) Bylaws of the Company Exhibit 3.2 to the
Company's Registration
Statement
(No. 33-11062-D)
10(i) Material Agreements
</TABLE>
12
<PAGE> 13
<TABLE>
<S> <C> <C>
(a)(1) Sales Agreement between In-Flo Liquid Dispens- E-1 to E-16
ing Corporation and Diverse Products
Incorporated dated May 5, 1995
(a)(2) Assignment of Sales Agreement between E-17 to E-18
Diverse Products Incorporated and Health
Shields Corporation dated May 9, 1995
(a)(3) Assignment of Sales Agreement between E-19 to E-20
Inflo-Liquid Dispensing Corporation and Inflo
North America Limited dated January 22, 1996
(a)(4) Addendum to Assignment of Sales Agreement E-21
between Diverse Products Incorporated and
Health Shields Corporation dated August 8, 1996
(a)(5) Amending Agreement between Inflo North E-22 to E-25
America Limited and Health Shields
Incorporated dated February 1, 1996
(a)(6) Second Addendum to Assignment of Sales E-26 to E-27
Agreement between Diverse Products Incorporated and
USC dated April 10, 1997
(a)(7) Promissory Note of USC dated December 12, 1995 E-28 to E-29
in favor of Ramsay-Hughes, Inc.
(a)(8) Letter of Ramsay-Hughes, Inc. dated December 1, E-30
1996 extending Promissory Note dated December 12,
1995
(a)(9) Promissory Note of USC dated December 1, 1996 E-31 to E-32
in favor of Ramsay-Hughes, Inc.
21 Subsidiaries of the Registrant
The Registrant has one subsidiary, United Shields
Corporation, a Nevada corporation.
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
Registrant filed a Form 8-K, dated October 18, 1996 reporting
that (i) Deem Securities Limited ("Deem") had purchased 1,490,000
shares of Common Stock, representing approximately 78% of the
outstanding Common Stock and (2) Registrant entered into a Sale of
Business Agreement pursuant to which it would acquire all of the assets
relating to the cold vaporization purification technology from Rainpure
Pty. Ltd. subject to certain conditions. No financial statements were
filed with the Form 8-K. The purchase of securities by Deem was
reversed so that ownership of the Common Stock
13
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after the reversal was identical to the ownership prior to the
purchase. The Sale of Business Agreement was not consummated.
14
<PAGE> 15
CAPITAL 2000, INC.
(A Development-Stage Enterprise)
--------------------------------
FINANCIAL STATEMENTS
with
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
December 31, 1996 and 1995
F-1
<PAGE> 16
CAPITAL 2000, INC.
(A Development-Stage Enterprise)
--------------------------------
Table of Contents
-----------------
<TABLE>
<S> <C>
Reports of Independent Certified Public Accountants F-3
Financial Statements:
Balance Sheet F-4
Statements of Operations F-5
Statement of Changes in Stockholders' (Deficit) F-6
Statements of Cash Flows F-8
Notes to Financial Statements F-9
</TABLE>
F-2
<PAGE> 17
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
The Board of Directors
Capital 2000, Inc.
Colorado Springs, CO 80907
We have audited the accompanying balance sheet of Capital 2000, Inc. (A
Development-Stage Enterprise) as of December 31, 1996, and the related
statements of operations, stockholders' (Deficit) and cash flows for the years
ended December 31, 1996 and 1995, and inception to December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements, referred to above, present fairly, in
all material respects, the financial position of Capital 2000, Inc. (A
Development-Stage Enterprise) as of December 31, 1996, and the results of its
operations, changes in its stockholders' (Deficit) and its cash flows for the
years ended December 31, 1996 and 1995, and inception to December 31, 1996 in
conformity with generally accepted accounting principles.
SCHUMACHER & ASSOCIATES, INC.
Certified Public Accountants
12835 E. Arapahoe Road
Tower II, Suite 110
Englewood, Colorado 80112
April 2, 1997
F-3
<PAGE> 18
CAPITAL 2000, INC.
(A Development-Stage Enterprise)
--------------------------------
<TABLE>
<CAPTION>
BALANCE SHEET
-------------
December 31, 1996
ASSETS
<S> <C>
Current Assets $ --
---------
TOTAL ASSETS $ --
==========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities:
Accounts payable $ 28,485
Payable to related party 15,200
-----------
TOTAL CURRENT LIABILITIES 43,685
-----------
Commitments (Note 4) --
Stockholders' (Deficit):
Common stock, no par value,
500,000,000 shares authorized
190,200 shares issued and
outstanding (Note 3) 67,550
Additional paid-in capital 142,956
Deficit accumulated (254,191)
-----------
TOTAL STOCKHOLDERS' (DEFICIT) (43,685)
TOTAL LIABILITIES AND STOCKHOLDERS'
(DEFICIT) $ --
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 19
CAPITAL 2000, INC.
(A Development-Stage Enterprise)
--------------------------------
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
------------------------
From October
22, 1986
(Date of
Inception)
Year Ended Year Ended through
December 31, December 31, December 31,
1996 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Interest income $ -- $ -- $ 75
----------- ----------- -----------
Expenses:
Professional fees 47,382 8,268 75,535
Payments to related parties -- -- 154,486
Stock issued for services -- -- 4,050
Other 6,888 4,567 20,195
----------- ----------- -----------
54,270 12,835 254,266
----------- ----------- -----------
Deficit Accumulated During
Development Stage $ (54,270) $ (12,835) $ (254,191)
=========== =========== ===========
Per Share $ (.03) $ (.07) $ (.78)
=========== =========== ===========
Common shares outstanding 1,757,515 181,925 325,698
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 20
CAPITAL 2000, INC.
(A Development Stage Company)
-----------------------------
STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT)
From October 22, 1986 (Date of Inception) through December 31, 1996
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Additional During Stock-
Common Stock Paid-in Development holders'
Shares Amount Capital Stage (Deficit)
------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance, October 22, 1986 (inception) -- $ -- $ -- $ -- $ --
Issuance of stock for cash at $.25 per share 12,000 3,000 -- -- 3,000
Issuance of stock for cash at $.50 per share 30,000 7,500 7,500 -- 15,000
Net Loss -- -- -- (13,511) (13,511)
------- ------- -------- --------- ---------
Balance, December 31, 1986 42,000 10,500 7,500 (13,511) 4,489
Common stock issued for cash at $2.50 net of
offering cost 60,280 15,070 125,656 -- 140,726
Net Loss -- -- -- (145,104) (145,104)
------- ------- -------- --------- ---------
Balance, December 31, 1987 102,280 25,570 133,156 (158,615) 111
Common stock issued for cash at $.25 per share 17,720 4,430 -- -- 4,430
Net Loss -- -- -- (1,651) (1,651)
------- ------- -------- --------- ---------
Balance, December 31, 1988 120,000 30,000 133,456 (160,266) 2,890
Stock issued for services 16,200 4,050 -- -- 4,050
Net Loss -- -- -- (11,940) (11,940)
------- ------- -------- --------- ---------
Balance, December 31, 1989 136,200 34,050 133,456 (172,206) (5,000)
Net Loss -- -- -- -- --
------- ------- -------- --------- ---------
Balance, December 31, 1990 136,200 34,050 133,156 (172,206) (5,000)
Common stock issued for cash at $.25 per share 4,000 1,000 -- -- 1,000
Net Loss -- -- -- (267) (267)
------- ------- -------- --------- ---------
Balance, December 31, 1991 140,200 $35,050 $133,156 $(172,473) $(4,267)
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 21
CAPITAL 2000, INC.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT), CONTINUED
From October 22, 1986 (Date of Inception) through December 31, 1996
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Additional During Stock-
Common Stock Paid-in Development holders'
Shares Amount Capital Stage (Deficit)
---------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1991 140,200 35,050 133,156 (172,473) (4,267)
Net Loss -- -- -- (406) (406)
---------- -------- -------- --------- --------
Balance, December 31, 1992 140,200 35,050 133,156 (172,879) (4,673)
Common stock issued for cash at $.25 per share 20,000 5,000 -- -- 5,000
Net Loss -- -- -- (306) (306)
---------- -------- -------- --------- --------
Balance, December 31, 1993 160,200 40,050 133,156 (173,185) 21
Net Loss -- -- -- (13,901) (13,901)
---------- -------- -------- --------- --------
Balance, December 31, 1994 160,200 40,050 133,156 (187,086) (13,880)
Common stock issued for cash as $.25 per share 30,000 7,500 -- -- 7,500
Net Loss -- -- -- (12,835) (12,835)
---------- -------- -------- --------- --------
Balance, December 31, 1995 190,200 $ 47,550 $133,156 $(199,921) $(19,215)
Common stock issued in exchange for assumption 1,709,800 20,000 -- -- 20,000
of Company's payable
Company debt paid by stockholders -- -- 9,800 -- 9,800
Net Loss (54,270) (54,270)
---------- -------- -------- --------- --------
Balance, December 31, 1996 1,900,000 $ 67,550 $142,956 $(254,191) $(43,685)
========== ======== ======== ========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE> 22
CAPITAL 2000, INC.
(A Development-Stage Enterprise)
--------------------------------
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From October
22, 1986
(Date of
Inception)
Year Ended Year Ended through
December 31, December 31, December 31,
1996 1995 1996
-------- -------- ---------
<S> <C> <C> <C>
Cash flow from operating activities:
Excess of (expenses over revenue)
during development stage $(54,270) $(12,835) $(254,191)
Stock issued for services -- -- 4,050
Increase in payable to stockholder 15,200 -- 15,200
Increase (Decrease) in accounts
payable 9,270 5,335 28,485
-------- -------- ---------
Net cash (used in) operating
activities (29,800) (7,500) (206,456)
-------- -------- ---------
Cash flows from investing activities -- -- --
-------- -------- ---------
Cash flow from financing activities:
Stock issued for assumption of
Company's debt 20,000 -- 20,000
Company accounts payable assumed
and paid by stockholder 9,800 -- 9,800
Common stock issued, net of
offering costs -- 7,500 176,656
-------- -------- ---------
Net cash provided by financing
activities 29,800 7,500 206,456
-------- -------- ---------
(Decrease) in cash -- --
-------- -------- ---------
Cash, beginning of period -- --
-------- -------- ---------
Cash, end of period $ -- $ -- $ --
======== ======== =========
</TABLE>
F-8
<PAGE> 23
<TABLE>
<S> <C> <C> <C>
Interest paid $ -- $ -- $ --
======== ======== =========
Income taxes paid $ -- $ -- $ --
======== ======== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE> 24
CAPITAL 2000, INC.
(A Development Stage Company)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
(1) Summary of Accounting Policies
------------------------------
This summary of significant accounting policies of Capital 2000, Inc.
(Company) is presented to assist in understanding the Company's
financial statements. The financial statements and notes are
representations of the Company's management who is responsible for
their integrity and objectivity. These accounting policies conform to
generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
(a) Nature of Operations
--------------------
The Company formerly O.T.C. Capital Corporation was organized
on October 22, 1986, as a Colorado Corporation. The Company is
in the development stage and planned principal operations have
not yet commenced. The Company was formed for the purpose of
functioning as a public shell to merge with other entities
through an exchange of shares. Such transactions may result in
public investors having their interests diluted. The Company
has selected December 31 as its year end.
(b) Per Share Information
---------------------
Per share information is based upon the weighted average
number of shares outstanding during the period.
(d) Reverse Stock Split
-------------------
Effective March 8, 1995 the Company effected a one-for two
hundred fifty reverse stock split. All references to common
stock in the financial statements have been retroactively
adjusted for the reverse stock split.
(e) Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
F-10
<PAGE> 25
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those
estimates.
F-11
<PAGE> 26
CAPITAL 2000, INC.
(A Development Stage Company)
-----------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
(1) Summary of Accounting Policies, Continued
-----------------------------------------
(f) Deferred Offering Cost
----------------------
Costs associated with the public offering were charged against
the proceeds of the offering. If the offering had not been
successful, the offering cost would have been expensed.
2. Income Taxes
------------
As of December 31, 1996 the Company had approximately $254,000 of
unused net operating loss carryovers, expiring in various years through
2011, available to offset future taxable income, if any. The recent
change in stock ownership of the Company as described in note 5 will
reduce or eliminate the Company's ability to utilize the loss
carryovers. As of December 31, 1996, the Company has deferred tax
assets of approximately $50,800 related to operating carryovers of
approximately $254,000 expiring in years through 2011. Due to the
uncertainty of the Company's ability to utilize the loss carryovers, an
allowance for the entire $50,800 has been provided. Therefore, no
deferred tax assets have been recorded in the financial statements as
of December 31, 1996.
3. Common Stock
------------
During 1996, the Company changed the par value of its common stock from
$.25 per share to no par value.
4. Subsequent Events
-----------------
On February 12, 1997, the Company entered into a share exchange
agreement with United Shields Corporation, a Nevada corporation
("USC"). The agreement provided that the Company exchange 1.59 shares
of its unissued no par common stock for all of the outstanding common
stock of USC, or a total of
F-12
<PAGE> 27
9,540,000 shares. The agreement, among other things, provided that
immediately after closing, the Company would enter into a twelve month
consulting agreement with Bleu Ridge Consultants , inc. a related
party, which provides for a monthly fee of $3,500.
F-13
<PAGE> 28
FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
UNITED SHIELDS CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
December 31, 1996 and 1995
F-14
<PAGE> 29
CONTENTS
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 3
FINANCIAL STATEMENTS
BALANCE SHEETS 4
STATEMENTS OF OPERATIONS 5
STATEMENTS OF DEFICIT IN STOCKHOLDERS' EQUITY 6
STATEMENTS OF CASH FLOWS 7
NOTES TO FINANCIAL STATEMENTS 8
F-15
<PAGE> 30
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
United Shields Corporation
We have audited the accompanying balance sheets of United Shields Corporation (a
Nevada Corporation and development stage enterprise) as of December 31, 1996 and
1995, and the related statements of operations and accumulated deficit and cash
flows for each of the two years in the period ended December 31, 1996 and for
the period July 26, 1993 (date of inception) to December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United Shields Corporation as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 1996 and for
the period July 26, 1993 (date of inception) to December 31, 1996 in conformity
with generally accepted accounting principles.
Cincinnati, Ohio
March 31, 1997
F-16
<PAGE> 31
UNITED SHIELDS CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
December 31,
<TABLE>
<CAPTION>
ASSETS 1996 1995
<S> <C> <C>
CURRENT ASSETS
Cash $ 107 $ 11,966
Accounts receivable - officers 6,955 --
--------- ---------
Total current assets 7,062 11,966
MARKETING AGREEMENT, net 81,667 101,667
--------- ---------
$ 88,729 $ 113,633
========= =========
LIABILITIES
CURRENT LIABILITIES
Notes payable - stockholders $ 79,919 $ 116,759
Accounts payable 213,368 --
Accrued liabilities - interest 11,831 3,126
--------- ---------
Total current liabilities 305,118 119,885
COMMITMENTS -- --
DEFICIT IN STOCKHOLDERS' EQUITY
Common stock - authorized 6,000,000 shares without
par value; issued and outstanding 5,796,000 and 5,599,300
at aggregate value at December 31, 1996 and 1995, respectively 63,102 35,002
Stock subscribed, not yet issued - 66,500 shares at December 31,
1996, no par value 133,000 --
Deficit accumulated during the development stage (412,491) (41,254)
--------- ---------
(216,389) (6,252)
--------- ---------
$ 88,729 $ 113,633
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-17
<PAGE> 32
UNITED SHIELDS CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
For the years ended December 31,
<TABLE>
<CAPTION>
JULY 26, 1993
(DATE OF INCEPTION)
1996 1995 TO DECEMBER 31, 1996
<S> <C> <C> <C>
Start-up and organizational costs $(82,069) $(4,293) $(106,864)
Amortization (20,000) (13,333) (33,333)
Bottle purchase requirements (232,363) -- (232,363)
Stock issued for compensation (28,100) -- (28,100)
--------- -------- ---------
Operating loss (362,532) (17,626) (400,660)
Other expense
Interest (8,705) (2,222) (11,831)
--------- -------- ---------
Loss before income taxes (371,237) (19,848) (412,491)
Income taxes -- -- --
--------- -------- ---------
NET LOSS $(371,237) $(19,848) $(412,491)
========= ======== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-18
<PAGE> 33
UNITED SHIELDS CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF DEFICIT IN STOCKHOLDERS' EQUITY
For the years ended December 31,
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED
STOCK SUBSCRIPTIONS DEFICIT TOTAL
<S> <C> <C> <C> <C>
Balance at January 1, 1995 $ -- $ -- $(21,406) $(21,406)
Shares issued:
5,599,300 shares in exchange for $35,002 35,002 -- -- 35,002
Net loss during the development stage -- -- (19,848) (19,848)
------- -------- --------- ---------
Balance at December 31, 1995 35,002 -- (41,254) (6,252)
Shares issued:
196,700 shares, at estimated value 28,100 -- -- 28,100
Stock subscribed, not yet issued - 66,500
shares in exchange for $133,000 -- 133,000 -- 133,000
Net loss during the development stage -- -- (371,237) (371,237)
------- -------- --------- ---------
Balance at December 31, 1996 $63,102 $133,000 $(412,491) $(216,389)
======= ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-19
<PAGE> 34
UNITED SHIELDS CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
For the years ended December 31,
<TABLE>
<CAPTION>
JULY 26, 1993
(DATE OF INCEPTION)
1996 1995 TO DECEMBER 31, 1996
Net cash flows provided by (used in) operating activities:
<S> <C> <C> <C>
Net loss accumulated during the development stage $(371,237) $(19,848) $(412,491)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization 20,000 13,333 33,333
Stock issued for compensation 28,100 -- 28,100
Changes in assets and liabilities:
Increase in accounts receivable (6,955) -- (6,955)
Increase in accounts payable 213,368 -- 213,368
Increase in accrued liabilities 8,705 2,222 11,831
--------- --------- ---------
Net cash used in operating activities (108,019) (4,293) (132,814)
Cash flows used in investing activities:
Acquisition of marketing agreement -- (110,000) (115,000)
Cash flows provided by (used in) financing activities:
Borrowings on notes payable 73,119 99,257 197,878
Payments on notes payable (109,959) (8,000) (117,959)
Proceeds from issuance of stock -- 35,002 35,002
Proceeds from stock subscribed 133,000 -- 133,000
--------- --------- ---------
Net cash provided by financing activities 96,160 126,259 247,921
--------- --------- ---------
Net increase (decrease) in cash (11,859) 11,966 107
Cash at beginning of period 11,966 -- --
--------- --------- ---------
Cash at end of period $107 $11,966 $107
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-20
<PAGE> 35
UNITED SHIELDS CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE A - SUMMARY OF ACCOUNTING POLICIES
The Corporation is a development stage company incorporated July 26, 1993.
The Corporation was organized to market a patented collapsible bottle for
use with beverage products. The Corporation's primary activities since
incorporation have been locating uses for the bottles, financial planning,
searching for business partners and raising capital. A summary of the
significant accounting policies consistently applied in the preparation of
the accompanying financial statements follows.
1. Accounts Receivable
-------------------
The Corporation considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required. If amounts
become uncollectible, they will be charged to operations when that
determination is made.
2. Marketing Agreement
-------------------
The cost of obtaining a marketing agreement is amortized using the
straight-line method over a period of approximately six years.
3. Use of Estimates in Financial Statements
----------------------------------------
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements,
as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE B - NOTES PAYABLE - STOCKHOLDERS
Notes payable to stockholders, totaling $31,759 at December 31, 1995, are
the result of reimbursing stockholders for expenses in connection with
corporation activities. The notes were repaid in 1996 and had a 6% interest
rate.
The 8% notes payable to stockholders, in the amount of $79,919 and $85,000
at December 31, 1996 and 1995, respectively, are payable upon demand.
F-21
<PAGE> 36
UNITED SHIELDS CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996 and 1995
NOTE C - MARKETING AGREEMENT
The Corporation entered into an agreement to obtain the world wide marketing
rights to sell a collapsible plastic bottle. The Corporation was assigned
the marketing rights by a related party which is owned by two of the
majority shareholders of the Corporation. The Corporation paid $115,000 for
these rights which was the cost to the related party. The agreement requires
minimum purchase commitments of bottles during each of the contract years as
specified in the agreement. The purchase price of the bottles is defined in
the agreement based on raw material costs and margin.
Included in accounts payable at December 31, 1996 is $204,863 relating to
remaining payments due under the minimum purchase requirements at the end of
the first contract year.
If minimum purchase requirements are not met, the Corporation is committed
to pay $100,000 per year for a licensing fee through 2000 in addition to
minimum purchase requirements under the remaining contract years as follows
(terms are stated in Canadian dollars):
<TABLE>
<CAPTION>
APPROXIMATE
U.S. DOLLARS
------------
<S> <C> <C>
1997 $ 500,000 CDN $ 365,000
1998 2,000,000 CDN 1,460,000
1999 3,500,000 CDN 2,555,000
2000 6,000,000 CDN 4,380,000
----------- ----------
$12,000,000 CDN $8,760,000
=========== ==========
</TABLE>
Accumulated amortization of the marketing agreement is $33,333 and $13,333
at December 31, 1996 and 1995, respectively.
The Corporation has also committed to pay the related party an amount equal
to $.05 for each collapsible bottle sold by the Corporation for the first
five million bottles sold, up to a maximum of $250,000.
NOTE D - STOCK SPLIT
On December 13, 1996, the Corporation's Board of Directors approved a
seven-for-one stock split to shareholders of record December 13, 1996. The
split resulted in the issuance of 4,800,000 new shares of common stock. All
share amounts have been adjusted to reflect the stock split.
NOTE E - COMMITMENT
The Corporation has entered into a twelve month consulting agreement which
requires monthly payments of $3,500.
F-22
<PAGE> 37
UNITED SHIELDS CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1996 and 1995
NOTE F - INCOME TAXES
Deferred income tax liabilities and assets are provided for temporary
differences between the tax basis and reported amounts of assets and
liabilities that will result in taxable or deductible amounts in future
years.
Deferred tax benefits are recorded only to the extent that the amount of net
deductible temporary differences or carryforward attributes may be utilized
against current period earnings, offset against taxable temporary
differences reversing in future periods, or utilized to the extent of
management's estimate of future taxable income.
The Corporation's principal temporary difference results from the deferral
of start-up costs for tax purposes.
Net deferred tax assets have been offset by a valuation allowance of equal
amounts at December 31, 1996 and 1995, due to the uncertainty of realizing
the net deferred tax asset through future operations. The valuation
allowances were $140,000 and $14,000 at December 31, 1996 and 1995,
respectively. The valuation allowance increased $126,000 at December 31,
1996. Gross deferred tax liabilities were immaterial for both years.
NOTE G - SUBSEQUENT EVENTS
In January 1997, the Corporation completed a private offering of 204,000
shares of its common stock. Proceeds of $133,000 received prior to December
31, 1996 (stock subscribed) and the remaining proceeds of $275,000 received
in January 1997 are being used to fund operations.
In January 1997, the Corporation also issued a letter of intent to acquire a
plastic bottle preform manufacturer.
In February 1997, the Corporation entered into a transaction whereby
stockholders exchanged all shares of the Corporation for 90% of the then
issued and outstanding shares of Capital 2000, Inc. Officers and Directors
of the Corporation have replaced those of Capital 2000, Inc. and have
assumed management control of Capital 2000, Inc.
For financial reporting purposes, the transaction will be accounted for as a
reverse acquisition whereby the Corporation will be considered the
accounting acquirer. Capital 2000, Inc. has no assets.
F-23
<PAGE> 1
Exhibit 10(i)(a)(1)
SALES AGREEMENT
THIS AGREEMENT made the 5th day of May, 1995
B E T W E E N:
IN-FLO LIQUID DISPENSING CORPORATION, a
corporation organized and existing under the laws of Canada,
(hereinafter referred to as the "Vendor")
OF THE FIRST PART;
- and -
DIVERSE PRODUCTS INCORPORATED, a corporation
organized and existing under the laws of the State of Ohio,
(hereinafter referred to as the "Master Marketer")
OF THE SECOND PART.
WHEREAS:
(1) The Vendor has developed a liquid product dispensing and packaging system,
consisting of certain components hereinafter described, which system has been
designed to facilitate the retail point of sale preparation and packaging of
liquid products, the aforesaid system hereinafter referred to as the "In-Flo
System";
(2) The components of the In-Flo System consist of three (3) separate and
distinct systems, each of which has been developed by In-Flo and in respect of
which In-Flo holds or owns certain exclusive intellectual property rights;
(3) The three (3) components referenced above include (i) a soft collapsible
plastic bottle having the characteristics identified in Schedule A to this
Agreement, hereinafter the "Bottles"; (ii) a retail robotic packaging shelf,
identified by the Vendor as the "Smart Shelf' by which the Bottles are
robotically filled at the point of sale with liquid, sealed with a cap mechanism
and presented for sale in a retail display shelf unit and (iii) a bottle
processing/packaging unit by which the Bottles are collapsed and specially
packaged for installation in the Smart Shelf;
<PAGE> 2
(4) The Master Marketer has devised a plan which will require a source of
supply of soft collapsible plastic bottles for use in conjunction with a water
filtration/purification process for the retail/consumer sale of water and other
water based beverages which will employ a system by which bottles are filled by
hand and employ a manually operated flexible spigot type tip filling head,
filling through a flip top cap and a plan for mechanical filling of bottles
with powdered instant drink premix to which consumers will add water;
(5) The Master Marketer has identified certain characteristics of the Bottle
which are proprietary to the Vendor and access to these rights would be
advantageous to the Master Marketer for use in the Master Marketer's system for
the retail/consumer sale of water and other water based beverages; and
pre-package instant drink pre-mixes;
(6) The Master Marketer wishes to obtain from the Vendor the exclusive right to
purchase Bottles from the Vendor for use and subsequent re-sale by the Master
Marketer to its customers in conjunction with its manual filling procedure to
sell water and water based beverage products;and pre-packed instant drink
pre-mixes;
(7) The Vendor is willing to sell the Bottles to the Master Marketer upon and
subject to the terms and conditions hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSES that for good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged by
each of the parties hereto) the parties make the agreements and acknowledgments
hereinafter set forth:
ARTICLE I
INTERPRETATION
--------------
1.1 DEFINITIONS - Whenever used in this Agreement, unless there is something in
the subject matter or context inconsistent therewith, the following words and
terms shall have the respective meanings ascribed to them as follows:
(a) "AGREEMENT" means this Agreement and all instruments supplemental
hereto or in amendment or confirmation hereof; "hereof", "hereto", and
"hereunder" and similar expressions mean and refer to this Agreement
and not to any particular Article or Section; "Article", "Section",
"paragraph" or "clause" means and refers to the specified article,
section, paragraph or clause of this Agreement;
(b) "BUSINESS DAY" means a day other than a Saturday, Sunday or any other
day on which the principal commercial banks located at the City of
Toronto are not open for business during normal banking hours;
(c) "CONTRACT YEAR" means a period during the Term of the Agreement
commencing the first
- 2 -
<PAGE> 3
(1st) day of February to and including the next following thirty first
(31st) day of January; and for greater certainty, the first such
Contract Year shall commence the first (1st) day of February 1996 and
end on the thirty-first (31st) day of January, 1997; and
(d) "EFFECTIVE DATE" means May 1, 1995.
1.2 HEADINGS - The division of this Agreement into Articles and Sections and
the insertion of headings are for the convenience of reference only and shall
not affect the construction or interpretation of this Agreement.
1.3 NUMBER - In this Agreement and unless the context otherwise requires, words
importing the singular number only shall include the plural and vice versa,
words importing the neuter gender shall include the masculine and feminine
genders and vice versa and words importing persons shall include individuals,
partnerships, associations, trusts, unincorporated organizations and
corporations and vice versa.
1.4 SCHEDULES - The following are the Schedules annexed hereto and incorporated
by reference and deemed to be part hereof:
Schedule A Bottle Specifications
Schedule B Minimum Purchase Requirements
Schedule C Pricing Specifications
1.5 REFERENCE TO STATUTES - All references contained in this Agreement to a
statute shall be deemed to be made to such statute as now enacted or as the same
may from time to time be amended, re-enacted or replaced, and in the case of any
such amendment, re-enactment or replacement, such reference herein to a
provision of such statute shall be read as a reference to such amended,
re-enacted or replaced provision.
ARTICLE 2
CONSIDERATION FOR GRANT OF EXCLUSIVE PURCHASE RIGHTS
----------------------------------------------------
2.1 INTERIM PAYMENT - Concurrently with the execution hereof the Master
Marketer shall deliver to the Vendor a non-refundable payment in the amount of
U.S.$10,000.00 Dollars ($10,000.00) in the form of a certified cheque or bank
draft made payable to the order of the Vendor, such payment being an inducement
by the Master Marketer to the Vendor to execute this Agreement and representing
an advance against the exclusivity fee of U.S.$110,000.00 provided in paragraph
2.2 below.
2.2 EXCLUSIVITY FEE - To secure performance of the exclusivity covenant
provided in paragraph 7.1 hereof, the Master Marketer agrees to pay to the
Vendor the non-refundable aggregate sum of U.S. $110,000.00. (the "Exclusivity
Fee"). Upon payment of the interim payment provided in paragraph 2.1 above, the
Exclusivity Fee shall be credited with the payment of U.S.$10,000.00.
- 3 -
<PAGE> 4
Within 190 calendar days of the Effective Date, the Master Marketer shall pay to
the Vendor the remaining portion of the Exclusivity Fee, being the sum of
U.S.$100,000.00. In the event of non-payment of this sum by the Master Marketer
within 190 calendar days of the Effective Date, unless such period is extended
by the Vendor, this Agreement shall thereupon terminate without notice to the
Master Marketer, it being expressly agreed by the Vendor that notwithstanding
any provision in this Agreement to the Contrary, upon such termination the
Master Marketer shall be excused from the performance of all obligations
hereunder, with the exception of paragraph 7.3 which shall survive such
termination and without limiting the generality of the foregoing, upon such
termination, the Master Marketer shall be excused from the payment of the
liquidated damages set forth in paragraph 8.6 hereof. The Exclusivity Fee, once
paid by the Master Marketer, shall be non-refundable and shall be retained by
the Vendor as liquidated damages and not as a penalty in the event of the
termination of this Agreement caused by Master Marketer's failure to perform any
obligation or comply with any term or provision contemplated herein.
ARTICLE 3
PURCHASE AND SALE OF BOTTLES AND PURCHASE PRICE
-----------------------------------------------
3.1 PURCHASED AND SALE OF BOTTLES - Subject to the terms and conditions hereof,
the Vendor agrees to sell Bottles to the Master Marketer and the Master
Marketer agrees to buy or market Bottles from the Vendor in such quantities as
the Master Marketer may direct in accordance with the provisions contained in
Schedule B attached hereto.
3.2 MINIMUM PURCHASE COMMITMENTS - The Master Marketer covenants and agrees to
purchase, or market, during the first three contract years of the Term of this
Agreement, an aggregate minimum of 125 million Bottles as specified in Schedule
B. The Master Marketer further acknowledges and agrees that the Agreement may
be terminated at the option of the Vendor upon notice to the Master Marketer
upon the completion of the fourth Contract Year in the event that the sum of
Bottles ordered by purchase orders received during the fourth Contract Year
does not exceed 200 million Bottles. The Master Marketer further acknowledges
and agrees that the Agreement may be terminated at the option of the Vendor
upon notice to the Master Marketer upon the completion of the sixth (6th) month
of the fifth (5th) Contract Year in the event that the sum of Bottles ordered
by purchase orders received during the first six (6) month period of the fifth
Contract Year does not exceed 200 million Bottles.
3.3 MINIMUM ORDER QUANTITIES - The Master Marketer acknowledges and agrees that
the cost of manufacture of the Bottles depends in part upon economies of scale
arising through uninterrupted production in significant volumes, and the base
price per Bottle quoted in Schedule C is based upon the Master Marketer
purchasing no fewer than 5 million Bottles with each individual purchase order
issued during the of the Term of this Agreement.
3.4 PLACING ORDERS - The Master Marketer acknowledges and agrees that from time
to time during the Term of this Agreement, it shall deliver purchase orders to
the Vendor specifying a
- 4 -
<PAGE> 5
number of Bottles to be produced and delivered to the Master Marketer. Each
purchase order shall comply with the provisions of paragraph 3.3 above. In
addition, the aggregate sum of Bottles ordered through purchase orders issued by
the Master Marketer in any Contract Year shall not be less than the minimum
purchase commitments identified in Schedule B. The Vendor shall use its
reasonable best efforts to arrange for the manufacture and shipment of the
specified number of Bottles within thirty (30) days following receipt of a
purchase order. The Master Marketer acknowledges and agrees that the Vendor's
manufacturing and delivery capacity during the first Contract Year is not
expected to exceed 800,000 Bottles in any thirty-day period, with the result
that completion of shipment of a minimum order quantity of 5 million Bottles may
take, from the date of receipt of the purchase order by the Vendor, up to seven
(7) calendar months to complete. The Vendor covenants and agrees that during the
term of this Agreement it shall co-operate with the Master Marketer and use its
reasonable best efforts to ensure that Bottles are manufactured and delivered
within the times required by the Master Marketer.
3.5 PURCHASE PRICE - The purchase price payable to the Vendor for the Bottles
shall be in accordance with the provisions of Schedule C attached hereto. The
Master Marketer expressly acknowledges and agrees that the purchase price
consists of a manufacturing component and a margin component. The manufacturing
component includes costs which are subject to change from time to time upon the
advice of the manufacturer of the Bottles selected by the Vendor. These
manufacturing cost components include resin, labour, cap, label and carton
costs. In the event that the price of any of these or other components are
increased or decreased, the Vendor will immediately notify the Master Marketer
of such increase or decrease in accordance with the notice provisions contained
in paragraph 9.4 hereof. All Bottle purchase orders placed by the Master
Marketer following the Vendor's receipt of a notice of increase or decrease, as
the case may be, shall be subject to such price increase or decrease. The
Master Marketer shall accept the Bottle manufacturer's notice of price increase
or decrease addressed to the Vendor and the Vendor shall be under no duty or
obligation to the Master Marketer to otherwise account for such price increase
or decrease, provided that the notice received from the Bottle manufacturer
specifies with some particularity the source and basis of such increase or
decrease. In addition, the Vendor's costs are incurred in Canadian dollars, and
as a result. the price of Bottles will be subject to adjustment from time to
time as a consequence of fluctuations in the value of the Canadian dollar
against the United States dollar. Subject to any cost driven price adjustments
as aforesaid, the purchase price payable for Bottles shall be the U.S. dollar
equivalent of the Canadian dollar purchase price specified in Schedule C then
in effect on the date of the purchase order determined by reference to the noon
buying rate of Canadian dollars in terms of United States dollars as reported
by the Federal Reserve Bank of New York or such other source as mutually agreed
by the Vendor and the Master Marketer.
3.6 TAXES - The Master Marketer or ultimate purchaser shall be liable for and
shall pay all sales and transfer taxes, and all other taxes, duties or other
like charges payable upon and in connection with the conveyance and transfer of
Bottles by the Vendor to the Master Marketer or ultimate purchaser, if
applicable.
3.7 PAYMENT OF PURCHASE Price - Unless otherwise agreed by the Vendor, payment
of the selling price for all Bottles shall be secured by irrevocable letter of
credit payable by release as delivery of
- 5 -
<PAGE> 6
Bottles is completed. Each purchase order placed shall be accompanied by an
irrevocable letter of credit denominated in U.S. dollars representing the entire
purchase price due and payable in respect of such order, in form and substance
acceptable to the Vendor or its nominee bank. Notwithstanding receipt of any
purchase order from the Master Marketer, the Vendor shall be under no obligation
to arrange for the production of Bottles pursuant to such purchase order unless
and until such irrevocable letter of credit is delivered to the Vendor. Because
production of Bottles in accordance with specific purchase orders will be spread
over a period of weeks or months, the parties do not anticipate that shipment of
entire purchase order quantities of Bottles, and delivery of any particular
purchase order may be spread over several shipments. The Master Marketer agrees
that the irrevocable letter of credit will permit the Vendor to draw thereupon
on a shipment by shipment basis to ensure payment for Bottles is made concurrent
with delivery. In addition, each letter of credit shall provide that payment for
Bottles which have been manufactured and available for delivery shall be made
notwithstanding that no delivery has been made in the event that the Master
Marketer has not made arrangements to accept delivery of such Bottles within
thirty (30) days of receipt of notice from the Vendor that such Bottles are
available for delivery. In the event the Purchaser is Daymon Associates, Inc.,
Slush Puppie Corp. or other purchaser satisfactory to the Vendor the terms will
be 30 days of receipt of notice from Vendor that such Bottles are available for
delivery.
ARTICLE 4
DELIVERY
--------
4.1 The place of delivery of the Bottles sold under this Agreement shall be
F.O.B. the place of manufacture in Canada or other warehouse as provided in
paragraph 4.2 below, as no allowance has been made in the determination of the
purchase price for delivery and insurance costs which would otherwise be borne
by the Vendor in arranging for delivery F.O.B. the Master Marketer's specified
destination.
4.2 The Vendor agrees that as Bottles are ready to be shipped pursuant to a
particular purchase order, the Vendor shall notify the Master Marketer or
ultimate purchaser of the fact and at the same time, advise the Master Marketer
or ultimate purchaser of available dates and times of delivery. In the event
that the manufacturer of the Bottles does not have the capacity to warehouse
all or any part of a purchase order prior to its delivery to the Master
Marketer or ultimate purchaser, the Master Marketer or ultimate purchaser must,
within a reasonable period of time and in any event, within the time prescribed
by paragraph 3.7 above, accept delivery of all such Bottles, pay the purchase
price payable in respect of such Bottles and make its own arrangements for
storage or shipment as may be necessary.
4.3 The Master Marketer or the Master Marketer's agent shall have the right to
inspect all Bottles tendered for delivery. The inspection shall take place at
the place for delivery (place of manufacture). The expense of inspection shall
be borne by the Master Marketer or ultimate purchaser except in the instance in
which goods have been rejected which determination may be based strictly upon
the failure of the Bottles to conform to the specifications for the Bottles
provided
- 6 -
<PAGE> 7
in Schedule A. In addition, any rejection of Bottles for nonconformity with the
specifications provided in Schedule A must be made by the Master Marketer or
ultimate purchaser by sending written notification to the Vendor of the
rejection within thirty (30) days of delivery. The notification must state the
particulars of the alleged nonconformity. After transmitting the notification of
rejection, the Master Marketer or ultimate purchaser will return any rejected
Bottles to the Vendor. The Master Marketer or ultimate purchaser will not be
charged for Bottles properly rejected as nonconforming with the specifications
of Schedule A. The Vendor shall as soon as practical deliver Bottles to the
Master Marketer or ultimate purchaser to replace rejected Bottles and complete
the purchase order. Except for the Vendor's warranty that the Bottles will
conform with the specifications contained in Schedule A, the Master Marketer
acknowledges and confirms that the Vendor makes no warranty, whether express or
implied that the Bottles will be fit for the Master Marketer's specific
purposes.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
--------------------------------------------
5.1 The Vendor hereby covenants, represents and warrants to the Master
Marketer that:
(a) DUE AUTHORIZATION, ETC. - The Vendor has all necessary corporate power,
authority and capacity to enter into this Agreement and the agreements
and other instruments contemplated herein and to perform its
obligations hereunder and thereunder. The execution and delivery of
this Agreement and the agreements and other instruments contemplated
herein and the consummation of the transactions contemplated hereunder
have been duly authorized by all necessary corporate action on the part
of the Vendor.
(b) VALID AND BINDING OBLIGATION - This Agreement constitutes and the
agreements and other instruments contemplated herein when executed will
constitute valid and binding obligations of the Vendor enforceable
against the Vendor in accordance with the terms hereof and thereof
subject, however, to limitations with respect to enforcement imposed by
law in connection with bankruptcy or similar proceedings affecting the
rights of creditors generally and to the extent that equitable remedies
such as specific performance and injunction are in the discretion of
the court from which they are sought.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE MASTER MARKETER
-----------------------------------------------------
6.1 The Master Marketer hereby covenants, represents and warrants to the
Vendor that:
(a) DUE AUTHORIZATION, Etc. - The Master Marketer has all necessary
corporate power, authority and capacity to enter into this Agreement
and the agreements and other instruments contemplated herein and to
perform its obligations hereunder and thereunder. The execution and
delivery of this Agreement and the agreements and other instruments
contemplated
- 7 -
<PAGE> 8
herein and the performance of the transactions contemplated hereunder
and thereunder have been duly authorized by all necessary corporate
action on the part of the Master Marketer.
(b) VALID AND BINDING OBLIGATION - This Agreement constitutes and the
agreements and other instruments contemplated herein when executed will
constitute valid and binding obligations of the Master Marketer
enforceable against the Master Marketer in accordance with the terms
hereof and thereof subject to limitation with respect to enforcement
imposed by law in connection with bankruptcy or similar proceedings
affecting the rights of credits generally and to the extent that
equitable remedies such as specific performance and injunction are in
the discretion of the court from which they are sought.
ARTICLE 7
COVENANTS OF THE VENDOR AND THE MASTER MARKETER
-----------------------------------------------
7.1 VENDOR - GRANT OF EXCLUSIVITY TO MASTER MARKETER FOR PARTICULAR USE OF
BOTTLES - The Vendor covenants and agrees that during the term of this
Agreement, the Master Marketer shall be the Vendor's exclusive world-wide
purchaser of Bottles only for the retail/consumer sale of water and other water
based beverages employing a system by which Bottles are filled by hand using a
manually operated flexible spigot type tip filling head, filling through a flip
top cap and a plan for mechanical filling of bottles with powdered instant
drink pre-mix to which consumers will add water. The Master Marketer also
expressly acknowledges and agrees that the grant of the exclusive purchase
rights granted hereunder are subject to the provisions of paragraph 2.2 of this
Agreement.
7.2 MASTER MARKETER - LIMITATIONS ON USE OF BOTTLES - The Master Marketer
covenants and agrees that during the term of this Agreement, the Master
Marketer shall purchase the Bottles only for the retail/consumer sale of water
and other water based beverages employing a system by which Bottles are filled
by hand using a manually operated flexible spigot type tip filling head,
filling through a flip top cap and a plan for mechnical filling of bottles with
powdered instant drink pre-mix to which consumers will add water. The Master
Marketer covenants and agrees that it will not, during the term of this
Agreement, adopt, use or sell any system by which Bottles are filled using a
robotic or automatic style of filling system, which rights are expressly
reserved by the Vendor.
7.3 MASTER MARKETER - CONFIDENTIALITY - In the event of the termination of this
Agreement without consummation of the transactions contemplated hereby, the
Master Marketer will keep confidential any information concerning the Bottles
or the business of the Vendor (unless in the public domain) obtained from the
Vendor. If this Agreement is so terminated, promptly after such termination,
all documents, working papers and other written material obtained from one
party in connection with this Agreement and not therefore made public
(including all copies thereof), shall be returned to the party which provided
such material.
- 8 -
<PAGE> 9
ARTICLE 8
TERMINATION
-----------
8.1 RIGHT OF TERMINATION ON NOTICE
(i) VENDOR Notwithstanding anything herein to the contrary, the Vendor
shall have the right to terminate this Agreement at any time in accordance with
the following:
(a) by giving the Master Marketer at least thirty (30)
days notice of such termination in the case of a
default by the Master Marketer of any term or
provision of this Agreement; provided however that,
if the Master Marketer within such thirty (30) day
period, shall remedy the default upon which such
notice shall have been based, or, within such thirty
(30) day period, shall commence to remedy such
default and thereafter diligently prosecute the
same, then such notice shall not become effective
and this Agreement shall continue and remain in full
force and effect; or
(b) by giving the Master Marketer notice of such
termination (such termination to be effective
forthwith upon the giving of such notice), upon any
action being taken to dissolve the Master Marketer,
or upon any attempt by the Master Marketer to grant a
sublicence hereunder or to assign, pledge, or
otherwise encumber or dispose of this Agreement,
whether voluntarily, by operation of law, or
otherwise except as otherwise expressly provided for
herein.
(ii) MASTER MARKETER Notwithstanding anything herein to the contrary,
the Master Marketer shall have the right to terminate this Agreement at any
time in accordance with the following:
(a) by giving the Vendor at least thirty (30) days
notice of such termination in the case of a default
by the Vendor of any term or provision of this
Agreement; provided however, if the Vendor within
such thirty (30) day period, shall remedy the
default upon which such notice shall have been
based, or, within such thirty (30) day period, shall
commence to remedy such default and thereafter
diligently prosecute the same, then such notice
shall not become effective and this Agreement shall
continue and remain in full force and effect; or
(b) by giving the Vendor notice of such termination (such
termination to be effective forthwith upon the giving
of such notice), upon any action being taken to
dissolve the Vendor, or to assign, pledge, or
otherwise encumber or dispose of this Agreement,
whether voluntarily, by operation of law, or
otherwise except as otherwise expressly provided for
herein.
- 9 -
<PAGE> 10
8.2 RIGHT OF TERMINATION WITHOUT NOTICE
(i) VENDOR Notwithstanding anything herein to the contrary, this Agreement
shall terminate, without notice required by the Vendor, upon
(a) the bankruptcy or insolvency of the Master Marketer,
(b) the making by the Master Marketer of an assignment for the
benefit of creditors, or
(c) the appointment of a receiver of the Master Marketer or of any
of its assets which appointment shall not be vacated within
thirty (30) days thereafter.
(ii) MASTER MARKETER Notwithstanding anything herein to the contrary, this
Agreement shall terminate, without notice required by the Master Marketer, upon
(a) the bankruptcy or insolvency of the Vendor,
(b) the making by the Vendor of an assignment for the benefit of
creditors, or
(c) the appointment of a receiver of the Vendor or of any of its
assets which appointment shall not be vacated within thirty
(30) days thereafter.
8.3 Except as otherwise provided in this Article 8, neither party shall be
liable to the other, by virtue of the termination of this Agreement in
accordance with this Article 8, for any compensation, reimbursement,
expenditure, or statutory or other indemnities, or for any investments, leases
or other commitments, or for any damages on account of the loss of prospective
profits or anticipated sales, or for any other loss, damage, expense or matter
growing out of such termination.
8.4 No termination of this Agreement for any reason shall relieve a party of or
release such party from those of its obligations hereunder which subsist or are
to be performed after such termination.
8.5 LIQUIDATED DAMAGES - In the event of the termination of this Agreement by
the Vendor in accordance with the provisions of paragraphs 8.1(i) or 8.2(ii)
prior to January 31st, 1999, being the end of the third Contract Year, the
Master Marketer shall pay to the Vendor the following amounts as liquidated
damages and not as a penalty:
(a) if the Agreement is terminated during the third Contract Year, the sum of
CDN.$2,475,000.00 less the product obtained by multiplying the total number of
Bottles included in purchase orders issued by the Master Marketer or ultimate
purchaser between February 1, 1998 to and including January 31, 1999 by
Cdn$0.0225;
(b) if the Agreement is terminated during the second Contract Year, the sum of
CDN.$2,975,000.00 less the lesser of (i) the product obtained by multiplying
the total number of Bottles included in purchase orders issued by the Master
Marketer between February 1, 1997 to and
- 10 -
<PAGE> 11
including January 31, 1998 by Cdn$0.025 and (ii) CDN$500,000; or
(c) if the Agreement is terminated during the first Contract Year, the sum of
CDN.$3,225,000.00 less the lesser of (i) the product obtained by multiplying
the total number of Bottles included in purchase orders issued by the Master
Marketer between February 1, 1996 to and including January 31, 1997 by
Cdn$0.05 and CDN$2,975,000.
ARTICLE 9
GENERAL
-------
9.1 TERM - The term of this Agreement shall commence with upon the Effective
Date and continue for an initial term of five years until the completion of
the fifth Contract Year, on the thirty first (31st) day of January, 2001 (the
"Initial Term"). Thereafter, this Agreement shall automatically continue for
successive one (1) year terms (any such one (1) year term being a "Renewal
Term") so long as Master Marketer is not in default and has fulfilled all
purchase requirements of this Sales Agreement.
9.2 PUBLIC NOTICES - The parties hereto hereby agree that with respect to all
notices to third parties and all other publicity concerning the transactions
contemplated by this Agreement, no party shall act unilaterally in this regard
without the prior approval of the other, such approval not to be unreasonably
withheld. unless such disclosure shall be required to meet timely disclosure
obligations of any party under applicable securities laws and stock exchange
rules in circumstances where prior consultation with the other party is not
practicable.
9.3 TIME - Time shall be of the essence of this Agreement and of every part
hereof and no extension or variation of this Agreement shall operate as a
waiver of this provision.
9.4 NOTICES - All payments and communications which may be or are required to
be given by either party to the other herein, shall (in the absence of any
specific provision to the contrary) be in writing and delivered or sent by
prepaid overnight courier or telecopier to the parties at their following
respective addresses:
For the Vendor: 120 Nugget Avenue
Agincourt, Ontario
MIS 3A7
Fax: 416-292-4573
For the Master Marketer: 4115 Edwards Road
Cincinnati, Ohio
45209
Fax: 513-531-0980
- 11 -
<PAGE> 12
and if any such payment or communication is sent by prepaid overnight courier,
it shall be conclusively deemed to have been received on the second Business Day
following the transmittal thereof and, if delivered or telecopied, it shall be
conclusively deemed to have been received at the time of delivery or
transmission. Either party may from time to time change its address hereinbefore
set forth by notice to the other of them in accordance with this section.
9.5 GOVERNING LAW - This Agreement and the rights and obligations and
relations of the parties hereto shall be governed by and construed in
accordance with the laws of the Province of Ontario and the federal laws of
Canada applicable therein (but without giving effect to any conflict of law
rules). The parties hereto agree that the Courts of Ontario shall have
jurisdiction to entertain any action or other legal proceedings commenced by
the Vendor based on any provisions of this Agreement and in such case, the
Master Marketer hereby attorns to the jurisdiction of the Courts of the
Province of Ontario. The parties hereto also agree that the Courts of Ohio
shall have jurisdiction to entertain any action or other legal proceedings
commenced by the Master Marketer based on any provisions of this Agreement and
in such case, the Vendor hereby attorns to the jurisdiction of the Courts of
the Province of Ontario.
9.6 HEADINGS - The index to and headings in this Agreement and in the
Schedules hereto are inserted solely for convenience of reference and do not
affect the interpretation thereof or define, limit or construe the contents of
any provision of this Agreement.
9.7 ASSIGNMENT - Neither this Agreement nor any rights or obligations
hereunder shall be assignable by any party hereto without the prior written
consent of each of the other parties. Subject thereto, this Agreement shall
enure to the benefit of and be binding upon the parties hereto and their
respective successors (including any successor by reason of amalgamation of
any party hereto) and permitted assigns. Notwithstanding the above, the
parties hereto agree that the Master Marketer may assign and delegate its
rights and duties of performance hereunder to a corporation affiliated with
the Master Marketer formed for the purpose of completing the plan of sale
developed by the Master Marketer as herein recited.
9.8 ENTIRE AGREEMENT - With respect to the subject matter of this Agreement,
this Agreement (a) sets forth the entire agreement between the parties hereto
and any persons who have in the past or who are now representing either of the
parties hereto, (b) supersedes all prior understandings and communications
between the parties hereto or any of them, oral or written, and (c)
constitutes the entire agreement between the parties hereto. Each party hereto
acknowledges and represents that this Agreement is entered into after full
investigation and that no party is relying upon any statement or
representation made by any other which is not embodied in this Agreement Each
party hereto acknowledges that he or it shall have no right to rely upon any
amendment. promise, modification, statement or representation made or
occurring subsequent to the execution of this Agreement unless the same is in
writing and executed by each of the parties hereto.
9.9 FURTHER ASSURANCES - The parties hereto shall with reasonable diligence do
all such things and provide all such reasonable assurances as may be required
to consummate the transactions contemplated hereby, and each party hereto
shall provide such all documents or instruments required
- 12 -
<PAGE> 13
by the other party as may be reasonably necessary or desirable to effect the
purpose of this Agreement and carry out its provisions whether before, at or
after the Closing Time.
9.10 COUNTERPARTS - This Agreement may be executed in any number of
counterparts and all such counterparts shall for all purposes constitute one
agreement, binding on the parties hereto, provided each party hereto has
executed at least one counterpart, and each shall be deemed to be an original,
notwithstanding that all parties are not signatory to the same counterpart.
9.11 WAIVER - The failure of any party to this Agreement to enforce at any
time any of the provisions of this Agreement or any of its rights in respect
thereto or to insist upon strict adherence to any term of this Agreement will
not be considered to be a waiver of such provision, right or term or in any
way to affect the validity of this Agreement or deprive the applicable party
of the right thereafter to insist upon strict adherence to that term or any
other term of this Agreement. The exercise by any party to this Agreement of
any of its rights provided by this Agreement will not preclude or prejudice
such party from exercising any other right it may have by reason of this
Agreement or otherwise, irrespective of any previous action or proceeding
taken by it hereunder. Any waiver by any party hereto of the performance of
any of the provisions of this Agreement will be effective only if in writing
and signed by a duly authorized representative of such party.
IN WITNESS WHEREOF the parties hereto have hereunto duly executed this
Agreement as of the day and year first above written.
IN-FLO LIQUID DISPENSING
CORPORATION
Per: /s/ F. Hurd
-----------------------------
Title
Per: President
-----------------------------
Title
DIVERSE PRODUCTS INCORPORATED
Per: /s/ James F. Tully
-----------------------------
Title
Per: President
-----------------------------
Title
- 13 -
<PAGE> 14
SCHEDULE A
BOTTLE SPECIFICATIONS
---------------------
Bottle - Including In-Flo proprietary neck insert as follows:
Patent Pending Canada #608,021
U.S.A. #07/829,047
E.P.O. Europe #90911521.4
Australia #61421/90
These applications relate to the Bottle neck design under registration as
containment system.
Design Registration Canada #65555
U.S.A. #D320932
These registrations relate to the shape of the body of the Bottle, without neck
details, and is a joint registration owned by In-Flo and A.B.C. Group Product
Development Ltd.
Specifications
- --------------
- - Bottle colour - clear or opaque blue
- - Bottle - complete with cap, label and shipping carton
- - 65 gram weight or 55 gram weight - Width - 170mm, Height - 290mm,
Capacity - 4 Litre or 1 (U.S.) Gallon
- - Resin - options - Dowlex L.D.P.E foodgrade material or Quantum
L.G.P.E. NA 345 foodgrade material
- - Flip-top - 28mm FFCR snap-on cap. foodgrade material.
Colour - White or Clear
- - Label - Primax (white polyolefin) #S246
Width - 3.3750 in., Length - 5.000 in.
Shape - Round corner rectangle
Front - 4 colour varnish U.V.
- - Carton - Overall diameter - 40 13/16 x 7 1/8 x 15 1/2 in.
48 Bottles/carton
Note: Cap neck may be changed at In-Flo's discretion to allow screw-on
application.
- 14 -
<PAGE> 15
SCHEDULE B
----------
MINIMUM PURCHASE REQUIREMENTS
- -----------------------------
The Master Marketer will be required, on or before February 1, 1996 to issue a
purchase order for a minimum of 5,000,000 bottles with targeted delivery dates.
The Master Marketer must generate orders for the following minimum Bottle
quantities in each Contract Year to maintain exclusively:
Minimum
-------
Contract Year 1 5 Million
2 20 Million
3 100 Million
4 200 Million
5 400 Million
Subsequent years 400 Million
- 15 -
<PAGE> 16
SCHEDULE C
----------
BOTTLE PRICING
- --------------
The base price for Bottles as at the date of the Agreement, subject Agreement,
and assuming they are ordered in lots not smaller than 5,000,000 Bottles per
purchase order shall be CDN$0.2746 per Bottle, being the sum of (i) a
manufacturing component of CDN$0.2246, which is based on Dowlex resin made by
DOW(Canada) (the "Manufacturing Component") and (ii) a margin component to the
Vendor of CDN$0.05 per Bottle (the "Margin Component").
Bottle orders in excess of the minimum for each year will be available for
purchase at a price equal to the Manufacturing Component as quoted above, as
adjusted from time to time in accordance with the provisions of the Agreement
plus a Margin Component per Bottle that is variable based upon Bottle volumes as
follows:
Contract Year Volume in Excess of Minimum Margin Component, Per Bottle
1 From 5 million - 20 million @ $0.0250
2 From 20 million - 100 million @ $0.0225
3 From 100 million - 200 million @ $0.0200
4 From 200 million - 400 million @ $0.0175
5 From 400 million and beyond @ $0.0150
Subsequent From Beyond 400 million @ 0.0150
Years
- 16 -
<PAGE> 1
Exhibit 10(i)(a)(2)
ASSIGNMENT OF SALES AGREEMENT
This Assignment made this 9th day of May, 1995 by and between Diverse
Products Incorporated, an Ohio corporation (hereafter referred to as
"Assignor") and Health Shields Corporation, a Nevada corporation (hereafter
referred to as "Assignee").
WHEREAS, the Assignor as Master Marketer and In-Flo Liquid Dispensing
Corporation, a corporation organized and existing under the laws of Canada,
referred to as "Vendor", have entered into and executed a certain Sales
Agreement dated May 5th, 1995 (the "Contract"), a copy of which is set forth
as Exhibit A and attached hereto and made a part hereof and
WHEREAS, Assignor now desires to grant, transfer, assign and set over
to Assignee all of Assignor's right, title and interest in and to the
Contract.
Now , Therefore, in consideration of $10.00 paid by the Assignee to
Assignor and other good and valuable consideration the receipt, amount, and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Assignor hereby assigns to Assignee all of the Assignor's rights,
title and interest in and to the Contract.
2. Assignee hereby accepts the assignment and agrees to assume and be
liable for any any all duties, obligations and responsibilities of Assignor
under the terms of the Contract.
3. Assignee hereby agrees to indemnify the Assignor against all
liabilities for any and all of the duties, obligations and responsibilities of
Assignor under the terms of the Contract.
4. This Assignment is binding on and inures to the benefit of the
parties hereto, their heirs, legatees, devisees, administrators, executors,
successors and assigns.
5. This Assignment shall be governed by the laws of the State of
Ohio.
IN WITNESS WHEREOF,the parties hereunder set their hands on the day and year
first written above.
DIVERSE PRODUCTS INCORPORATED
By: /s/ James F. Tully
------------------------------
Title: President & CEO
<PAGE> 2
HEALTH SHIELDS CORPORATION
By: /s/ T. J. Tully
------------------------------
Title: President & CEO
Acknowledged and Accepted:
In-Flo LIQUID DISPENSING CORPORATION
By: /s/ F. Hurd
----------------------------------
Title: President
<PAGE> 1
Exhibit 10(i)(a)(3)
ASSIGNMENT OF SALES AGREEMENT
THIS AGREEMENT made this 22nd day of January, 1996 by and between
Inflo-Liquid Dispensing Corporation, a corporation formed under the laws of the
Dominion of Canada ("Assignor") and Inflo North America Limited, formed under
the laws of the Province of Ontario ("Assignee").
WHEREAS the Assignor as Vendor and Diverse Products Incorporated, a corporation
formed under the laws of the State of Ohio ("Diverse") have entered into and
executed a certain Sales Agreement dated May 5, 1995 (the "Contract"), a copy of
which is set forth as Exhibit A and attached hereto and forming a part hereof;
AND WHEREAS by assignment dated May 9, 1995 Diverse assigned and set over to
Health Shields Corporation, a corporation formed under the laws of the State of
Nevada (the "Master Marketer") all of its right , title and interest in and to
the Contract;
AND WHEREAS the Assignor has by licence agreement dated January 22, 1996
licenced certain of its intellectual property rights to the Assignee, which
rights will permit the Assignee to fulfil the Assignor's obligations to the
Master Marketer under the Contract;
AND WHEREAS the Assignor now desires to grant, transfer, assign and set over to
Assignee all of the Assignor's right, title and interest in and to the Contract.
NOW THEREFORE, in consideration of $2.00 now paid by the Assignee to the
Assignor and other good and valuable consideration, the receipt, amount and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Assignor hereby assigns to Assignee all of the Assignor's rights, title and
interest in and to the Contract
2. Assignee hereby accepts the assignment and agrees to assume and be liable
for any and all of the duties, obligations and responsibilities of the
Assignor under the terms of the Contract.
3. This assignment is binding on and inures to the benefit of the parties
hereto, their heirs, legatees, devisees, administrators, executors,
successors and assigns.
4. This Assignment shall be governed by the laws of the Province of Ontario.
IN WITNESS WHEREOF the parties hereto have hereunto duly
executed this Assignment as of the day and year first above written.
INFLO NORTH AMERICA LIMITED
Per: /s/ Fred Hurd
-----------------------------
<PAGE> 2
IN-FLO LIQUID DISPENSING
CORPORATION
Per: /s/ Fred Hurd
------------------------
Acknowledged and accepted as evidenced by
the execution of Health Shields Corporation: HEALTH SHIELDS CORPORATION
Per: /s/ T. J. Tully
-------------------------
Title CEO
<PAGE> 1
Exhibit 10(i)(a)(4)
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 May,
1995, as Assignor and Assignee respectively, acknowledged and accepted by
In-Flo LDC, a copy of which is attached as Exhibit A, and;
WHEREAS, the Agreement provided for but did not recite all consideration paid or
to be by Assignee to Assignor, and;
WHEREAS, HSC has changed its name to United Shields Corporation ("USC");
WHEREAS, on the 22nd day of January, 1996 on an instrument called the Assignment
of Sales Agreement wherein In-Flo LDC assigned its interest in the Sales
Agreement to In-Flo North America Limited, formed under the laws of the
Providence of Ontario, which assignment has been acknowledged and accepted by
HSC.
WHEREAS, Diverse as assignor and HSC/USC as assignee, wish to clarify the terms
and provisions of the Assignment as amended and modified,
NOW, THEREFORE, the undersigned modify the Agreement and Assignment to add the
following:
6. Assignee will pay to Assignor, for the assignment of the rights,
title and interest in and to the Contract, Two Hundred Fifty Thousand
($250,000) dollars, to be paid on or before December 31, 2001. 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.
IN WITNESS WHEREOF, the parties hereunder set their hands on this day
8th of August, 1996.
Diverse Products Incorporated Unites Shields Corporation
fka Health Shields Corporation
By: /s/ T. J. Tully By: /s/ T. J. Tully
-------------------------- ---------------------------
Title: Co Chairman Title: CEO
----------------------- ------------------------
<PAGE> 1
Exhibit 10(i)(a)(5)
EXECUTION COPY
AMENDING AGREEMENT
THIS AGREEMENT made the 1st day of February, 1996
B E T W E E N:
INFLO NORTH AMERICA LIMITED, a corporation organized
and existing under the laws of the Province of Ontario,
(hereinafter referred to as the "Vendor")
OF THE FIRST PART;
HEALTH SHIELDS CORPORATION, a corporation organized
and existing under the laws of the State of Nevada,
(hereinafter referred to as the "Master Marketer")
OF THE SECOND PART.
WHEREAS:
(1) The Vendor's parent company, In-Flo Liquid Dispensing Corporation ("Inflo")
entered into a sales agreement with Diverse Products Incorporated ("Diverse")
dated May 5, 1995 (the "Sales Agreement") pursuant to which Inflo agreed to sell
to Diverse, for re-sale by Diverse, soft collapsible plastic bottles having the
characteristics and upon the terms identified in the Sales Agreement;
(2) With Inflo's consent, Diverse assigned its rights under the Sales Agreement
to the Master Marketer by assignment dated May 9, 1995;
(3) With the Master Marketer's consent, Inflo assigned its rights under the
Sales Agreement to the Vendor by assignment dated January 22, 1996; and
(4) The Vendor and the Master Marketer wish to amend the terms of the Sales
Agreement upon the terms set out in this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that for good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged by each of the parties hereto) the parties make the agreements and
acknowledgments hereinafter set forth:
<PAGE> 2
- 2 -
ARTICLE 1
INTERPRETATION
--------------
1.1 DEFINITIONS - Whenever used in this Agreement, unless there is something in
the subject matter or context inconsistent therewith, the following words and
terms shall have the respective meanings ascribed to them in the Sales
Agreement.
1.2 HEADINGS - The division of this Agreement into Articles and Sections and the
insertion of headings are for the convenience of reference only and shall not
affect the construction or interpretation of this Agreement.
1.3 NUMBER - In this Agreement and unless the context otherwise requires, words
importing the singular number only shall include the plural and vice versa,
words importing the neuter gender shall include the masculine and feminine
genders and vice versa and words importing persons shall include individuals,
partnerships, associations, trusts, unincorporated organizations and
corporations and vice versa.
ARTICLE 2
AMENDMENTS
----------
2.1 CORRECTION - The reference to paragraph 8.2(ii) in the second line of
paragraph 8.5 of the Sales Agreement was a typographical error and this
reference is hereby deleted and replaced with a reference to paragraph 8.2(i) of
the Sales Agreement.
2.2 PURCHASE AND SALE OF BOTTLES - MINIMUM COMMITMENTS - Subject to the terms
and conditions hereof, the Vendor and the Master Marketer agree to amend the
minimum purchase commitments set out in Schedule B of the Sales Agreement for
Contract Year 1, Contract Year 2 and Contract Year 3 as follows: Contract Year 1
Minimum - 2.5 million Bottles, Contract Year 2 Minimum - 10 million Bottles, and
Contract Year 3 - 50 million Bottles, and that the reference to 125 million
Bottles in paragraph 3.2 of the Sales Agreement is hereby replaced with a
reference to 62.5 million Bottles. In all other respects, paragraph 3.2 and
Schedule B to the Sales Agreement continue without further amendment.
2.3 MINIMUM ORDER QUANTITIES - The reference to 5 million Bottles in paragraph
3.3 of the Sales Agreement is hereby replaced with a reference to 2.5 million
Bottles, and in all other respects, paragraph 3.3 of the Sales Agreement
continues without further amendment.
2.4 PURCHASE PRICE - Schedule C of the Sales Agreement is deleted in its
entirety and replaced with the schedule which is attached hereto and labelled
"Schedule "C" AS AMENDED".
2.5 ADDITIONAL FEE - In consideration for the reduction in the minimum purchase
commitments of the Master Marketer provided by this agreement, the Master
Marketer shall pay an additional fee of US$100,000 to the Vendor, which fee
shall be non-refundable and shall not otherwise be credited to amounts due to
the Vendor by the Master Marketer in respect of
<PAGE> 3
- 3 -
purchases of Bottles. This fee shall be due and payable in full on the last day
of the first Contract Year, unless the Master Marketer has terminated this
Amending Agreement in accordance with paragraph 2.6 below.
2.6 REVERSION TO SALES AGREEMENT PROVISIONS. - In the event that the Master
Marketer placed purchase orders under the Sales Agreement for an aggregate of
not fewer than 5 million Bottles on or prior to the expiry of the first Contract
Year, and provided the Master Marketer has complied with the provisions of
paragraph 3.7 of the Sales Agreement in respect of such purchase orders, then
the Master Marketer may, at is sole option and without the consent of the
Vendor, notify the Vendor that it wishes to revert back to the original terms of
the Sales Agreement, and upon the delivery of such notice to the Vendor, the
provisions of paragraph 2.2 to 2.5 inclusive of this Amending Agreement shall be
deemed to have been terminated in their entirety. In such event, the Master
Marketer shall be given a credit of $0.02 per Bottle on the first 2.5 million
Bottles purchased in the first Contract Year, which credit shall be applied
against the purchase price payable in respect of the second 2.5 million Bottles
purchased in the first Contract Year. For greater certainty, the parties also
confirm that the additional fee payable in accordance with paragraph 2.5 above
shall not apply if the Master Marketer shall have placed purchase orders under
the Sales Agreement for an aggregate of not fewer than 5 million Bottles on or
prior to the expiry of the first Contract Year.
2.7 NO FURTHER AMENDMENTS. - Except as expressly amended by this Amending
Agreement, the Sales Agreement continues in full force and effect.
IN WITNESS WHEREOF the parties hereto have hereunto duly
executed this Agreement as of the day and year first above written.
INFLO NORTH AMERICA LIMITED
Per: /s/ F. HURD
--------------------------
Title President
HEALTH SHIELDS CORPORATION
Per: /s/ T. J. TULLY
--------------------------
Title CEO
<PAGE> 4
- 4 -
SCHEDULE "C" AS AMENDED
-----------------------
BOTTLE PRICING
- --------------
The base price for Bottles as at the date of the Agreement, subject to
adjustment as provided by the Agreement, and assuming they are ordered in lots
not smaller than 2,500,000 Bottles per purchase order shall be CDN$0.2746 per
Bottle, being the sum of (i) a manufacturing component of CDN$0.2246, which is
based on Dowlex resin made by DOW(Canada) (the "Manufacturing Component") and
(ii) a margin component to the Vendor of CDN$0.07 per Bottle (the "Margin
Component").
Bottle orders in excess of the minimum for each year will be available for
purchase at a price equal to the Manufacturing Component as quoted above, as
adjusted from time to time in accordance with the provisions of the Agreement
plus a Margin Component per Bottle that is variable based upon Bottle volumes as
follows:
Contract Year Volume in Excess of Minimum Margin Component, Per Bottle
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 From 2.5 million - 10 million @ $0.070
2 From 10 million - 50 million @ $0.050
3 From 50 million - 200 million @ $0.040
4 From 200 million - 400 million @ $0.0175
5 From 400 million and beyond @ $0.0150
Subsequent From Beyond 400 million @ $0.0150
Years
</TABLE>
<PAGE> 1
Exhibit 10(i)(a)(6)
SECOND 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 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, with said amount
to be paid on or before December 31, 2001; 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;
NOW, THEREFORE, the undersigned modify the Agreement, Assignment, and Addendum
to provide that Section 6 as provided in the 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
Five Cents ($.05) (U.S. Dollars) for each bottle sold by or through
HSC/USC. Said amount (Five Cents [$.05] per bottle) shall be paid on
the first five million (5,000,000) bottles sold by HSC/USC, a maximum
of Two Hundred Fifty Thousand ($250,000.00) dollars. 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.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereunder set their hands on this day
10th of April, 1997.
Diverse Products Incorporated Unites Shields Corporation
fka Health Shields Corporation
By: /s/ T. J. Tully By: /s/ T. J. Tully
----------------------- ------------------------
Title: V.P. Title: CEO
-------------------- ---------------------
<PAGE> 1
Exhibit 10(a)(7)
PROMISSORY NOTE
$85,000.00 Date: December 12, 1995
For value received, the undersigned, Health Shields Corporation ("the Promisor")
promises to pay to the order of Ramsay-Hughes, Inc., (the "Payee"); at 602 Main
Street, Cincinnati, Ohio 45202, (or at such other place as the Payee may
designate in writing) the sum of $85,000.00 with interest from December 15,
1995, on the unpaid principal at the rate of 8.00% annually.
The unpaid principal shall be payable in full on March 15, 1996 (the "Due
Date").
All payments on this Note shall be applied first in payment of accrued interest
and any remainder in payment of principal.
The Promisor reserves the right to prepay this Note by making payment in full
of the then remaining unpaid principal and accrued interest.
If any payment obligation under this Note is not paid when due, the Promisor
promises to pay all costs of collection, including reasonable attorney fees,
whether or not a lawsuit is commenced as part of the collection process.
If any of the following events of default occur, this Note and any other
obligations of the Promisor to the Payee, shall become due immediately, without
demand or notice:
1) the failure of the Promisor to pay the principal and any accrued
interest in full on or before the Due Date;
2) the filing of bankruptcy proceedings involving the Promisor as a
Debtor;
3) the application for appointment of a receiver for the Promisor;
4) the making of a general assignment for the benefit of the Promisor's
creditors;
5) the insolvency of the Promisor; or
6) the misrepresentation by the Promisor to the Payee for the purpose of
obtaining or extending credit.
If any one or more of the provisions of this Note are determined to be
unenforceable, in whole or in part, for any reason, the remaining provisions
shall remain fully operative.
All payments of principal and interest on this Note shall be paid in the legal
currency of the United States. Promisor waives presentment for payment,
protest, and notice of protest and nonpayment of this Note.
<PAGE> 2
No renewal or extension of this Note, delay in enforcing any right of the Payee
under this Note, or assignment by Payee of this Note shall affect the liability
of the Promisor. All rights of the Payee under this Note are cumulative and may
be exercised concurrently or consecutively at the Payee's option.
This Note shall be construed in accordance with the laws of the State of Ohio.
Signed this 13th day of December, 1995, at Cincinnati, Ohio.
Health Shields Corporation
By: /s/ T. J. TULLY
----------------------------
T.J. Tully, Chairman, CEO
<PAGE> 1
Exhibit 10(a)(8)
December 1, 1996
Health Shields Corporation
T.J. Tully, Chairman, CEO
602 Main Street
Cincinnati, Ohio 45202
Dear Mr. Tully,
Ramsay-Hughes, Inc. hereby agrees to extend the Due Date, of the $85,000
Promissory Note dated December 12, 1995, from March 15, 1996 to a revised Due
Date of March 31, 1997.
Sincerely,
/s/ RICK HUGHES
Rick Hughes, CEO
<PAGE> 1
Exhibit 10(a)(9)
PROMISSORY NOTE
$66,568.70 Date: December 1, 1996
For value received, the undersigned United Shields Corporation ("the Promisor")
promises to pay to the order of Ramsay-Hughes, Inc., (the "Payee"), at 602 Main
Street, Cincinnati, Ohio 45202, (or at such other place as the Payee may
designate in writing) the sum of $66,568.70.
The unpaid principal shall be payable in full on or before March 31, 1997 (the
"Due Date").
If any payment obligation under this Note is not paid when due, the Promisor
promises to pay all costs of collection, including reasonable attorney fees,
whether or not a lawsuit is commenced a as part of the collection process.
If any of the following events of default occur, this Note and any other
obligations of the Promisor to the Payee, shall become due immediately, without
demand or notice:
1) the failure of the Promisor to pay the principal in full on or before
the Due Date;
2) the filing of bankruptcy proceedings involving the Promisor as a
Debtor;
3) the application for appointment of a receiver for the Promisor;
4) the making of a general assignment for the benefit of the Promisor's
creditors;
5) the insolvency of the Promisor; or
6) the misrepresentation by the Promisor to the Payee for the purpose of
obtaining or extending credit.
If any one or more of the provisions of this Note are determined to be
unenforceable, in whole or in part, for any reason, the remaining provisions
shall remain full operative.
All payments of principal of this Note shall be paid in the legal currency of
the United States. Promisor waives presentment for payment, protest, and notice
of protest and nonpayment of this Note.
No renewal or extension of this Note, delay in enforcing any right of the Payee
under this Note, or assignment by Payee of this Note shall affect the liability
of the Promisor. All rights of the Payee under this Note are cumulative and may
be exercised concurrently or consecutively at the Payee's option.
This Note shall be construed in accordance with the laws of the State of Ohio.
<PAGE> 2
Signed this 5th day of December, 1996, at Cincinnati, Ohio
United Shields Corporation
By: /s/ T. J. TULLY
--------------------------
T. J. Tully
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 43,685
<BONDS> 0
<COMMON> 67,550
0
0
<OTHER-SE> (111,235)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 54,270
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (54,270)
<INCOME-TAX> 0
<INCOME-CONTINUING> (54,270)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (54,270)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
