U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
{X} Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required)
For the fiscal year ended December 31, 1997
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{ } Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
Pollution Research and Control Corp.
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(Name of Small Business Issuer as Specified in its Charter)
California 95-2746949
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
506 Paula Avenue, Glendale, California 91201
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(Address of Principal Executive Offices) (Zip Code)
Small Business Issuer's telephone number, including area code (818) 247-7601
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
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(Title of Class)
Check whether the Small Business Issuer (1) has filed all reports required to be
filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Small Business Issuer
was required to file such reports), and (2) has been subject to such filing
requirements of the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-KSB or any amendment to
this Form 10-KSB {X}.
Small Business Issuer's revenues for its most recent fiscal year: $6,792,767
The aggregate market value of the voting stock held by non-affiliates of the
Small Business Issuer, computed by reference to the average bid and asked prices
of such stock on March 24, 1998 was $1,460,000.
Total number of pages - 92 Exhibit Index is located at Page E-1
DOCUMENTS INCORPORATED BY REFERENCE:
Certain exhibits to this Annual Report as set forth in the Exhibit
Index located at page E-1.
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POLLUTION RESEARCH AND CONTROL CORP.
Form 10-KSB
For the Fiscal Year Ended December 31, 1997
TABLE OF CONTENTS
Part I Page
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Item 1. Description of Business 4
General 4
History of the Company 4
The Air Pollution Industry 5
Instrument Market 6
Control Market 7
Governmental Approval 7
Governmental Regulation and Enforcement 8
Company Products 9
Marketing and Sales; Backlog 10
Foreign Sales 11
Manufacturing and Purchasing 11
Research and Development 12
Employees 12
Competition 12
Intellectual Property 13
Item 2. Description of Properties 13
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of
Security Holders 14
Part II.
Item 5. Market for Common Equity and Related
Stockholder Matters 14
Item 6. Management's Discussion and Analysis or
Plan of Operation 14
Liquidity and Capital Resources 16
Seasonality 17
Item 7. Financial Statements 17
Item 8. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosures 17
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TABLE OF CONTENTS
(continued)
Part III Page
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Item 9. Directors, Executive Officers, Promoters
and Control Persons; Compliance with
Section 16(a) of the Exchange Act 17
Directors, Executive Officers and Key Employees 17
Family Relationships 18
Business Experience 18
Section 16(a) Beneficial Ownership
Reporting Compliance 20
Item 10. Executive Compensation 21
Executive Compensation 21
Compensation of Directors 21
Employment Agreements 21
Item 11. Security Ownership of Certain Beneficial
Owners and Management 22
Item 12. Certain Relationships and Related Transactions 24
Item 13. Exhibits and Reports on Form 8-KA
(a) Exhibits 24
(b) Reports on Form 8-KA 24
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Item 1. Description of Business
General
The Company's core business for over twenty years has been primarily the
design, manufacture and marketing of automated continuous monitoring instruments
used to detect and measure various types of air pollution, such as "acid rain,"
"ozone depletion" and "smog episodes," through its wholly-owned subsidiary,
Dasibi Environmental Corp. The Company's products are generally used to measure
air pollution levels in geographic areas which range in size from small
industrial sites to entire states or countries. The Company also supplies
computer-controlled calibration systems that verify the accuracy of its
instruments, data loggers to collect and manage pollutant information and final
reporting software for remote centralized applications, which is classified as
"core business related."
Because severe competitive price pressures in its core business have
developed (see "History of the Company" below), the Company has adapted uses of
its technology to medical instrumentation which measures air pollutants for
medical diagnostics and to control applications to eliminate or reduce the air
pollutants measured in its "core business." (See "Instrumentation Market" and
"Control Market" below).
History of the Company
The Company was organized as a California corporation on December 24, 1971,
under the name of "A.E. Gosselin Engineering, Inc." as a wholly-owned subsidiary
of "Pollution Research and Control Corp." ("PRCC"), a California corporation
co-founded in 1966 by Albert E. Gosselin, Jr., the Company's President and Chief
Executive Officer, and his wife, Barbara Gosselin, an executive officer and
director of the Company. Mr. Gosselin founded the Company to design, manufacture
and market air pollution monitoring equipment for ambient air (i.e., the
surrounding air) as distinguished from the customer stack source monitoring
systems then being designed, manufactured and sold by PRCC. The name of the
Company was changed to "Dasibi Environmental Corp." on March 22, 1973. (See Item
9. "Directors, Executive Officers, Promoters and Control Person; Compliance with
Section 16(a) of the Exchange Act - Directors, Executive Officers and Key
Employees.")
The Company was operated as a wholly-owned subsidiary of PRCC until its
initial public offering of securities in May 1985. In 1984, PRCC discontinued
its research and development activities and assigned them to the Company. From
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1984 through May 1985, PRCC acted primarily as a holding company for the Company
and Applied Conservation Technology, Inc. ("ACT"), then a wholly-owned
subsidiary of PRCC engaged in the business of providing environmental impact
reports to electric utilities. ACT was purchased by its management from PRCC in
November 1986. Gary Dudley, a director and former Vice President of the Company
and a former executive officer and director of PRCC, has been the President and
a principal shareholder of ACT, a diversified environmental consulting firm now
located in Westminster, California, since November 1986. (See Item 9.
"Directors, Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act - Directors, Executive Officers and Key
Employees.")
The Company changed its name to "Pollution Research and Control Corp.," the
name of its former parent, PRCC, in November 1989. In January 1990, the Company
acquired all of the issued and outstanding shares of Common Stock, $1.00 par
value per share, of an inactive California corporation, organized by Mr. And
Mrs. Gosselin as co-founders under the name of "Baral Engineering, Inc." in July
1976, which changed its name to "Dasibi Environmental Corp." ("Dasibi") in
January 1990. All of the Company's operations were transferred to Dasibi
subsequent to the acquisition. Also in 1990, the Company changed its fiscal year
from June 30 to December 31.
In February, 1994, the Company acquired the technology and inventory of the
Byron Hydrocarbon Analyzer line from General Monitors, Inc. ("GMI"), for a
purchase price of $225,000. Of the purchase price, $200,000 was paid by the
Company in cash and $25,000 was rescheduled by mutual agreement and was paid
July 1, 1996.
In March 1994, the Company entered into an exclusive worldwide requirements
agreement over a three-year period with London-based Logan Research, Ltd.
("LRL") to provide LRL with oxides of nitrogen instrument parts on an "as
required" basis for use in medical technology applications. In October 1995, the
agreement was modified to be exclusive with a domestic corporation, Logan
Medical Devices ("LMD"), which acquired Logan Research, Ltd. In 1995, the
Company advanced $164,000 to LRL. The $164,000 was charged against operations in
1995. In June 1996 the Company acquired 100% of the common stock of LMD for
600,500 options to LMD shareholders, all options above market bid price and
vesting in January, 1998, such bid price as existed in the date of agreement. In
addition, the Company contributed $250,000 to LMD for working capital. LMD is
considered as a "start-up" which requires equity funding for marketing and FDA
approval. The product however, is considered "commercial." No equity funding has
been obtained to this date and there is no assurance that any equity funding can
be obtained.
Also, in June, 1996, the Company acquired 100% of the stock of Nutek, Inc.,
a Pensacola, Florida, electrical control panel and printed circuit board
manufacturer. No company stock was issued, but 340,000 options at above market
bid price on the date of agreement were issued to key employees in this
transaction, lawyers and "finders." Such options vested in January 1998. The
Company directly paid $250,000 cash into an estimated total purchase price of
$1,900,000, the balance obtained from asset based financing solely on Nutek's
assets. The Company acquired Nutek primarily for the customer list as it would
fit into the Company's air pollution control technology diversification plans.
To this date no air pollution control technology use has been made of Nutek's
customer list.
The Air Pollution Industry
Air pollution consist of certain gases or particles, generally the products
of combustion or other industrial processes, which are or may be hazardous to
human health. Pollutants include carbon monoxide, ozone, oxides of sulfur and
nitrogen, hydrogen sulfide and particles. Small amounts of these pollutants,
such as a few parts per million or part per billion, may be harmful. The
instruments produced and sold by the Company, the "core business" detect and
measure these pollutants and are also utilized in calibrating other pollution
measurement equipment. Any systems or processes such as the Company's "flue gas
purification system" patent employ chemical and mechanical means to remove these
same pollutants from combustion exhaust gases. (See "Research and Development"
under this Item 1. "Description of Business").
Industrial entities require equipment to detect the presence and measure
the level of pollutants in order to comply with governmental regulations and
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government regulatory agencies require equipment to enforce governmental
standards. Currently, international priority has been given to control (and
therefore to monitor) such gaseous pollutants as sulfur dioxide, oxides of
nitrogen, carbon monoxide, ozone and particulates (suspended dust).
Although manual sampling of both gases and particulates is still performed
routinely, improvements in the reliability and accuracy of automated, continuous
monitoring equipment, such as that manufactured and sold by the Company, have
made manual sampling less desirable and automated monitoring increasingly
common.
In basic continuous monitoring instruments, ambient air is taken into a
manifold, the function of which is to direct a fast-moving stream of ambient air
to the monitor. The instrument may use a filter to remove particulates or
scrubbers to remove gasses that might interfere with accurate measurement of the
pollutant. The pollutant is then introduced into a measurement cell environment
where it undergoes a chemical or physical reaction, the output of which can be
converted to an electrical signal which, in turn, can be read locally or
transmitted to some remote monitoring plant or computer. Measurement cells can
be based in many different methods for the detection of the pollutants of
interest. Thus, an instrument designed may have many different methods available
by which a pollutant may be identified and measured.
Some methods used by the Company are flame photometry (wherein
concentrations of gaseous elements are measured by burning them and optically
observing the color and intensity of the flame generated thereby), infrared
absorption (wherein concentrations of infrared absorbing gases are measured by
detecting changes in intensity of a radiation beam closed cell),
chemiluminescence (wherein a chemical generates a light or a wave length
measurable by a photo multiplier tube), ultraviolet spectroscopy (wherein the
pollutants' decrease in ultraviolet light intensity is converted by a
photoelectric detector to an electric signal) and beta ray attenuation (wherein
a radioactive source's beta ray emanation is reduced in direct proportion to the
mass of a particle).
Instrument Market
The air pollution monitoring equipment market includes two markets: (i)
source instrumentation for monitoring the source's pollutant emissions as they
are discharged into the air and (ii) ambient air for instrumentation for
monitoring ambient air pollution. The two markets are quite different in that
source instrumentation is generally not subject to rigid governmental-imposed
guidelines because of the difficult analyses involved, while ambient air
instruments are subject to rigid governmental guidelines because the pollutants
are easier to define and measure.
Generally, the Company sells its instruments for use in systems for the
measurement of ambient air pollution. In a system, air pollution monitoring
instruments are united with additional equipment to provide a comprehensive
measurement unit. In an ambient air instrumentation system, the monitoring
instrument is combined with a manifold intake, a calibrator and data
transmitters. The system samples the ambient air, measure the pollutants and
transmits the data. The Company designs and manufactures all instruments used in
a system, including the data tabulation and transmission devices. At the present
time, the Company believes that it is the only manufacturer that is able to
furnish its customers with a complete "in-house" ambient air monitoring system.
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Until 1992, the Company's products were not applicable to the source
instrumentation market. However, because of revised governmental regulations
requiring greater accuracy and dilution conditioning as a standard (reducing
pollution concentrations to the parts per billion level) for source
instrumentation involving a continuous emission monitoring system ("CEMS"), the
Company's products became applicable. The Company is not currently able to offer
customers a CEMS because it does not manufacture the additional equipment needed
to complete the system. The Company commenced a research and development program
in July 1992 and halted in 1994 for the purpose of developing an innovative CEMS
which currently remains in the prototype stage of development. The Company does
not require EPA-approval of any of its instruments in order to complete a CEMS.
(See "Research and Development" under this Item 1. "Description of Business.")
In 1995 the Company completed research and development in a joint venture
with Logan Research Ltd. for development of a NOX analyzer for non-invasive
asthma diagnostics. Although the unit is recognized as "Commercial", limited
funding prohibits the Food and Drug Administration (FDA) testing for approval.
Currently small quantities of this analyzer are being sold in foreign countries.
Control Market
The air pollution control market makes only minimal use of measurement
instrumentation. This market is concerned with "purification" of exhaust gases
emanating from combustion-related or even chemical-only processes. The
"purification" process consists of using various types of equipment which may or
may not involve catalysts and/or reagents to cause reactions and/or mechanical
removal of a high percentage of selected air pollutants. The highest percentage
obtainable will relate, at any given time, to the state-of-the-art of the
technology involved and the economics of implementing the technology. The market
is old, in essence dating to the beginnings of the industry when soot collectors
were first installed on combustion chambers. However, the market size is
embryonic since technology has not materially advanced and implementation
remains costly so as not to allow any generally accepted control of source
pollutants. The Company filed a patent application in April 1994 for a "flue gas
purification system," which issued in 1996, however, the commercial viability of
a market for this invention is not assured. (See "Research and Development" and
"Intellectual Property" under this Item 1. "Description of Business.")
The acquisition of Nutek, which primarily designs and fabricates instrument
electrical control panels, was intended at first, as an entry into the
coal-fired industrial applications and second as a manufacturer for significant
components of the Company's patent system. As of this date, no application of
this potential has been made for the air pollution control market.
Governmental Approval
The Environmental Protection Agency (the "EPA") administers the federal
Clean Air Act, as amended by the Clean Air Act Amendments of 1990, and approves
ambient air pollution monitoring equipment meeting certain requirements as
either reference or equivalent methods for measuring pollutants. The EPA
established the reference method as the basic method for measuring a pollutant.
An equivalent method measures the same pollutant utilizing a different technique
which achieves results identical to those of the referenced method.
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As a practical matter, before a monitoring instrument can be sold in the
United States, it must receive EPA-approval as either a "reference" or
"equivalent" method. Such approvals are given only after rigorous and expensive
testing by the applicant and the submission to, and approval by, the EPA of the
results of such testing. The testing and approval process generally requires
between 12 and 18 months. Following approval, the EPA typically acquires and
tests a production model of the device. If the model being tested does not meet
the standards established by the approval process, the approval may be
withdrawn.
Each of the Company's models of ozone monitors and its sulfur dioxide and
oxides of nitrogen monitors have been approved as equivalent methods by the EPA.
Additionally, the Company's carbon monoxide have been approved as equivalent
methods by the EPA. Additionally, the Company's carbon monoxide monitors have
been approved as reference methods. The Company is currently testing a
particulate analyzer (beta ray attenuation) for approval as an equivalent method
by the EPA. The Company has never had, or been threatened with, a recall as the
result of subsequent testing by the EPA of a production model of any of its
instruments.
The Company believes that, as the performance of air monitoring equipment
improves and monitoring technology becomes available in the market, government
regulatory agencies tend to adopt regulations requiring the use of such
technology. The Company has never been required to modify or discontinue any of
its products as a result of improved technology. However, there can be no
assurance that future technological improvements will not mandate changes in, or
cause the obsolescence of, Company products.
Governmental Regulation and Enforcement
Legislation requiring more precise air pollution monitoring and enforcement
is increasing in the sophistication of the technology improves and as concern
for the environment, particularly the depletion of the ozone layer, becomes more
acute. The Clean Air Act and the Clean Air Act Amendments of 1990 (the "1990
Amendments"), which are being rapidly implemented, require increased control of
industrial air pollution and represent an increasing threat of shut-down for
U.S. industrial concerns which fail to obtain necessary permits and engage in
other conduct violative of the legislation. Because increased control requires
increased management and monitoring of air pollutants by government and
industry, the Company expects, but cannot assure, a steadily increasing market
for its products. Company management believes that governmental enforcement
policy also has a significant effect on the demand for the Company's products. A
relaxation during 1982 in the federal enforcement of governmental standards
resulted in a decrease in demand for the Company's products. Since the, the
worldwide trend toward increasingly stringent environmental standards for
industrial air pollution together with stricter governmental enforcement of
environmental regulations, is expected by management to cause continued
expansion of segments of the analytical instruments market and a continued
increase in demand for the Company's products. In essence, the Company furnishes
a product that the customer does not want to buy voluntarily. In previous years,
price difference was not significant to the selection process. Since 1994,
sizeable discounts have become significant to the purchasers.
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Company Products
In 1972, the Company developed, and in 1974 initially marketed, the first
ultraviolet ozone monitor, of which eight models are currently marketed by the
Company, including high concentration, manual, remote and
microprocessor-controlled versions. The Company will continue to seek to develop
new versions of its basic model of ozone monitor, but does not expect any change
in the basic principle upon which the instrument operates. The Company is
generally considered the leader in ozone measurement technology in the world.
The Company developed microprocessor-controlled carbon monoxide, sulfur
dioxide and oxides of nitrogen monitors in 1981, 1986 and 1987, respectively. In
August 1986, the Company completed prototype development of a
microprocessor-controlled oxides of nitrogen monitor based upon a technique
acquired from Combustion Engineering Corporation. Although the unit did not
initially receive EPA-approval, a redesigned unit received the requisite
approval of the EPA in mid-1992.
Calibration equipment, which is utilized to independently verify the
measurements made by other monitoring equipment, was first manufactured and sold
by the Company in 1976 and known as the "Auditor," was followed by a
manually-operated, portable model which performs similar functions. In 1990,
both of these models were superseded by the Company's Model 5008
state-of-the-art, programmable calibration equipment.
The Company completed development, in 1991, of a Model 7001 beta-gauge to
measure sub-micronic particulates, a Model 8001 data-logger to gather and
transmit measured air pollutant information and a Model 9001 semi-CEMS to be
used as a portable stack monitoring system.
In February 1994, the Company acquired the technology and inventory of the
Byron Hydrocarbon Analyzer line. In bidding various jobs, the Company has been
asked to furnish an ambient hydrocarbon analyzer as a portion of the "system."
Previously, the Company did not have the technical capability to manufacture
this particular product and was forced to purchase it from other companies. The
Company's choice, whenever possible, was the Byron Hydrocarbon Analyzer, even
though it was the most expensive. Management believes that the acquisition of
this technical capability has made the Company more competitive in bid
applications requiring a hydrocarbon instrument. In addition, the analyzer has
certain proprietary aspects which are helpful in competitive bid situations
specifically requesting hydrocarbon data.
In June 1996, the Company acquired Logan Medical Devices ("LMD") a
"start-up" "operation". For three years prior, the Company worked with LMD's
principal to modify and improve the Company's nitric oxide instrument to allow
non-invasive asthma diagnostics. While the Company believes the instrument is
"commercial", external funding is required for a medically-oriented sales and
marketing network and additionally for completion of FDA approval. There is no
indication that the Company will be successful in its attempt to manufacture and
market this product on a scale comparable to its "core business," nor that
external funding can be realized to obtain FDA approval.
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The Company offers a two-year warranty on all of its instruments, with the
exception of certain components, such as lamps, which have short lives. With
respect to such components, the Company passes on to the customer the warranty
(usually one year) which it receives from the manufacturer. The Company's
warranty provides for repair or replacement of defective products. During each
of the last five fiscal years, the Company has been required to honor its
warranty with respect to less than 0.3% of total instruments sales during each
such year.
In June, 1996, the Company acquired Nutek, Inc., - an established
instrument, electrical control panel design and fabrication facility. These
products, per se, are not synergistic with the air pollution control technology
nature of the Company except in certain cases where the panels may control large
air pollutant removal devices. Nutek's customers are primarily associated with
coal-fuel combustion and are therefore potential customers for the Company's
current approach to the air pollution control business. However, Nutek has a
substantial potential synergistic value in design and manufacture of the
Company's existing instrument components and the Company's proposed control
systems.
Historically, Nutek has operated at low gross profit margins. As a result
of the Company's acquisition, Nutek has been required to service its asset-based
lender's debt on receivables, equipment and inventory. Periodically during the
past year, Nutek's low margins have required debt service assistance from the
Company. This unexpected burden on the Company has required the Company to
re-evaluate the fabrication business of Nutek. As a result of re-evaluation, the
Company has initiated a sale or liquidation of the fabrication business and/or
assets. As of this date, no sale or liquidation has been realized.
Marketing and Sales; Backlog Instruments
The marketing and sales activities of the Company include advertising by
mail in trade journals (primarily Pollution Equipment News and Air Pollution
Control Association Journal) and attendance and exhibition at worldwide air
pollution conferences. The Company attends the annual conference of the Air
Pollution Control Association as well as worldwide conferences. The Company's
core business instruments have been sold to customers world-wide, including
industrial manufacturers; federal, state, city, local and foreign governmental
agencies; major industrial companies; and educational and research institutions
in over 30 countries. Sales made in the United States are handled directly by
the Company's sales staff. All of the Company's foreign sales are made to
distributors who, in turn, resell to the end users. The Company sells to these
distributors at a discount from the listed price. Management believes that the
loss of a distributor who may account for a large percentage of sales would have
little impact on net revenues as the end users of the Company's products could
be transferred to new distributors.
Historically and currently foreign sales represent 60 percent to 70 percent
of the Dasibi Environmental subsidiary - the core business. Nutek sales are 90
percent domestic.
The Company's core business sales in the export market are evenly
distributed among all of its products. Export sales are billed and paid in
United States dollars only.
The Company's core business instruments have been sold during the past five
years to over 300 customers in over 30 countries, including industrial
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manufacturers; federal, state, city, local and foreign governmental agencies;
and educational and research institutions. However, a significant loss in the
number of government agencies, industrial companies or research agencies which
typically purchase the Company's instruments could have a material adverse
effect on the Company.
Historically, none of the Company's business has been subject to the
re-negotiation of profits, and no government orders have ever been terminated.
The core business backlog at December 31, 1997 was approximately $65,000 which
amount the Company does not consider material, since it is proportional to the
"downsized" fixed expenses of the Company. The Nutek business backlog at
December 31, 1997 was approximately $750,000, an amount the Company does not
consider material.
Foreign Sales
The following table sets forth certain information regarding the Company's
foreign sales for the last two fiscal years:
Year Ended
December 31,
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1997 1996
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(In thousands)
Aggregate sales to unaffiliated foreign customers:
Europe and The United Kingdom $ 1,104 $ 866
Asia and Pacific Rim $ 622 $ 1,200
Latin America & Other $ 434 $ 607
During the fiscal years ended December 31, 1996 & 1997, no one customer
accounted for more than 10% of net sales.
Historically, backlog has not been significant to the Company's operations
because orders usually require delivery in 45 to 90 days. As of December 31,
1997, the Company had approximately $815,000 in orders which required delivery
in 90 days or less, a backlog which the Company does not consider significant.
Manufacturing and Purchasing
The Company manufactures many components and subsystems for use in its
products, including critical optical components and analog and digital
circuitry. Other components, including packaging materials, integrated circuits,
microprocessors and minicomputers, are purchased from unaffiliated third
parties. Most of the raw materials and supplies purchased by the Company are
either available from a number of different suppliers or alternative sources
could be developed without a materially adverse effect on the Company's
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business. However, the availability and quality of certain key instrument
components, such as printed circuit board designs and lamps, are controlled by a
limited number of vendors. A vendor's inability to supply these components to
the Company in a timely fashion, or to the Company's satisfaction, can affect
the Company's ability to deliver its instruments on time.
Research and Development
Historically, the Company has been actively engaged in research and
development in order to produce new products. However, the competitive price
pressures experienced by the Company since early 1994 have sharply limited the
new product development to areas of software as opposed to hardware. Developed
over the past three years, DECS (Dasibi Environmental Central Software) is a
Windows-based, network control and reporting program for multi systems of
pollutant analyzers and ancillaries. Similar programs exist but management
believes none are under single manufacturer design and responsibility.
Because of price pressure demands, the Company has been limiting CEMS and
Flue Gas Purification System development work.
Employees
As of March 24, 1998, the Company had 43 full-time employees, of whom 6
were engaged in administration, 10 in engineering, 25 in manufacturing and 2 in
sales and marketing. None of the Company's employees are represented by a labor
union. The Company has never had a strike or lockout and considers its employee
relations to be good. The Company's core business had a personnel reduction of
65% of its employees and Nutek had a reduction of 80% of its employees during
1997.
Competition - Instruments
The Company is the smallest competitor in the ambient air pollution
instrumentation market. Therefore, it is subject to the effects of
better-financed competitors and their research and development efforts, and
price discounting. The Company competes on the basis of technical advances in
its products and its reputation among customers as a quality provider of
products and services. To a lesser extent, the Company competes on the basis of
price.
Although the Company is not aware of any other company that competes with
it in all of its product lines, all of its competitors have resources
substantially greater than those of the Company. There are also smaller
companies that specialize in a limited number of the types of products
manufactured by the Company. The Company's primary competitors in the domestic
market are Thermo Instrument Systems, Inc. ("Thermo Instrument Systems") and
Monitor Labs, Inc. ("Monitor Labs"). In the foreign market, the Company's
primary competitors are Thermo Instrument Systems, Monitor Labs and
Environnement S.A of France ("Environnement") and Horiba Instruments ("Horiba
Instruments.")
A number of the Company's principal competitors (including Thermo
Instrument Systems, Monitor Labs and Environnement) offer ambient air pollution
monitoring and also CEMS to their customers. As discussed hereinabove under
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"Instrument Market" and "Research and Development", the Company is presently
unable to provide CEMS. The Company eventually intends to enter the market for
CEMS, although it is extremely competitive and the firms in such market have
substantially greater experience and financial resources than the Company. There
can be no assurance that the Company's efforts to enter the CEMS market will be
successful.
Competition - Control Panels
Nearly all of Nutek's competitors are considerably larger and more
"well-financed" than Nutek. Nearly all awards are the result of competitive
bidding which results in low gross profit margins. Primary competitors are
Instrument Control Service ("ICS") and Carter-Crawley Engineering and Controls.
The low margins have had a negative operating effect on Nutek since September,
1997. (See Item 6 "Management Discussion and Analysis of Plan of Operation").
Intellectual Property
Although the Company obtained patents for its ozone monitor and various
techniques in instrument design, it has generally been the Company's policy to
proceed without patent protection since it is management's belief that the
disclosure requirements of the federal patent laws provide competitors with easy
access to the secrets of rapidly changing technology. The instrument patents
obtained by the Company, all of which have expired, are not deemed by management
to be significant to the Company's business operations or potential success. The
Company has no federal or state registered trademarks and no franchises or
concessions. The Company has common law rights to the trademark "Dasibi."
Albert E. Gosselin, Jr., the Company's co-founder, has, for the past
several years, devoted personal research time to developing an innovative, cost
conscious system for purifying exhaust gases. His efforts resulted in the filing
of a patent application for such system on behalf of the Company in April 1994,
subsequently granted in September 1996.
Item 2. Description of Properties
In July 1994, the Company moved its administrative, instrument
manufacturing and employee facilities to 39,070 square feet, increased to 45,000
square feet in 1997, at 506 Paula Avenue, Glendale, California. The Company
leases the space from an unaffiliated third party for a term of ten years
commencing as of July 1, 1994, at a base rent of $24,223 per month plus
operating costs and taxes, with a provision for increases in the base rent
related to increases in the Consumer Price Index to the present rent of $30,000
per month. The Company utilizes most of its existing office and manufacturing
space and believes that such space is more than adequate for its needs for the
foreseeable future.
Nutek has two buildings located in twelve acres in a prime commercial area.
The main building contains offices, sheet metal and electrical areas and has
20,200 square feet. The second building, housing printed circuit board and
painting, has 18,180 square feet. Land and buildings are under one five year
lease to an unaffiliated party at rents increasing from $3,000 per month to
$7,000 per month in year 5.
13
<PAGE>
LMD occupies approximately 4000 square feet in Kent, U.K. which is leased
from Mr. Ron Logan- Sinclair pension fund holdings, an affiliate of LMD, at a
rate of $600 per month which the Company believes to be fair and reasonable.
Item 3. Legal Proceedings
No material legal proceedings are pending to which the Company or any of
its property is subject, nor to the knowledge of the Company are any such legal
proceedings threatened. The Company is a party to legal actions from
time-to-time which develop in the ordinary course of its business and which are
not, in the opinion of management, material to the Company's business.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's Common Stock is traded over-the-counter on NASDAQ under the
symbol "PRCC." Set forth below are the high and low closing bid by quotations in
the over-the-counter market for the Common Stock as reported by the relevant
market makers for fiscal years 1997 and 1996. Quotations represent inter-dealer
quotations, without adjustment for retail mark-ups, mark-downs or commissions,
and may not necessarily represent actual transactions.
Fiscal 1997 Fiscal 1996
Quarter Ended High Bid Low Bid High Bid Low Bid
- ------------- -------- ------- -------- -------
Common Stock:
March 31 $1.28 $ .69 $ .81 $ .44
June 30 .81 .47 1.91 .59
September 30 .69 .34 1.81 .97
December 31 .47 .16 1.44 .81
As of March 24, 1998, the approximate number of shareholders of record of
the Company's Common Stock was 1,100. The Company has never paid or declared any
dividends on its Common Stock and does not anticipate paying dividends in the
foreseeable future.
Item 6. Management's Discussion and Analysis or Plan of Operation
The Company's operating profit for fiscal 1994, 1995, 1996, and 1997
decreased significantly as compared to fiscal 1993. These declines were
principally because of significant competitive price pressure for the Company's
air pollution monitoring instruments, thus forcing the Company to lower its
14
<PAGE>
domestic and foreign bids, reducing the number of the Company's bids awarded and
reducing the profit margin on the bids awarded to the Company. Beginning in the
third quarter of fiscal 1994, the Company implemented certain cost reduction
measures in its operating expenses, suspended major new product development
efforts and scaled back its efforts to improve or modify existing technologies
in response to the competitive price pressures. Throughout 1995 and 1996 the
Company shipped record numbers of instrumentation units, but continued
competitive pricing pressure resulted in lowered gross margins. In March of
1996, efforts were begun to reduce fixed expenses by participating in the
Mexican Maquiladora program, initially for all production labor associated with
the Company's excess backlog, if any. This program was cancelled in July 1996
and all costs expensed. In 1997 continued competitive price pressures required
the Company to significantly reduce the number of core business personnel to
reduce fixed expenses.
Net revenues in 1997 were $6,793,000 compare to $8,805,000 in 1996, a 23%
decrease. Both Dasibi and Nutek decreases were primarily due to continual
competitive price pressures resulting in fewer contract awards. A monthly
average comparison indicated a 46% decrease in Dasibi core business and a 43%
decrease in the Nutek business (in 1996 Nutek operated for 6 months as opposed
to a full year in 1997).
Gross margin was 20% of consolidated net revenues in 1997 compared to 27%
in 1996, again due to an increase in competitive price pressures.
Selling, general and administrative expenses increased from $2,278,000 in
1996 to $2,495,000 in 1997, or 10%. The six month increase of selling, general
and administrative expenses for 1997 of Nutek and LMD acquired in June, 1996
were offset in part by the cost reductions made at Dasibi by downsizing.
Research and development expense decreased from $136,000 in 1996 to $37,000
in 1997 due to further cutbacks management made in its research and development
efforts in response to the continuing price pressures.
Interest expense increased from $146,000 in 1996 to $233,000 in 1997,
primarily due to the debt incurred to finance the Nutek acquisition.
In 1996, a non-recurring gain from the sale of a portion of the Company's
shares in Atlanta Technology Group, Inc. of $570,000 was realized. In 1997 a
similar non-recurring gain of $83,000 was realized.
As a result of the foregoing factors, net loss was $1,231,000 in 1997
compared to a net income of $640,000 in 1996.
In its low gross margin operation, the Company's Nutek subsidiary has
experienced difficulty in "downsizing" and as a result, its working capital has
been reduced to a level requiring assistance in the form of intercompany loans
from Dasibi. Dasibi has had difficulty supplying these cash requirements. As a
result, the Company initiated attempts to sell Nutek on February 16, 1998. As of
March 24, 1998 the Company is investigating liquidation of the assets of Nutek.
There is no assurance that a buyer will be found for the Nutek assets or that
Dasibi can continue to supply Nutek's cash needs.
15
<PAGE>
Under forced liquidation, if necessary, the asset base lender liability as
of March 24, 1998 is $984,000, of which approximately $410,000 is secured by
$410,000 of current receivables. The balance of $574,000 is secured by over
$1,000,000 book value of equipment and approximately $650,000 of inventory, at
cost. Management believes that the debt will be significantly satisfied by the
liquidation. (See "Liquidity and Capital Resources", below)
Deficiency, if any, is not considered material to the Company's overall
operation. As a contingency, long term liabilities of approximately $601,651 has
been reclassified as current liabilities.
Liquidity and Capital Resources
The Company has historically financed operations through bank borrowings
and the issuance of common stock in both public and private offerings. Current
market value of the Company's Common Stock preclude this approach as of this
date.
Working capital at December 31, 1997 was $1,070,000. Management believes
that the anticipated cash flows from operations will be sufficient to meet the
Company's short-term cash needs provided the Nutek subsidiary is sold or
liquidated. As of March 24, 1998, the Company has no material commitments for
capital expenditures.
The Company has a line of credit with a bank which provides for borrowings
of up to $200,000 until June 3, 1998. Interest is at the prime rate plus 2%.
$140,000 was outstanding at December 31, 1997; $130,000 was outstanding on March
24, 1998.
Nutek has a receivables line of credit from an asset-based lender of the
lesser of $1,000,000 or the borrowing base (as defined), which expires on June
28, 1999. Nutek's line of credit bears interest at the large commercial bank
prime rate plus 2 1/2%. At December 31, 1997 Nutek had borrowed $389,123 on its
receivable line, and $601,651 on the fixed term amount. Nutek's level of vendor
payables exceeds the available Nutek working capital level and its operating
cash has been supplemented by Dasibi. As discussed above, the Company is
pursuing the sale of Nutek as a "going business" or if necessary a liquidation
of assets. Management believes that a deficiency, if any, could be structured
into a long term note which could be accommodated by anticipated cash flows from
operations.
Cash decreased in 1997 due primarily to reduction of long term debt for a
full year as opposed to half a year in 1996.
16
<PAGE>
Seasonality
Management does not believe that the Company's business is seasonal.
Item 7. Financial Statements
The Company's Financial Statements and the related Notes thereto are set
forth at pages F-1 through F-24.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
On December 28, 1996, the Company disengaged the accounting firm of
Greenberg & Jackson as its independent auditors and selected the accounting firm
of A.J. Robbins to act as the Company's independent auditors for the fiscal year
ended December 31, 1996. Disclosure regarding this matter is set forth in the
Company's Current Report on Form 8-KA dated January 9, 1997.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Directors, Executive Officers and Key Employees
Set forth below are the names, ages, positions with the Company, Dasibi
Environmental Corp, Nutek, Inc. and Logan Medical Devices:
<TABLE>
<CAPTION>
Name Age Position(S) With Company And Dasibi
---- --- -----------------------------------
<S> <C> <C>
Albert E. Gosselin, Jr. (1)(3) 65 President, Chief Executive Officer and
Chairman of the Board of Directors
Cynthia L. Gosselin 36 Operations Manager of Dasibi
Barbara L. Gosselin (1)(2) 62 Secretary and Director
Donald Ford (1) 70 Chief Financial Officer
Marcia A. Smith (1) 59 Director of Pollution Research and Control
Corp.; Manager of Administration of Dasibi
Environmental Corp.
Paul Richardson 54 President, Director Nutek
Debbie Kendrick 45 Vice-President, Director Nutek
Gary L. Dudley (1) 60 Director
Craig E. Gosselin (1) 38 Director
Ron Logan-Sinclair 48 President, Director LMD
Barry Soltani 42 Director
17
</TABLE>
<PAGE>
(1) The individuals named above hold the identical positions indicated with
Dasibi Environmental Corp. ("Dasibi")
(2) The individuals named above hold identical positions indicated with Nutek,
Inc.
(3) The individual above is a director of Nutek.
All directors hold office until the next annual meeting of the Company's
shareholders and until their successors have been elected and qualify. Officers
serve at the pleasure of the board of directors.
Family Relationships
Albert E. Gosselin, Jr., and Barbara L. Gosselin, husband and wife, are the
parents of Craig E. and Cynthia L., both of whom are adults. All of the
foregoing are presently serving as executive officers and/or directors of the
Company. Except as set forth herein, no family relationship exists between any
director or executive officer of the Company.
Business Experience
Albert E. Gosselin, Jr., has served as the President, Chief Executive
Officer and Chairman of the Board of Directors of the Company (formerly "Dasibi
Environmental Corp." and "A.E. Gosselin Engineering, Inc.") and Dasibi (formerly
"Baral Engineering, Inc."), corporations which he co-founded with Barbara L.
Gosselin, since the organization of those corporations in December 1971 and July
1976, respectively. He also served as the President, Chief Executive Officer and
Chairman of the Board of Directors of the Company's former parent corporation, a
corporation also named "Pollution Research and Control Corp. ("PRCC") which he
co-founded with Mrs. Gosselin under the name of "A.E. Gosselin Engineering Co.,"
from its inception date in 1966 through the date of its spin-off in October
1986. Mr. Gosselin also served as the President, Chief Executive Officer and
Chairman of the Board of Directors of Applied Conservation Technology, Inc.
("ACT"), a former wholly-owned subsidiary engaged in the business of providing
environmental impact reports to electric utilities, together with the Company,
of PRCC, from 1980 through the date of the purchase of ACT by its management
from PRCC in November 1986. ACT is presently a diversified environmental
consulting firm owned and managed by Gary L. Dudley, a Company director, and
other members of management. Mr. Gosselin received a Bachelor of Science in
mechanical engineering from Loyola University, Los Angeles, California, in 1954.
He has been a registered mechanical engineer in the State of California since
1959.
Cynthia L. Gosselin has served as the Chief Financial Officer of the
Company and Dasibi from May 1990 to January 1998 when she resigned that position
and became Operations Manager of Dasibi and the Company. Additionally, she has
acted as Dasibi's Purchasing Agent from May 1990 to the present.. She was
employed by Dasibi in various capacities, including Production Manager, from
1983 through April 1990. Ms. Gosselin received a B.S. in business from the
University of California at Long Beach in 1982.
Barbara L. Gosselin has served as an executive officer and a director of
the Company, which she co-founded with Albert E. Gosselin, Jr., in December
18
<PAGE>
1971, since its inception. Mrs. Gosselin has served in the office of Secretary
of the Company since April 1990 and, from inception through April 1990, she
served as the Company's Chief Financial Officer. Mrs. Gosselin, together with
Mr. Gosselin, co-founded Dasibi in July 1976 and she has served as the Secretary
and a director of Dasibi since its organization. Mrs. Gosselin was the
co-founder in 1966, with Mr. Gosselin, of PRCC, the Company's former parent
corporation, for which she served as an executive officer and a director until
it was spun-off in October 1986.
Marcia A. Smith has served as a director of the Company and Dasibi since
May 1990. She has been employed as the Manager of Administration and in various
other capacitities with Dasibi since 1979.
Paul Richardson was enployed by Nutek as an Electrical Engineer from 1970
to 1994. He returned in 1996 to serve as President and a Director of Nutek. Mr.
Richardson received a Bachelor of Electrical Engineering from the University of
Florida in 1964.
Debbie Kendrick, a founder of Nutek, has been employed with Nutek since
1978 in all areas of administration. Ms. Kendrick resigned in September 1997 and
was not replaced.
Gary L. Dudley has served as a director of the Company during the periods
since June 1991 and from 1980 through January 1991, and he served as the
Company's Vice President from 1979 through November 1986. Mr. Dudley also served
as an executive officer and a director of PRCC, the Company's former parent
corporation, from 1984 through the date of the spin-off of PRCC in October 1986.
Mr. Dudley has been the President and a principle shareholder of ACT, now
located in Westminster, California, a diversified environmental consulting firm
formerly wholly-owned, together with the Company, by PRCC, since the purchase of
ACT by its management from PRCC in November 1986. He served as ACT's Vice
President from 1980 through 1986. From 1962 through 1978, Mr. Dudley was
employed in various engineering- related positions by Southern California Edison
Company, TRW Systems, McDonnell Douglas Corporation and North American Rockwell
Corporation. He received a Bachelor of Science in engineering from California
State University in 1962 and a Masters Degree in Mechanical Engineering from the
University of Southern California in 1966. Mr. Dudley is a registered mechanical
engineer in the State of California and a member of the Association of
Environmental Professionals.
Craig E. Gosselin has served as a director of the Company and Dasibi since
October 1987. Mr. Gosselin is an attorney who has been licensed to practice law
in the State of California since 1984. He has served as the Vice President and
General Counsel of Vans, Inc., a publicly-held manufacturer, distributor and
retailer of footwear, snowboard boots, apparel and related accessories located
in Santa Fe Springs, California, since July 1992. He received a Bachelor of
Business Administration from Loyola Marymount University in 1981 and a Juris
Doctor from Southwestern University School of Law in 1984.
Ron Logan-Sinclair founded, and has served as the Managing Director of
Logan Research Limited, Rochester, Kent, England, since April 1994. Logan
Research Limited has been engaged in research and development involving medical
devices, primarily, medical inflammation (nitric oxide) analysis devices and
artificial heart drive devices since May 1994. For a period of approximately 24
years prior to April 1994, Mr. Logan-Sinclair was employed by the Royal Brompton
National Heart and Lung Hospital, London, England, with responsibilities in the
19
<PAGE>
areas of medical electronics, biomedical and clinical engineering and medical
physics. He is a proven researcher and designer of medical equipment who
developed the inflammation and analytical monitor and is presently engaged in
the development of a number of other medical devices.
Donald Ford obtained a B.S. in Marketing from the University of California
at Berkeley in 1952 and was a staff assistant at Price Waterhouse from 1953 to
1957 and has been a self-employed Economist from 1958 to present.
Barry Soltani obtained a PhD in economics from the University of
California, Riverside in 1989, his Master's from the University of California,
Riverside in 1983, and graduated from San Diego State University in 1981 with a
B.B.A. in economics. Dr. Soltani is directly involved in funding for industrial
development projects in China and since 1993 has been an independent consultant
in corporate finance for joint ventures in China.
The Company, Albert E. Gosselin, Jr., President, Chief Executive Officer
and Chairman of the Board of Directors of the Company, and Cynthia L. Gosselin,
Chief Financial Officer of the Company were named as defendants in Case Number
1.94CV01425 filed by the Securities and Exchange Commission in the United States
District Court for the District of Columbia on June 28, 1994. The Commission
alleged in the Complaint for Permanent Injunction and Other Relief, among other
things, that the Company and Mr. Gosselin committed numerous violations of the
federal securities laws in 1989, 1990 and 1991, including disseminating
materially false and misleading information about the Company to the investing
public through public announcements and filings with the Commission relating,
primarily, to the Company's acquisition and subsequent disposition of two
companies, Air Instruments and Measurements, Inc. and Environmental Information
Systems. Additionally, the Complaint alleged that the Company's financial
statements incorrectly reported inventory figures and failed to reflect timely
write-offs of uncollectible accounts receivable and that the Company materially
understated annual and quarterly losses during this period. The allegations
against Ms. Gosselin were that she served as the Company's Chief Financial
Officer and that she was responsible for the Company's inadequate books and
records and internal controls during this period. The Commission also alleged
that the Company violated the federal securities laws in connection with an
unregistered public distribution of securities. The Commission sought to enjoin
the defendants from engaging in the future in similar illegal acts and practices
and to order defendant Albert E. Gosselin, Jr., to pay civil penalties. On July
14, 1994, the defendants, without admitting or denying any of the allegations of
the Complaint, consented to the entry of Final Judgment of Permanent Injunction
and Other Relief (the "Final Judgment"). The Final Judgment as to Mr. Gosselin
required him to pay a civil penalty in the amount of $25,000.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, required
the Company's and executive officers and directors, and persons who own more
than ten percent of a registered calls of the Company's equity securities, to
file with the Securities and Exchange Commission initial reports of ownership,
and reports of changes in ownership, of Common Stock and other equity securities
of the Company. Executive officers, directors and greater than ten percent
shareholders are required by Commission regulations to furnish the Company with
20
<PAGE>
copies of all Section 16(a) reports they file. To the Company's knowledge, based
solely on a review of the copies of such reports furnished to the Company, and
representations that no other reports were required during the fiscal year ended
December 31, 1997, the Company's executive officers, directors and greater than
ten per cent beneficial owners of its Common Stock, complied with all Section
16(a) filing requirements applicable to them.
Item 10. Executive Compensation
Executive Compensation
The following table sets forth the total cash and non-cash compensation
paid by the Company for the fiscal years ended December 31, 1995, 1996, and 1997
to the Company's President and Chief Executive Officer who was the only
executive officer of the Company whose aggregate cash compensation exceeded
$100,000 for the 1997 fiscal year.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
Long Term
Compensation Awards
Securities Underlying
Name and Principal Position Year Salary Options/SARs(#)
- --------------------------- ---- ------ ---------------------
<S> <C> <C> <C>
Albert E. Gosselin, Jr., President, 1997 $ 151,000 -------
Chief Executive Officer and 1996 $ 211,925 55,000
Chairman of the Board 1995 $ 196,638 -------
</TABLE>
The Company does not provide officers or employees with pension, stock
appreciation rights, long-term incentive or other plans.
Compensation of Directors
Directors do not receive compensation pursuant to any standard arrangement
for their services as directors.
Employment Agreements
The Company has employment agreements with Albert E. Gosselin, Jr., the
President, Chief Executive Officer and Chairman of the Board of Directors of the
Company, Cynthia L. Gosselin, and Marcia Smith. Mr. Gosselin's employment
agreement (the "Agreement") was first approved by the Board of Directors on July
30, 1987, and has since been extended through August 31, 1999. The Agreement,
21
<PAGE>
as extended, provides for the payment to Mr. Gosselin of a base salary of
$200,000, $210,000 and $220,000 during the one-year periods ended August 31,
1997, 1998 and 1999 respectively. (See "Executive Compensation" under this Item
10. "Executive Compensation" hereinabove.) The Agreement further obligates the
Company to permit Mr. Gosselin to participate in the Company's Employee's
Incentive Stock Option Plan and Group Medical Plan and any other health, life
insurance, group medical, disability income insurance and/or stock option plan
adopted by the Company. Under the Agreement, Mr. Gosselin's salary continues in
the event of his disability and for two years after his death. He is also
entitled to a lump sum severance payment equivalent to 2.99 times his current
salary in the event of his termination as President or Chief Executive Officer
within eighteen months after a "change of control" of the Company, including,
among other events, certain types of mergers and other business combinations,
material changes in the composition of the Board of Directors or the beneficial
ownership of the Common Stock, the sale of substantially all of the Company's
assets or securities and the material downsizing or dissolution of the Company.
If such an event occurs during fiscal 1998, Mr. Gosselin would be entitled to
receive $660,000 as a severance payment.
The Company's employment agreement with Cynthia L. Gosselin first commenced
on July 20, 1994, and and was amended on February 9, 1998 and continues through
August 31, 1999. Marcia Smith's employment agreement commenced on June 9, 1997
and continues through August 31, 1999. The agreements provide for the payment to
them of a base salary of $72,300 during each one-year period ended July 20,
1997, 1998, and 1999 and annual increases in the discretion of the Board of
Directors. Pursuant to the employment agreement, they are required to be
reimbursed by the Company for their expenses incurred in connection with the
performance of their responsibilities. In the event of their death or
disability, the agreement provides for their salary to continue for six months
thereafter. They are also entitled to participate in any Company health, life
insurance, group medical, disability income insurance and/or stock option plan.
The employment agreement provides that they are entitled to a lump sum severance
payment equivalent to 2.99 times their current salary in the event of their
termination within eighteen months after a "change in control" of the Company,
as defined in the Company's Employment Agreement with Mr. Albert E. Gosselin,
Jr., described hereinabove. They would each be entitled to receive a severance
payment of $216,177 if a change in control of the Company occurs during fiscal
1998.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of March 24, 1998, regarding
the ownership of the Company's Common Stock by each shareholder known by the
Company to be the beneficial owner of more than five percent of its outstanding
shares of Common Stock, each of the named executive officers, each director, and
all executive officers and directors as a group. Except as otherwise indicated,
each of the shareholders has sole voting and investment power with respect to
the shares of Common Stock beneficially owned.
22
<PAGE>
Name and Address Amount Percent
of Beneficial Owner (1) Beneficially Owned of Class (2)
- ------------------------------------ ------------------ ------------
Lee N. Sion 656,500 (4) 7.5 %
Albert E. and Barbara L. Gosselin, Jr. 686,235 (5) 7.9 %
Marcia A. Smith 121,180 (6) 1.3 %
Cynthia L. Gosselin 116,305 (7) 1.3%
Gary L. Dudley 105,000 (8) 1.2%
Craig E. Gosselin 65,000 (9) *
Barry Soltani 0 (10) *
Ron Logan-Sinclair 0 (10) *
All Executive Officers and Directors as
a Group (nine persons) 11.7%
* Less than one percent
(1) The address of Mr. Lee Sion is P.O. Box 910, Glendale, California 91209.
The addresses of the rest of the individuals named above is 506 Paula
Avenue, Glendale, California 91201.
(2) Assumes the exercise of outstanding options and warrants to purchase a
total of 1,005,500 shares of the Company's Common Stock.
(4) Includes 87,500 shares of Common Stock issuable upon the exercise of
options owned of record by Lee N. Sion which is exercisable within 60 days.
(5) Includes 293,000 shares of Common Stock issuable upon the exercise of
options owned of record by Albert E. Gosselin, Jr. exercisable within 60
days. Does not include a total of 209,133 shares of Common Stock owned of
record collectively by Craig. E., Cynthia L., Keith A. and Jennifer .
Gosselin, the adult children of Albert E. and Barbara Gosselin, Jr., as to
which Mr. and Mrs. Gosselin disclaim any beneficial ownership. Mr. and Mrs.
Gosselin hold their shares of Common Stock as community property and
exercise joint voting and investment power with respect to such shares.
(6) Includes 60,000 shares of Common Stock issuable upon the exercise of an
option owned of record by Marcia Smith, and exercisable within 60 days.
23
<PAGE>
(7) Cynthia L. Gosselin is the adult daughter of Albert E. and Barbara L.
Gosselin, Jr., who disclaim any beneficial ownership of her shares and
includes 60,000 shares of Common Stock issuable upon the exercise of an
options owned of record and exercisable within 60 days.
(8) Represents 105,000 shares of Common Stock issuable upon the exercise of
options owned of record by Gary L. Dudley which is exercisable within 60
days.
(9) Craig E. Gosselin is the adult son of Albert E. and Barbara L. Gosselin,
Jr., who disclaim any beneficial ownership of his shares and includes
60,000 shares of Common Stock issuable upon the exercise of an options
owned of record and exercisable within 60 days.
(10) A total of 340,000 shares of Common Stock issuable upon the exercise of
options owned of record and exercisable within 60 days by Ron
Logan-Sinclair (300,000) and Barry Soltani (40,000).
Item 12. Certain Relationships and Related Transactions
Not Applicable.
Item 13. Exhibits and Reports on Form 8-KA
(a) Exhibits
The exhibits listed in the Exhibit Index located at Pages E-1 through E-17
are filed pursuant to Item 13(a) of this Report.
(b) Reports on Form 8-KA
The Company filed no reports on Form 8-KA during the fourth quarter of
fiscal 1997.
24
<PAGE>
INDEX
-----
Page
----
Independent Auditors' Report F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-5
Consolidated Statements of Changes in Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-8
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Pollution Research and Control Corp.
Glendale, California
We have audited the accompanying consolidated balance sheets of Pollution
Research and Control Corp. and Subsidiaries as of December 31, 1997 and 1996,
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the years then ended. 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 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 consolidated financial position of Pollution Research
and Control Corp. and Subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Notes 1 and 9 to the
financial statements, as of December 31, 1997, the Company was in default under
certain covenants of its asset-based lending agreement. The lender has a right
to demand repayment of the loans. No such demand has been made. The Company
cannot predict what the outcome of such demand will be. Managements plans in
regard to this matter are also described in Note 1. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
AJ. ROBBINS, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
AND CONSULTANTS
Denver, Colorado
February 13, 1998
F-2
<PAGE>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
--------------------------------
ASSETS
------
1997 1996
---------- ----------
CURRENT ASSETS:
Cash $ 515,222 $ 723,170
Marketable securities 3,250 99,000
Accounts receivable, trade, less
allowance for doubtful
accounts of $19,381 and $46,381 643,031 1,710,970
Inventories 2,504,559 2,575,252
Other current assets 16,610 21,046
---------- ----------
Total Current Assets 3,682,672 5,129,438
---------- ----------
PROPERTY, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, less accumulated
depreciation and amortization of
$395,661 and $205,884 1,469,583 1,650,563
---------- ----------
OTHER ASSETS:
Goodwill, less accumulated amortization
of $11,143 and $4,265 270,377 288,212
Loan costs, less accumulated amortization
of $45,412 and $15,137 45,412 75,687
Other intangible assets, less accumulated
amortization of $6,800 and $5,100 33,709 35,409
Other assets
6,107 17,634
---------- ----------
Total Other Assets 355,605 416,942
---------- ----------
Total Assets $5,507,860 $7,196,943
========== ==========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE>
<TABLE>
<CAPTION>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
--------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
1997 1996
----------- -----------
CURRENT LIABILITIES:
<S> <C> <C>
Secured overdraft facility $ 58,334 $ --
Notes payable 529,123 553,658
Accounts payable, trade 632,631 967,963
Accounts payable, officer 8,886 8,710
Accrued liabilities 281,554 224,099
Customer advances 143,695 50,820
Income taxes payable -- 9,800
Current portion of long-term debt 646,736 186,741
Current portion of long-term debt, related parties 311,496 5,413
----------- -----------
Total Current Liabilities 2,612,455 2,007,204
----------- -----------
LONG-TERM DEBT, less current portion 86,233 667,596
LONG-TERM DEBT, related parties, less current portion 56,324 368,801
DEFERRED RENT 102,669 99,203
DEFERRED INCOME TAXES -- 55,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, no par value, 20,000,000 shares
authorized, none issued and outstanding -- --
Common stock, no par value, 30,000,000 shares
authorized, 8,673,732 issued and outstanding 6,588,980 6,588,980
Less notes due from sale of common stock, related
parties (86,857) (86,857)
Other paid-in capital 145,764 145,764
Accumulated deficit (4,025,545) (2,794,573)
Unrealized gain on marketable securities 3,250 99,000
Unrealized foreign currency translation gain 24,587 46,825
----------- -----------
Total Stockholders' Equity 2,650,179 3,999,139
----------- -----------
Total Liabilities and Stockholders' Equity $ 5,507,860 $ 7,196,943
=========== ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
1997 1996
----------- -----------
<S> <C> <C>
NET REVENUES $ 6,792,767 $ 8,805,011
COST OF GOODS SOLD 5,410,574 6,463,208
----------- -----------
GROSS PROFIT 1,382,193 2,341,803
----------- -----------
OPERATING EXPENSES:
Selling, general and administrative 2,495,446 2,277,785
Research and development 36,903 136,356
----------- -----------
Total Operating Expenses 2,532,349 2,414,141
----------- -----------
LOSS FROM OPERATIONS (1,150,156) (72,338)
----------- -----------
OTHER INCOME (EXPENSE):
Gain on sale of marketable securities 82,896 570,435
Interest income 4,811 6,431
Interest expense (202,413) (130,616)
Interest expense, related parties (30,910) (15,500)
----------- -----------
Total Other Income (Expense) (145,616) 430,750
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT) (1,295,772) 358,412
----------- -----------
PROVISION (BENEFIT) FOR INCOME TAXES:
Current (9,800) 10,000
Deferred (55,000) (292,000)
----------- -----------
Total Provision (Benefit) for Income Taxes (64,800) (282,000)
----------- -----------
NET INCOME (LOSS) $(1,230,972) $ 640,412
=========== ===========
NET INCOME (LOSS) PER SHARE - Basic and Diluted $ (.14) $ .08
=========== ===========
Weighted Average Shares 8,673,732 7,786,487
=========== ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
Notes Due Other
Common Stock From Sale of Paid-in
Shares Amount of Stock Capital
--------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
Balances, December 31, 1995 6,932,662 $ 5,431,623 $ (86,857) $ --
Sale of common stock 1,350,003 884,000 -- --
Exercise of options and warrants 391,067 273,357 -- --
Stock-based compensation expense recognized -- -- -- 145,764
Unrealized gain on marketable securities -- -- -- --
Realized gain on marketable securities -- -- -- --
Unrealized foreign currency translation gain -- -- -- --
Net income for the year -- -- -- --
----------- ----------- ----------- -----------
Balances, December 31, 1996 8,673,732 6,588,980 (86,857) 145,764
Realized gain on marketable securities -- -- -- --
Unrealized foreign currency translation loss -- -- -- --
Net loss for the year -- -- -- --
----------- ----------- ----------- -----------
Balances, December 31, 1997 8,673,732 $ 6,588,980 $ (86,857) $ 145,764
=========== =========== =========== ===========
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
CONTINUED
----------------------------------------------
Unrealized
Unrealized Foreign
Gain on Currency Total
Accumulated Marketable Translation Stockholders'
(Deficit) Securities Gain Equity
----------- ----------- ------------ ------------
Balances, December 31, 1995 $(3,434,985) $ 100,000 $ -- $ 2,009,781
Sale of common stock -- -- -- 884,000
Exercise of options and warrants -- -- -- 273,357
Stock-based compensation expense recognized -- -- -- 145,764
Unrealized gain on marketable securities -- 74,250 -- 74,250
Realized gain on marketable securities -- (75,250) -- (75,250)
Unrealized foreign currency translation gain -- -- 46,825 46,825
Net income for the year 640,412 -- -- 640,412
----------- ----------- ----------- -----------
Balances, December 31, 1996 (2,794,573) 99,000 46,825 3,999,139
Realized gain on marketable securities -- (95,750) -- (95,750)
Unrealized foreign currency translation loss -- -- (22,238) (22,238)
Net loss for the year (1,230,972) -- -- (1,230,972)
----------- ----------- ----------- -----------
Balances, December 31, 1997 $(4,025,545) $ 3,250 $ 24,587 $ 2,650,179
=========== =========== =========== ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
1997 1996
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Reconciliation of net income (loss) to net
cash flows (used in) operating activities:
Net income (loss) $(1,230,972) $ 640,412
Depreciation and amortization 229,025 128,079
Deferred rent 3,466 (2,534)
Deferred income taxes (55,000) (292,000)
Stock-based compensation expense -- 121,406
Changes in operating assets and liabilities:
Accounts receivable, trade, net 1,064,863 (789,107)
Inventories 62,191 358,560
Other current assets 4,242 20,571
Secured overdraft facility 58,021 --
Accounts payable, trade (333,656) (155,505)
Accounts payable, officer 176 8,710
Accrued liabilities 58,091 (122,093)
Customer advances 92,875 (150,810)
Income taxes payable (9,800) 9,800
Other assets 11,527 (11,298)
----------- -----------
Net Cash Flows (Used in)
Operating Activities (44,951) (235,809)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, equipment and leasehold
improvements (9,838) (53,023)
Investment in patent -- (23,509)
Cash paid for acquisition of subsidiaries,
net of cash acquired of $208,054 -- (379,870)
----------- -----------
Net Cash Flows (Used in)
Investing Activities (9,838) (456,402)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of
expenses of $16,000 -- 1,157,357
Advances on notes payable 3,774,645 2,805,095
Payments on notes payable (3,799,180) (3,026,909)
Additions to long term debt 100,000 --
Payments of long term debt (221,368) (163,355)
Payments of long term debt - related parties (5,413) --
----------- -----------
Net Cash Flows (Used In)
Provided by Financing Activities (151,316) 772,188
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,843) 1,498
----------- -----------
(DECREASE) INCREASE IN CASH (207,948) 81,475
CASH, beginning of year 723,170 641,695
----------- -----------
CASH, end of year $ 515,222 $ 723,170
=========== ===========
Supplemental Cash Flow Information:
See Note 14
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-7
</TABLE>
<PAGE>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE 1 - BUSINESS ACTIVITY AND GOING CONCERN
Pollution Research and Control Corp., a California corporation, primarily
designs, manufacturers and markets air pollution monitoring instruments,
electrical control panels, and medical instrumentation through its wholly-owned
subsidiaries Dasibi Environmental Corporation ("Dasibi"), Nutek, Inc. ("Nutek"),
and Logan Medical Devices, Inc. ("LMD"), respectively. Nutek and LMD were
acquired in June 1996 (see Note 8). Dasibi currently accounts for approximately
45% of consolidated revenues, Nutek 48%, and LMD 7%.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company is in violation of its Loan and Security Agreement with
its asset-based lender due to the Company's inability to meet certain financial
ratio covenants. Although all principal and interest payments have been made,
provisions of the agreement state that in event of default, or events that might
lead to default, the lender has the option to make all notes and loans due and
owing immediately. As of the date of this report no action has been taken by the
lender in this regard. Management intends to sell the Nutek subsidiary or
liquidate the assets of Nutek. Notes and loans due to the lender have been
classified in the financial statements in accordance with provisions of the
agreement. The resulting effect is a reclassification of long-term debt totaling
$601,651 to current liabilities as of December 31, 1997.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation - The consolidated financial statements include the accounts of
Pollution Research and Control Corp. and its wholly-owned subsidiaries (the
"Company"). All significant intercompany balances and transactions have been
eliminated in consolidation.
Revenue Recognition - Revenue is recognized upon shipment of products.
Inventories - Inventories are stated at the lower of cost or market. Cost is
determined on the first-in first-out (FIFO) basis.
Property, Equipment and Leasehold Improvements and Depreciation - Property,
equipment and leasehold improvements are stated at cost less accumulated
depreciation and amortization. Depreciation is provided for on the straight-line
method over the estimated useful lives of the assets, generally five to ten
years. Amortization of leasehold improvements is over the shorter of the life of
the lease or five years. Total depreciation expense was $190,047 and $107,422
for the years ended December 31, 1997 and 1996, respectively.
Goodwill - The goodwill was recorded in connection with the acquisition of Logan
Medical Devices, Inc. discussed in Note 8 below, and is being amortized on a
straight-line basis over 40 years. Amortization of goodwill was $7,003 and
$4,265 for the years ended December 31, 1997 and 1996, respectively.
F-8
<PAGE>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock-Based Compensation - During 1996 the Company adopted Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). The new standard required the Company to adopt the
"fair value" method with respect to stock-based compensation of consultants and
other non-employees. The Company did not change its method of accounting with
respect to employee stock options; the Company continues to account for these
under the "intrinsic value" method, and to furnish the proforma disclosures
required by SFAS 123. See Notes 11 and 12 for additional information with
respect to stock-based compensation.
Earnings per Share - In 1997, the Financial Accounting Standards Board (FASB)
issued Statement No. 128, "Earnings Per Share". Statement 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where appropriate, restated to conform to
Statement 128 requirements.
Cash Equivalents - For purposes of reporting cash flows, the Company considers
all funds with original maturities of three months or less to be cash
equivalents.
Fair Value of Financial Instruments - The carrying amounts of cash, accounts
receivable, accounts payable and accrued expenses approximate fair value because
of the short maturity of these items. The fair value of the lines of credit
approximate market because the interest rates on all of these instruments adjust
on a periodic basis with the market. The fair value of various notes payable
were estimated based on market values for debt with similar terms. Management
believes that the fair value of that debt approximated its carrying value. The
fair value of notes payable to related parties cannot be determined due to the
terms under which these instruments were negotiated.
Investments in Equity Securities - Management determines the appropriate
classification of its investments in equity securities at the time of purchase
and reevaluates such determinations at each balance sheet date. The Company has
classified its investment portfolio as available for sale. Available for sale
securities are stated at fair market value with unrealized gains and losses
included as a separate component of stockholders' equity. Realized gains and
losses are included in earnings and are derived using the specific
identification method.
Translation of Foreign Currencies - The translation of foreign currencies into
U.S. dollars is performed for balance sheet accounts using current exchange
rates in effect at the balance sheet date and for revenue and expense accounts
using an average exchange rate for the period. The gains or losses resulting
from translation are included in stockholders' equity.
Research and Development Costs - Research and development costs are charged to
operations as incurred.
F-9
<PAGE>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes - Deferred income taxes are recorded to reflect the tax
consequences in future years of temporary differences between the tax basis of
the assets and liabilities and their financial statement amounts at the end of
each reporting period. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized. Income tax
expense is the tax payable for the current period and the change during the
period in deferred tax assets and liabilities. The deferred tax assets and
liabilities have been netted to reflect the tax impact of temporary differences.
A valuation allowance has been established for the entire deferred tax asset as
management believes that it is more likely than not that a tax benefit will not
be realized.
Use of Estimates in the Preparation of Financial Statements - 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 revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Reclassification - Certain amounts reported in the Company's financial
statements for the year ended December 31, 1996 have been reclassified to
conform to the current year presentation.
Recently Issued Accounting Pronouncements - In 1997, the FASB Issued Statements
No. 130, "Reporting Comprehensive Income" and No. 131, "Disclosures About
Segments Of An Enterprise And Related Information", effective for fiscal years
beginning after December 15, 1997. The adoption by the Company of these
Statements in January 1998 is not expected to have a material impact on the
Company's financial statements.
NOTE 3 - MARKETABLE SECURITIES
During 1997 and 1996, the Company sold 86,000 and 301,000 of Atlanta Technology
Group, Inc. (ATYG) shares, respectively, realizing net proceeds and a gain of
$82,897 and $570,435, respectively. The remaining 13,000 shares are carried on
the balance sheet at an estimated market value of $3,250 at December 31, 1997.
At December 31, 1997, the cost of the shares is considered to be $3,250 and the
unrealized holding gain $-0-.
F-10
<PAGE>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE 4 - INVENTORIES
Inventories at December 31, 1997 and 1996 consisted of the following:
1997 1996
---------- ----------
Raw materials $1,372,792 $1,587,232
Work in process 530,983 859,925
Finished goods 600,784 128,095
---------- ----------
Total $2,504,559 $2,575,252
========== ==========
Inventories at December 31, 1997 and 1996 include overhead of $538,236 and
$363,211, respectively.
NOTE 5 - PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements at December 31, 1997 and 1996
consisted of the following:
1997 1996
---------- ----------
Machinery and equipment $1,388,490 $1,387,363
Furniture and fixtures 152,209 144,357
Leasehold improvements 324,545 324,727
---------- ----------
1,865,244 1,856,447
Less accumulated depreciation and amortization 395,661 205,884
---------- ----------
Net property, equipment and leasehold improvements $1,469,583 $1,650,563
========== ==========
NOTE 6 - ACCRUED LIABILITIES
Accrued liabilities at December 31, 1997 and 1996 consisted of the following:
1997 1996
-------- --------
Accrued payroll and related taxes $167,315 $113,868
Accrued interest 46,446 26,269
Accrued vacation 29,050 28,969
Current portion of deferred rent 23,012 23,012
Accrued legal and professional fees -- 21,364
Other 15,731 10,617
-------- --------
Total $281,554 $224,099
======== ========
F-11
<PAGE>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE 7 - DEFERRED RENT
Upon execution of a 10 year lease for its present facility in Glendale,
California commencing July 1, 1994, the Company was granted 6 months "free"
rent. Upon the acquisition of Nutek, Inc. effective June 20, 1996 discussed in
Note 8, the Company executed a five year lease with increasing minimum rental
amounts on each anniversary date. As required by generally accepted accounting
principles, rent expense is being recognized by amortizing the total minimum
rentals payable under the leases over the terms of the leases on a straight-line
basis. The deferred rent shown on the balance sheet as of December 31, 1997 and
1996 represents the excess of the total amount charged to rent expense over the
amounts actually due and payable under the leases as of such date, of which
$23,012 and $23,012 have been classified as current and $102,669 and $99,203 as
long term, respectively.
NOTE 8 - ACQUISITIONS
Effective June 20, 1996, the Company acquired 100% of the outstanding stock of
Nutek, Inc. ("Nutek"), a Florida-based company primarily engaged in the design,
manufacture and marketing of electrical control panels for automation use in
utility and industrial applications. The Company paid $304,000 (inclusive of
acquisition costs) and incurred or assumed an additional $1,593,000 in debt, for
a total purchase price including the assumption of debt of $1,897,000. The
acquisition was accounted for as a purchase. Current assets and liabilities were
recorded at their fair values, with the remaining purchase price of $1,525,000
recorded as the value of property and equipment acquired.
In connection with the acquisition, the Company granted 340,000 common stock
options exercisable at $1.10 per share to various consultants and employees of
Nutek (above market on the date of the grant) (see Note 11). Additionally, loan
costs of $91,000 were incurred in connection with the financing of the
acquisition (see Note 9); the loan costs are being amortized over the three year
term of the credit facility. Amortization of loan costs was $30,275 and $15,137
for the years ended December 31, 1997 and 1996, respectively.
Effective June 1, 1996, the Company acquired 100% of the outstanding common
stock of Logan Medical Devices, Inc., a Colorado corporation ("LMD") and its
wholly-owned subsidiary Logan Research Limited of Rochester, Kent, England, a
private United Kingdom company limited by shares ("LRL"). LMD and LRL are
primarily engaged in the design, manufacture and marketing of medical
instrumentation internationally. The Company issued 600,500 options to purchase
its common stock exercisable at $1.10 per share (above market on the issue date)
in exchange for the 1,201,000 shares (80.1%) of LMD it did not already own.
Additionally, the Company made a $250,000 capital contribution to LMD, and LMD
issued $300,000 in notes to the former stockholders of LRL in payment for 100%
of the outstanding stock of LRL. The total amount paid was $287,000 inclusive of
acquisition costs, and including the $300,000 in notes issued by LMD the total
purchase price was $587,000.
F-12
<PAGE>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE 8 - ACQUISITIONS (Continued)
This acquisition was accounted for as a purchase. Current assets, property and
equipment and liabilities were recorded at their fair values, with the remaining
purchase price of $292,000 assigned to goodwill. The goodwill is being amortized
on a straight-line basis over 40 years. Additionally, the Company entered into
an employment contract with the President of LMD and LRL (see Note 13).
NOTE 9 - NOTES PAYABLE AND LONG-TERM DEBT
Notes Payable
- -------------
In May 1997, the Company entered in to an extension of its line of credit
agreement with a bank, which provides borrowings of up to $200,000 through June
3, 1998. Borrowings under this agreement bear interest at the bank's prime rate
plus 2% (10.5% at December 31, 1997) and are collateralized by substantially all
of the Company's assets. The agreement contains several restrictive covenants
common to lines of credit, including certain tangible net worth and current
ratio requirements. The balance outstanding at December 31, 1997 was $140,000.
In connection with the acquisition of Nutek, Nutek obtained a working capital
facility from the asset-based lender for the lesser of $1,000,000 or the
borrowing base (as defined). A total of $535,000 was advanced in connection with
the acquisition; $389,123 and $363,658 were outstanding at December 31, 1997 and
1996, respectively. The note bears interest at the large commercial bank prime
rate plus 2.5% (11% and 10.75% at December 31, 1997 and 1996, respectively) and
matures June 28, 1999. Substantially all of Nutek's assets are pledged as
collateral for this loan and for the term loan described below, which was
obtained from the same asset-based lender. The related Loan and Security
Agreement contains numerous restrictive covenants common to asset-based
financing, including the requirement to maintain specified levels of debt
service coverage, working capital, tangible net worth, and profitability, and
restrictions on additional borrowings, the payment of dividends, and limitations
on payments to affiliates including the parent company (see Note 1).
Additionally, the parent company has guaranteed these loans.
Logan Research Limited has a secured overdraft facility with an English bank of
up to (pound)60,000 (approximately $100,000 at current exchange rates). Amounts
borrowed under the facility bear interest at the reference rate plus 3%
(currently 9%). The facility expires and must be "reviewed" March 31, 1998. The
facility is secured by substantially all of the assets of LRL and by the
residences of two individuals who are officers and/or directors of LMD and LRL
and the former stockholders of LRL. Amounts outstanding were $58,334 and $-0- as
of December 31, 1997 and 1996, respectively.
F-13
<PAGE>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE 9 - NOTES PAYABLE AND LONG-TERM DEBT (Continued)
Long-Term Debt
Long-term debt at December 31, 1997 and 1996 consisted of the following:
1997 1996
-------- --------
Nutek, Inc., term loan $601,651 $687,500
Notes payable to former stockholders 89,174 100,000
Installment loans 42,144 66,837
-------- --------
732,969 854,337
Less current portion 646,736 186,741
-------- --------
Long-term debt $ 86,233 $667,596
======== ========
Nutek's term loan bears interest at the large commercial bank prime rate plus
3.5% (12% and 11.75% at December 31, 1997 and 1996, respectively). Monthly
payments of $14,623 and $12,500 plus interest at December 31, 1997 and 1996,
respectively, are required until June 28, 1999, at which time the remaining
balance is due. The term loan was received from the same asset-based lender who
provided Nutek's working capital facility--see description of Nutek's working
capital facility above (see Note 1).
The notes payable to Nutek's former stockholders bears interest at 8%. Monthly
interest-only payments were required until June 30, 1997, after which time the
principal and interest is payable in 48 equal monthly installments aggregating
$2,442. The notes are unsecured.
The installment loans bear interest at rates ranging from 6.5% to 9.25% (the
commercial bank prime rate plus .75%) and mature at various times from May 1998
to April 2000. The loans are secured by purchase money liens on the related
assets.
Long-Term Debt, Related Parties
- -------------------------------
Long-term debt, related parties at December 31, 1997 and 1996, consisted of the
following:
1997 1996
-------- --------
Nutek, Inc. - notes payable to family member of employee $ 44,587 $ 50,000
Logan Medical Devices, Inc.- notes payable to
officers/employees 300,000 300,000
Logan Research Limited - advances from officer 23,233 24,214
-------- --------
367,820 374,214
Less current portion 311,496 5,413
-------- --------
Long-term debt, related parties $ 56,324 $368,801
======== ========
F-14
<PAGE>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE 9 - NOTES PAYABLE AND LONG-TERM DEBT (Continued)
The note payable to a family member of an employee was part of the financing of
the acquisition of Nutek. The note bears interest at 8%. Monthly interest-only
payments were required until June 30, 1997, after which time the principal and
interest is payable in 48 equal monthly installments of $1,221.
The note is unsecured.
The notes payable to officers/employees of Logan Medical Devices, Inc. were
issued to two individuals in payment for 100% of the outstanding stock of Logan
Research Limited in connection with the acquisition. These individuals became
officers of Logan Medical Devices, Inc. upon acquisition. The notes bear
interest at 9%. Quarterly payments of accrued interest are required commencing
June 30, 1998. The notes are redeemable by the Company at any time after
December 28, 1996, and are callable by the holders at any time after June 28,
1998. The notes are secured by substantially all of the assets of LMD and LRL.
The advances from an officer of LRL are represented by an open advance account.
Management does not expect to repay the amount in the foreseeable future.
Scheduled maturities of long-term debt are as follows:
Related
Total Parties Others
---------- ---------- ----------
1998 $ 958,232 $ 311,496 $ 646,736
1999 53,750 12,451 41,299
2000 44,107 13,483 30,624
2001 21,467 7,157 14,310
2002 -- -- --
Thereafter 23,233 23,233 --
---------- ---------- ----------
$1,100,789 $ 367,820 $ 732,969
========== ========== ==========
As explained in Note 1 to the financial statements, the Company is in violation
of its Loan and Security Agreement with its asset-based lender, due to the
Company's inability to meet certain financial ratio covenants. Provisions of the
loan agreement states that in event of default or events that might lead to
default, the lender has the option to make all notes and loans due and owing
immediately. As of the date of this report no action has been taken by the
lender in this regard. The notes and loans due to the lender have been
classified in the financial statement in accordance with the provision of the
loan agreement.
F-15
<PAGE>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE 10 - INCOME TAXES
The income tax provision (benefit) for the years ended December 31, 1997 and
1996 differs from the computed expected provision (benefit) at the federal
statutory rate of 35% for the following reasons:
1997 1996
--------- ---------
Computed expected income tax provision (benefit) at 35% $(455,000) $ 125,000
Non-deductible meals and entertainment 4,000 8,000
Temporary differences for items deductible from
(includible in) taxable income in future years:
Stock based compensation expense -- 43,000
Depreciation 37,000 22,000
Inventory valuation allowance 29,000 3,000
Incomplete contracts -- (29,000)
Bad debt allowance (9,000) --
Other -- 1,000
State income taxes, net of federal income tax effect (56,000) 22,000
Net operating loss carryforward unutilized (utilized) 450,000 (195,000)
Alternative minimum tax (9,800) 10,000
Increase (reduction) to valuation allowance (55,000) (292,000)
--------- ---------
Income tax provision (benefit) $ (64,800) $(282,000)
========= =========
F-16
<PAGE>
<TABLE>
<CAPTION>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE 10 - INCOME TAXES (Continued)
The components of the deferred tax assets and liabilities as of December 31,
1997 and 1996 were as follows:
1997 1996
----------- -----------
Deferred tax assets:
Temporary differences:
<S> <C> <C>
Allowance for doubtful accounts $ 8,000 $ 17,000
Inventory valuation allowance 64,000 31,000
Incomplete contracts 25,000 25,000
Accrued expenses 15,000 15,000
Stock based compensation 48,000 48,000
Loss on joint venture investment 66,000 66,000
Tax depreciation in excess of book depreciation -- 10,000
Net operating loss carryforward 1,363,000 926,000
Less valuation allowance (1,128,000) (729,000)
----------- -----------
Long-term deferred tax assets after valuation allowance 461,000 409,000
Deferred tax liability:
Excess of basis of Nutek's property and equipment for financial
reporting purposes over tax basis (461,000) (464,000)
----------- -----------
Net long-term deferred tax liability $ -- $ (55,000)
=========== ===========
The components of the deferred tax expense were as follows:
1997 1996
----------- -----------
Stock-based compensation expense $ -- $ (48,000)
Allowance for doubtful accounts 9,000 (1,000)
Inventory valuation allowance (33,000) --
Incomplete contracts -- (31,000)
Other -- (10,000)
Depreciation 7,000 (26,000)
(Unutilization) utilization of net operating
loss carryforward (437,000) 195,000
Change in valuation allowance 399,000 (433,000)
----------- -----------
$ (55,000) $ (292,000)
=========== ===========
F-17
</TABLE>
<PAGE>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE 10 - INCOME TAXES (Continued)
As of December 31, 1997 the Company has net operating loss carryforwards
available to offset future taxable income of approximately $3,400,000 expiring
in 2004 through 2011.
NOTE 11 - STOCKHOLDERS' EQUITY
Issuance of Common Stock
- ------------------------
On June 24, 1996 the Company sold in a private placement 1,000,003 units
consisting of one share of common stock and one warrant to purchase the
Company's common stock at $1.00 per share (above market on the date of sale),
receiving net proceeds of $584,000. On September 20, 1996, the Company completed
a private placement consisting of 350,000 shares of common stock and warrants to
purchase 300,000 shares of common stock at $1.50 per share (above market on the
date of sale), receiving net proceeds of $300,000. Additionally, in 1996 the
Company received net proceeds of $273,357 from the exercise of an aggregate of
391,067 options and warrants and, accordingly, issued 391,067 shares.
Warrants
- --------
In July 1989, the Company issued 1,453,497 warrants to purchase its common stock
at $1.75 per share as part of units sold in a public offering. Additionally,
there were outstanding 652,501 warrants at an exercise price of $1.75 per share,
which had been originally issued to the Underwriter. These 2,105,998 warrants
were publicly traded in earlier years. The Board of Directors approved the
extension of the expiration date of the warrants until March 29, 1996 at an
exercise price of $0.60 per share. In March 1996, 266,900 of the warrants were
exercised, and the remaining 1,839,098 warrants expired March 29, 1996.
On July 11, 1996, 25,000 warrants issued in 1991 to purchase the Company's
common stock at $0.69 per share were exercised.
In connection with the June 24, 1996 private placement described above,
1,000,003 warrants to purchase the Company's common stock at $1.00 per share
were issued, expiring June 14, 1999. In November 1996, 89,167 of the warrants
were exercised; 910,836 were outstanding at December 31, 1997 and 1996.
In connection with the September 20, 1996 private placement described above, the
Company issued 300,000 warrants to purchase the Company's common stock at $1.50
per share, expiring September 20, 1999.
Additionally, at December 31, 1997 and 1996, there were 60,000 warrants
outstanding to purchase the Company's common stock at $1.70 per share expiring
August 31, 1998, and 5,000 warrants at $2.00 per share expiring November 7,
1998.
In January 1997, the Company issued 65,000 warrants to purchase the Company's
common stock at $1.25, to an investment banker. The warrants were cancelled in
March 1997, due to non-performance.
F-18
<PAGE>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE 11 - STOCKHOLDERS' EQUITY (Continued)
Options
- -------
On June 29, 1995, the Company granted options to various employees to purchase
30,000 shares of common stock at $0.63, expiring June 28, 2000. In January 1997
and 1996, 10,000 and 5,000 of the options were cancelled due to an employee's
departure; 15,000 remain outstanding. The Company had also granted 160,000
options at $0.63 to officers, directors and key employees on June 29, 1995; the
160,000 options were cancelled May 31, 1996.
On July 1, 1995, the Company granted employee options to purchase 25,000 shares
at $1.38, expiring June 30, 1998.
On July 10, 1995, the Company granted options to a consulting firm to purchase
500,000 shares at $0.70 per share. The options were cancelled in January 1996,
due to non-performance.
On April 1, 1996, the Company issued to a consultant options to purchase 10,000
shares at $0.68 per share. The options were exercised October 18, 1996.
On May 30, 1996, the Company issued to a public relations firm options to
purchase 1,000,000 shares at $0.94 per share and 300,000 shares at $1.25 per
share. The options expire May 29, 2000. The Company believes the public
relations firm has not performed under its contract and the options are
presently in dispute.
On May 31, 1996, in connection with the acquisition of Nutek, the Company issued
options to purchase 340,000 shares at $1.10 per share to various consultants and
employees of Nutek. The options may be exercised beginning January 7, 1998 and
expire May 31, 2000. In 1997, 35,000 options were cancelled due to employee
departures.
On June 1, 1996, in connection with the acquisition of LMD, the Company
exchanged options to purchase 600,500 shares at $1.10 per share for the
1,201,000 shares of LMD it did not already own (see Note 8). The options may be
exercised beginning January 7, 1998 and expire May 31, 2000. The 600,500 options
include 123,000 issued to the Chief Executive Officer and a director of the
Company, 20,000 shares each to four directors and 300,000 to the President of
the Company's subsidiaries LMD and LRL.
Also on June 1, 1996, the Company issued options to purchase 280,000 shares at
$1.10, expiring May 31, 2000, to the officers and directors of the Company
referred to in the previous paragraph, as follows: Chief Executive Officer
120,000, 40,000 each to four directors. Additionally, the Company granted
options to purchase 40,000 shares at $1.10 per share to an unrelated individual.
On July 1, 1996, the Company granted options to purchase 25,000 shares at $1.38
per share to an employee, expiring June 30, 1999.
F-19
<PAGE>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE 11 - STOCKHOLDERS' EQUITY (Continued)
On November 22, 1996, the Company granted options to purchase 400,000 shares at
$1.12 per share to a consultant. The options expire November 4, 1999. In 1997,
233,000 options were cancelled due to non-performance.
Additionally, the Company has outstanding options granted in 1991 to purchase
50,000 shares at $0.55 per share, expiring May 28, 2001, to the Chief Executive
Officer and a director of the Company, 50,000 to an owner of record of 6% of the
Company's outstanding common stock, and 45,000 to a director of the Company.
Also outstanding at December 31, 1996, were options granted to an employee to
purchase 25,000 shares at $1.38, which expired June 30, 1997.
On March 3, 1997, the Company granted options to purchase 40,000 shares at $.95
per share to a consultant/director. The options may be exercised beginning
January 8, 1998 and expire on January 6, 2002.
On April 30, 1997, the Company granted options to purchase 50,000 shares at $.75
to a consultant. The options may be exercised beginning March 4, 1998 and expire
on November 4, 2000.
The following table summarizes the activity of options and warrants for the two
years ended December 31, 1997:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise Exercise
Options Warrants Price Amount
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Outstanding, December 31, 1995 885,000 2,195,998 $ 1.44 $ 4,433,197
Granted 2,995,500 1,300,003 $ 1.08 4,640,853
Reduction to exercise price -- -- $ -- (2,421,898)
Exercised (10,000) (381,067) $ 0.70 (273,357)
Cancelled (665,000) -- $ 0.68 (453,950)
Expired -- (1,839,098) $ 0.60 (1,103,459)
----------- ----------- -----------
Outstanding, December 31, 1996 3,205,500 1,275,836 $ 1.08 4,821,386
Granted 90,000 65,000 $ 1.01 156,750
Cancelled (278,000) (65,000) $ 1.13 (387,010)
Expired (25,000) -- $ 1.75 (43,750)
----------- ----------- -----------
Outstanding, December 31, 1997 2,992,500 1,275,836 $ 1.07 $ 4,547,376
=========== =========== ===========
At December 31, 1997 and 1996, the Company had a total of 4,268,336 and
4,481,336 options and warrants outstanding, respectively, at exercise prices
ranging from $0.55 to $2.00, with a weighted average remaining contractual term
of 3.1 years.
F-20
</TABLE>
<PAGE>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE 11 - STOCKHOLDERS' EQUITY (Continued)
The Company filed a registration statement on Form S-3 on June 7, 1995 to
register the shares underlying 3,053,497 warrants and 170,000 options. A
post-effective amendment was filed February 26, 1996 to adjust the number of
shares registered to equal shares underlying 2,170,998 warrants and 320,000
options. A Form S-3 was filed October 15, 1996 to register 1,375,003 shares of
common stock and the shares underlying an additional 1,875,000 options and
1,365,003 warrants.
Notes Receivable
- ----------------
During 1990, the Company issued 150,000 shares of its common stock for notes
receivable totaling $86,587. The notes were originally due in 1994 with interest
at 10% per year. The notes were amended to be due with no interest. The
underlying shares are collateral for the note and are held by the Company.
NOTE 12 - STOCK-BASED COMPENSATION
During 1996 the Company adopted Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation". The new standard required the
Company to adopt the "fair value" method with respect to stock-based
compensation of consultants and other non-employees. Options issued to
consultants and other non-employees in 1997 did not have a material effect to
the financial statements. Options issued to consultants and other non-employees
resulted in a charge to operations of $121,406 in 1996. Additionally, $24,358
was capitalized as acquisition costs in 1996.
The Company did not change its method of accounting with respect to employee
stock options; the Company continues to account for these under the "intrinsic
value" method. Had the Company adopted the fair value method with respect to
options issued to employees as well, an additional charge to income of $104,249
would have been required in 1996; proforma net income would have been $536,163
and earnings per share would have been $0.07 on both a basic and fully diluted
basis.
In estimating the above expense, the Company used the Modified Black-Scholes
American pricing model. The risk-free interest rate used was 6.2%; volatility
was estimated at 71.5%; the expected life was less than one year.
F-21
<PAGE>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE 13 - COMMITMENTS AND CONTINGENCIES
Operating Leases - The Company leases its facilities under long-term
non-cancelable operating leases. The lease terms provide for increases in future
minimum rental payments based on the Consumer Price Index, and an option to
purchase during the lease term. The lease on the Company's facility in England
is payable to the pension trust of the President of the Company's LMD and LRL
subsidiaries. The lease on the Company's Nutek facility is payable to a
partnership in which one of the former stockholders of Nutek and the husband of
a current employee of the Company's Nutek subsidiary has an interest. Future
minimum lease commitments as of December 31, 1997 are as follows:
Year Ended Total Commitments to Commitments
December 31, Commitments Related Parties To Others
- ------------ ----------------- --------------- -----------------
1998 $ 451,269 $ 66,254 $ 385,015
1999 444,735 73,071 371,664
2000 427,980 81,268 346,712
2001 378,864 42,000 336,864
2002 336,864 - 336,864
Thereafter 533,368 - 533,368
----------------- --------------- -----------------
Total $ 2,573,080 $ 262,593 $ 2,310,487
================= =============== =================
Total rentals under all operating leases charged against income amounted to
$474,500 and $461,500 for the years ended December 31, 1997 and 1996,
respectively.
Employment Agreements - The Company is obligated to make certain minimum salary
payments to the Chief Executive Officer and other employee/directors. All
contracts expire in 1999, as follows:
Year Ended
December 31, Total
----------- ---------------
1998 $ 421,220
1999 233,910
---------------
Total $ 655,130
===============
Contingencies - The Company is not currently involved in any legal proceedings
except for those arising in the ordinary course of business, none of which are
expected to have a material impact on the Company's financial statements in the
event of unfavorable resolution.
F-22
<PAGE>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE 14 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes was $1,817 and $-0- during the years ended December
31, 1997 and 1996, respectively. Cash paid for interest was $192,955 and
$119,847 during the years ended December 31, 1997 and 1996, respectively.
During 1996 the Company entered into several non-cash transactions. The Company
exchanged 600,500 options for 1,201,000 shares of Logan Medical Devices, Inc. it
did not already own in connection with the acquisition of Logan as discussed in
Note 8. Also in connection with the acquisition, LMD issued $300,000 in notes to
the former stockholders of LRL in exchange for 100% of the outstanding stock in
LRL. In connection with the acquisition of Nutek, Nutek issued $150,000 in notes
to its former stockholders as part of the purchase price. Additionally, 100,000
stock options valued at $12,333 were capitalized as part of the Nutek
acquisition, and 97,500 stock options valued at $12,025 were capitalized as part
of the LMD acquisition.
NOTE 15 - INDUSTRY SEGMENT AND EXPORT INFORMATION
Beginning in 1996 with the acquisitions of Nutek and LMD, the Company operates
in three business segments; air pollution monitoring equipment, electrical
control panels, and medical instrumentation. Following is certain information
related to each segment for 1997 and 1996:
1997 Electrical
- ---- Air Pollution Control Medical
Instruments Panels Instruments
--------------- ----------- -----------
Revenues $ 3,072,600 $ 3,299,687 $ 420,480
=============== =========== ===========
Income (loss) from operations $ (906,904) $ (143,755) $ (99,497)
=============== =========== ===========
Identifiable assets $ 2,334,399 $ 2,608,459 $ 565,002
=============== =========== ===========
Depreciation and amortization $ 33,128 $ 184,170 $ 11,727
=============== =========== ===========
Capital expenditures $ -- $ 5,417 $ 4,421
=============== =========== ===========
F-23
<PAGE>
POLLUTION RESEARCH AND CONTROL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
----------------------------------------------
NOTE 15 - INDUSTRY SEGMENT AND EXPORT INFORMATION (Continued)
1996 Electrical
- ---- Air Pollution Control Medical
Instruments Panels Instruments
----------- ----------- -----------
Revenues $ 5,672,249 $ 2,867,819 $ 264,943
=========== =========== ===========
Income (loss) from operations $ (328,590) $ 268,135 $ (11,883)
=========== =========== ===========
Identifiable assets $ 3,522,922 $ 2,966,639 $ 707,382
=========== =========== ===========
Depreciation and amortization $ 28,778 $ 91,708 $ 7,593
=========== =========== ===========
Capital expenditures $ 41,176 $ 9,757 $ 2,090
=========== =========== ===========
In 1997 and 1996, no customer accounted for 10% or more of consolidated net
sales.
Export sales for the years ended December 31, 1997 and 1996 were as follows:
1997 1996
---------- ----------
Europe and United Kingdom $1,103,673 $ 865,586
Asia and Pacific 622,228 1,200,401
Latin America and other 434,073 607,456
---------- ----------
Total $2,159,974 $2,673,443
========== ==========
NOTE 16 - CONCENTRATION OF CREDIT RISK
Concentrations of credit risk with respect to trade receivables exist due to
large balances with a few customers. At December 31, 1997 and 1996, accounts
receivable balances from two significant customers were $165,375 and $700,505,
or 25% and 40% of the total accounts receivable balance, respectively. Ongoing
credit evaluations of customers' financial conditions are performed, and
generally, no collateral is required. The Company maintains reserves for
potential credit losses, and such losses in the aggregate have not exceeded
management's expectations. Customers are located throughout the world.
The Company maintains all cash in bank accounts, which at times may exceed
federally insured limits.
F-24
<PAGE>
SIGNATURES
In Accordance with Section 13 or 15(d) of the Securities and Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: March 24, 1998 POLLUTION RESEARCH AND CONTROL CORP.
(Registrant)
By: /s/ Albert E. Gosselin, Jr.
-----------------------------------------
Albert E. Gosselin, Jr., President, Chief
Executive Officer and Chairman of the Board
of Directors
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and on the dates indicated.
Date: March 24, 1998 /s/ Albert E. Gosselin, Jr.
---------------------------------------------
Albert E. Gosselin, Jr., President, Chief
Executive Officer and Chairman of the Board
of Directors
(Principal Executive Officer)
Date: March 24, 1998 /s/ Donald R. Ford
---------------------------------------------
Donald R. Ford, Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: March 24, 1998 /s/ Barbara L. Gosselin
---------------------------------------------
Barbara L. Gosselin, Director
Date: March 24, 1998 /s/ Gary L. Dudley
---------------------------------------------
Gary L. Dudley, Director
Date: March 24, 1998 /s/Marcia A. Smith
---------------------------------------------
Marcia A. Smith, Director
Date: March 24, 1998 /s/ Craig E. Gosselin
---------------------------------------------
Craig E. Gosselin, Director
Date: March 24, 1998 /s/ Barry Soltani
---------------------------------------------
Barry Soltani, Director
25
<PAGE>
EXHIBIT INDEX
Item
Number Description
3.1 Articles of Incorporation of A. E. Gosselin Engineering, Inc. (now
"Pollution Research and Control Corp.") (Incorporated herein by
reference to Exhibit 3(a) to the Amendment No. 1 to the Registration
Statement on Form 10 of Dasibi Environmental Corporation (now
"Pollution Research and Control Corp.")
3.2 Certificate of Amendment of Articles of Incorporation of A. E.
Gosselin Engineering, Inc. (now "Pollution Research and Control
Corp.") (Incorporated herein by reference to Exhibit 3(a) to the
Amendment No. 1 to the Registration Statement on Form 10 of Dasibi
Environmental Corporation (now "Pollution Research and Control Corp.")
3.3 Certificate of Amendment of Articles of Incorporation of Dasibi
Environmental Corp. (now "Pollution Research and Control
Corp.")(Incorporated herein by reference to Exhibit 3(a) to the
Amendment No. 1 to the Registration Statement on Form 10 of Dasibi
Environmental Corporation (now "Pollution Research and Control Corp.")
3.4 By-laws of A. E. Gosselin Engineering, Inc. (now "Pollution Research
and Control Corp.") (Incorporated herein by reference to Exhibit 3(a)
to the Amendment No. 1 to the Registration Statement on Form 10 of
Dasibi Environmental Corporation (now "Pollution Research and Control
Corp.")
4.1 Form of Warrant Agreement. (Incorporated herein by reference to
Exhibit 4.1 to the Registration Statement on Form S-1 (File No.
33-26558 of Pollution Research and Control Corp., dated January 17,
1989.)
4.2 Form of Unit Purchase Warrant. (Incorporated herein by reference to
Exhibit 4.2 to the Registration Statement on Form S-1 (File No.
33-26558 of Pollution Research and Control Corp., dated January 17,
1989.)
4.3 Form of Stock Purchase Warrant. (Incorporated herein by reference to
Exhibit 4.3 to the Registration Statement on Form S-1 (File No.
33-26558 of Pollution Research and Control Corp., dated January 17,
1989.)
10.1 Warrant to Purchase 7,500 shares of Common Stock issued to Frost &
Company P.S. on February 10, 1987. (Incorporated herein by reference
to Exhibit 10.2 to the Registration Statement on Form S-1 (File No.
33-26558) of Pollution Research and Control Corp., dated January 17,
1989.)
10.2 Employment Agreement, dated July 31, 1987, between Pollution Research
and Control Corp. and Albert E. Gosselin, Jr. (Incorporated herein by
reference to Exhibit 10.3 to the Registration Statement on Form S-1
(File No. 33-26558) of Pollution Research and Control Corp., dated
January 17, 1989.)
10.3 Employees' Incentive Stock Option Plan. (Incorporated herein by
reference to Exhibit 10.4 to the Registration Statement on Form S-1
(File No. 33-26558) of Pollution Research and Control Corp., dated
January 17, 1989.)
E-1
<PAGE>
10.4 Employment Agreement, as amended, dated August 19, 1989, between
Pollution Research and Control Corp. and Albert E. Gosslein, Jr.
(Incorporated herein by reference to Exhibit 10-28 to the Annual
Report on Form 10-K for the fiscal year ended June 30, 1989.)
10.5 Lease, dated July 1, 1989, between Pollution Research and Control
Corp. and Shahik Mardeross-ASL. (Incorporated herein by reference to
Exhibit 10.30 to the Annual Report on Form 10-K for the fiscal year
ended June 30, 1989.)
10.6 Stock Option Agreement, dated May 28, 1991, between Pollution Research
and Control Corp. and Lee Sion. (Incorporated herein by reference to
Exhibit 10.14 to the Transition Report on Form 10-K for the transition
period ended June 30, 1991.)
10.7 Stock Option Agreement, dated May 28, 1991, between Pollution Research
and Control Corp. and Albert E. Gosselin, Jr., (Incorporated herein by
reference to Exhibit 10.15 to the Transition Report on Form 10-K for
the transition period ended June 30, 1991.)
10.8 Stock Option Agreement, dated May 28, 1991, between Pollution Research
and Control Corp. and Gary L. Dudley, (Incorporated herein by
reference to Exhibit 10.13 to the Transition Report on Form 10-K for
the transition period ended June 30, 1991.)
10.9 Agreement, dated November 1, 1991, between Pollution Research and
Control Corp. and KVB, Inc. (Incorporated herein by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1991.)
10.10 Purchase Agreement, dated as of December 2, 1991, between Pollution
Research and Control Corp. and CSC Industries, Inc. and affiliated
companies Pension Plans Trust. (Incorporated herein by reference to
Exhibit 10.7 to the Amendment No. 1 to the Registration Statment on
form S-1 (File No., 33-43124) of Pollution Research and Control Corp.
dated December 23, 1991.)
10.11 Warrant, dated as of December 2, 1991, issued to CSC Industries, Inc.
and affiliated companies Pension Plans Trust. (Incorporated herein by
reference to Exhibit 10.8 to the Amendment No. 1 to the Registration
Statement on form S-1 (File No. 33-43124) of Pollution Research and
Control Corp. dated December 23, 1991.)
10.12 Purchase Agreement, dated as of December 9, 1991, between Pollution
Research and Control Corp. and Richard M. Molinsky (Incorporated
herein by reference to Exhibit 10.9 to the Amendment No. 1 to the
Registration Statment on form S-1 (File No. 33- 43124) of Pollution
Research and Control Corp. dated December 23, 1991.)
10.13 Warrant, dated as of December 9, 1991, issued to Richard M. Molinsky.
(Incorporated herein by reference to Exhibit 10.10 to the Amendment
No. 1 to the Registration Statment on form S-1 (File No. 33-43124) of
Pollution Research and Control Corp. dated December 23, 1991.)
10.14 Purchase Agreement, dated as of December 11, 1991, between Pollution
Research and Control Corp. and Global Environment Fund. (Incorporated
herein by reference to Exhibit 10.11 to the Amendment No. 1 to the
Registration Statment on form S-1 (File No. 33-43124) of Pollution
Research and Control Corp. dated December 23, 1991.)
10.15 Warrant, dated as of December 11, 1991, issued to Global Enviroment
Fund. (Incorporated herein by reference to Exhibit 10.7 to the
Amendment No. 1 to the Registration Statement on form S-1 (File No.
33-43124) of Pollution Research and Control Corp. dated December 23,
1991.)
E-2
<PAGE>
10.16 Purchase Agreement, dated as of December 13, 1991, between Pollution
Research and Control Corp. and Robert A. Tantleff (Incorporated herein
by reference to Exhibit 10.13 to the Amendment No. 1 to the
Registration Statement on form S-1 (File No. 33-43124) of Pollution
Research and Control Corp. dated December 23, 1991.)
10.17 Warrant, dated as of December 2, 1991, issued to Robert A. Tantleff.
(Incorporated herein by reference to Exhibit 10.14 to the Amendment
No. 1 to the Registration Statement on form S-1 (File No. 33-43124) of
Pollution Research and Control Corp. dated December 23, 1991.)
10.18 Purchase Agreement, dated as of December 16, 1991, between Pollution
Research and Control Corp. and Stanley Baker. (Incorporated herein by
reference to Exhibit 10.15 to the Amendment No. 1 to the Registration
Statement on form S-1 (File No. 33- 43124) of Pollution Research and
Control Corp. dated December 23, 1991.)
10.19 Warrant, dated as of December 16, 1991, issued to Stanley Baker.
(Incorporated herein by reference to Exhibit 10.16 to the Amendment
No. 1 to the Registration Statment on form S-1 (File No. 33-43124) of
Pollution Research and Control Corp. dated December 23, 1991.)
10.20 Purchase Agreement, dated as of December 16, 1991, between Pollution
Research and Control Corp. and Bruce Lynch. (Incorporated herein by
reference to Exhibit 10.17 to the Amendment No. 1 to the Registration
Statement on form S-1 (File No. 33- 43124) of Pollution Research and
Control Corp. dated December 23, 1991.)
10.21 Warrant, dated as of December 16, 1991, issued to Bruce Lynch.
(Incorporated herein by reference to Exhibit 10.18 to the Amendment
No. 1 to the Registration Statement on form S-1 (File No. 33-43124) of
Pollution Research and Control Corp. dated December 23, 1991.)
10.22 Purchase Agreement, dated as of December 16, 1991, between Pollution
Research and Control Corp. and John Kilmartin. (Incorporated herein by
reference to Exhibit 10.19 to the Amendment No. 1 to the Registration
Statement on form S-1 (File No. 33- 43124) of Pollution Research and
Control Corp. dated December 23, 1991.)
10.23 Warrant, dated as of December 16, 1991, issued to John Kilmartin.
(Incorporated herein by reference to Exhibit 10.20 to the Amendment
No. 1 to the Registration Statement on form S-1 (File No. 33-43124) of
Pollution Research and Control Corp. dated December 23, 1991.)
10.24 Consulting Agreement, dated January 3, 1992, between Pollution
Research and Control Corp. and Total Software, Inc. (Incorporated
herein by reference to Exhibit 10.24 to the Annual Report on Form 10-K
for the fiscal year ended December 31, 1992.)
10.25 Option Agreement, dated January 3, 1992, between Pollution Research
and Control Corp. and Total Software, Inc. (Incorporated herein by
reference to Exhibit 10.25 to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1992.)
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10.26 Option Agreement, dated March 11, 1992 between Pollution Research and
Control Corp. and Total Software, Inc. (Incorporated herein by
reference to Exhibit 10.26 to the Annual Report on Form 10-K for the
fiscal year eneded December 31, 1992.)
10.27 Agreement, dated March 5, 1992, between Pollution Research and Control
Corp. and Lee Sion. (Incorporated herein by reference to Exhibit 10.27
to the Annual Report on Form 10-K for the fiscal year ended December
31, 1992.)
10.28 Option Agreement, dated June 22, 1992, between Pollution Research and
Control Corp. and Total Software, Inc. (Incorporated herein by
reference to Exhibit 10.28 to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1992.)
10.29 Option Agreement, dated June 22, 1992, between Pollution Research and
Control Corp. and Total Software, Inc. (Incorporated herein by
reference to Exhibit 10.29 to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1992.)
10.30 Lease Agreement, dated June 1, 1992, between Dasibi Environmental
Group. and Bernard C. Mills, Jr. (Incorporated herein by reference to
Exhibit 10.30 to the Annual Report on form 10-KSB for the fiscal year
ended December 31, 1994.)
10.31 Lease Agreement, dated January 6, 1994, between Dasibi Environmental
Group. and the Prudential Insurance Company of America. (Incorporated
herein by reference to Exhibit 10.31 to the Annual Report on form
10-KSB for the fiscal year ended December 31, 1994.)
10.32 Agreement, and Bill of Sale, dated February 18, 1994, between
Pollution Research and Control Corp. and General Monitors, Inc.
(Incorporated herein by reference to Exhibit 10.32 to the Annual
Report on form 10-KSB for the fiscal year ended December 31, 1994.)
10.33 Stipulation of Settlement, dated February 1994, between Pollution
Research and Control Corp. and Diversified Research Partners Limited
Partnership. (Incorporated herein by reference to Exhibit 10.33 to the
Annual Report on form 10-KSB for the fiscal year ended December 31,
1994.)
10.34 Requirements Contract dated March 10, 1994, between Pollution Research
and Control Corp. and Logan Research, Ltd. (Incorporated herein by
reference to Exhibit 10.34 to the Annual Report on form 10-KSB for the
fiscal year ended December 31, 1994.)
10.35 Lease Agreement dated April 15, 1994, between Dasibi Environmental
Corp. and Summit Park Associates. (Incorporated herein by reference to
Exhibit 10.35 to the Annual Report on form 10-KSB for the fiscal year
ended December 31, 1994.)
10.36 Amended Employment Agreement, effective August 31, 1993, between
Pollution Research and Control Corp. and Albert E. Gosselin, Jr.,
(Incorporated herein by reference to Exhibit 10.36 to the Annual
Report on form 10-KSB for the fiscal year ended December 31, 1994.)
10.37 Employment Agreement, dated July 20, 1994, between Pollution Research
and Control Corp. and Cynthia L. Gosselin (Incorporated herein by
reference to Exhibit 10.37 to the Annual Report on form 10-KSB for the
fiscal year ended December 31, 1994.)
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10.38 Final Judgment of Permanent Injunction and Other Relief as to
Pollution Research and Control Corp. dated July 7, 1994 in Case Number
1.94CV01425, the Securities and Exchange Commission v. Pollution
Research and Control Corp., Albert E. Gosselin and Cynthia Gosselin.
(Incorporated herein by reference to Exhibit 10.38 to the Annual
Report on form 10-KSB for the fiscal year ended December 31, 1994.)
10.39 Final Judgment of Permanent Injunction and Other Relief as to
Pollution Research and Contorl Corp. dated July 13, 1994 in Case
Number 1.94CV01425, the Securities and Exchange Commission v.
Pollution Research and Control Corp., Albert E. Gosselin and Cynthia
Gosselin. (Incorporated herein by reference to Exhibit 10.39 to the
Annual Report on form 10-KSB for the fiscal year ended December 31,
1994.)
10.40 Consent of Albert E. Gosselin dated June 7, 1994, in Case Number
1.94CV01425, the Securities and Exchange Commission v. Pollution
Research and Control Corp., Albert E. Gosselin and Cynthia Gosselin.
(Incorporated herein by reference to Exhibit 10.40 to the Annual
Report on form 10-KSB for the fiscal year ended December 31, 1994.)
10.41 Final Judgment of Permanent Injunction and Other Relief as to Cynthia
Gosselin,. dated July 13, 1994 in Case Number 1.94CV01425, the
Securities and Exchange Commission v. Pollution Research and Control
Corp., Albert E. Gosselin and Cynthia Gosselin. (Incorporated herein
by reference to Exhibit 10.41 to the Annual Report on form 10-KSB for
the fiscal year ended December 31, 1994.)
10.42 Consent of Cynthia L.. Gosselin dated June 7, 1994, in Case Number
1.94CV01425, the Securities and Exchange Commission v. Pollution
Research and Control Corp., Albert E. Gosselin and Cynthia Gosselin.
(Incorporated herein by reference to Exhibit 10.41 to the Annual
Report on form 10-KSB for the fiscal year ended December 31, 1994.)
10.43 Warrant to Purchase 40,000 Shares of Common Stock of Pollution
Research and Control Corp., dated January 22, 1990, issued to Marty
Williams. ((Incorporated herein by reference to Exhibit 4.9 to the
Registration Statement on form S-3 (Registration No. 33-60035) of
Pollution Research and Control Corp. dated June 7, 1995.)
10.44 Amendment to Warrant to Purchase Common Stock of Pollution Research
and Control Corp., of Marty Williams, dated effective June 6, 1994.
((Incorporated herein by reference to Exhibit 4.10 to the Registration
Statement on form S-3 (Registration No., 33-60035) of Pollution
Research and Control Corp. dated June 7, 1995.)
10.45 Warrant to Purchase 202,500 Shares of Common Stock of Pollution
Research and Control Corp., dated December 2, 1991, issued to CSC
Industries, Inc. and affiliated companies. (Incorporated herein by
reference to Exhibit 4.11 to the Registration Statement on form S-3
(Registration No. 33-60035) of Pollution Research and Control Corp.
dated June 7, 1995.)
10.46 Amendment Warrant to Purchase Common Stock of Pollution Research and
Control Corp., of CSC Industries, Inc. and affiliated companies
Pension Plans Trust, dated effective June 6, 1994. (Incorporated
herein by reference to Exhibit 4.12 to the Registration Statement on
form S-3 (Registration No. 33-60035) of Pollution Research and Control
Corp. dated June 7, 1995.)
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<PAGE>
10.47 Warrant to Purchase 67,500 Shares of Common Stock of Pollution
Research and Control Corp., dated December 8, 1991, issued to Richard
M. Molinsky. (Incorporated herein by reference to Exhibit 4.13 to the
Registration Statement on form S-3 (Registration No. 33-60035) of
Pollution Research and Control Corp. dated June 7, 1995.)
10.48 Amendment to Warrant to Purchase Common Stock of Pollution Research
and Control Corp., of Richard M. Molinsky, dated effective June 6,
1994. (Incorporated herein by reference to Exhibit 4.14 to the
Registration Statement on form S-3 (Registration No. 33-60035) of
Pollution Research and Control Corp. dated June 7, 1995.)
10.49 Warrant to Purchase 135,000 Shares of Common Stock of Pollution
Research and Control Corp., dated December 11, 1991, issued to
Kingsley & Co. (formerly Global Environment Fund) (Incorporated herein
by reference to Exhibit 4.15 to the Registration Statement on form S-3
(Registration No. 33-60035) of Pollution Research and Control Corp.
dated June 7, 1995.)
10.50 Amendment to Warrant to Purchase Common Stock of Pollution Research
and Control Corp. of Kingsley & Co. (formerly Global Environment
Fund), dated effective June 6, 194. (Incorporated herein by reference
to Exhibit 4.16 to the Registration Statement on form S-3
(Registration No. 33-60035) of Pollution Research and Control Corp.
dated June 7, 1995.)
10.51 Warrant to Purchase 67,500 Shares of Common Stock of Pollution
Research and Control Corp., dated December 13, 1991, issued to A.
Robert Tantleff. (Incorporated herein by reference to Exhibit 4.17 to
the Registration Statement on form S-3 (Registration No. 33-60035) of
Pollution Research and Control Corp. dated June 7, 1995.)
10.52 Amendment to Warrant to Purchase Common Stock of Pollution Research
and Control Corp. of A. Robert Tantleff, dated effective June 6, 1994.
(Incorporated herein by reference to Exhibit 4.18 to the Registration
Statement on form S-3 (Registration No. 33-60035) of Pollution
Research and Control Corp. dated June 7, 1995.)
10.53 Warrant to Purchase 101,250 Shares of Common Stock of Pollution
Research and Control Corp., dated December 16, 1991, issued to Stanley
Becker. (Incorporated herein by reference to Exhibit 4.19 to the
Registration Statement on form S-3 (Registration No. 33-60035) of
Pollution Research and Control Corp. dated June 7, 1995.)
10.54 Amendment to Warrant to Purchase Common Stock of Pollution Research
and Control Corp. of Stanley Becker, dated effective June 6, 1994.
(Incorporated herein by reference to Exhibit 4.20 to the Registration
Statement on form S-3 (Registration No. 33-60035) of Pollution
Research and Control Corp. dated June 7, 1995.)
10.55 Warrant to Purchase 27,000 Shares of Common Stock of Pollution
Research and Control Corp., dated December 16, 1991, issued to John
Kilmartin. (Incorporated herein by reference to Exhibit 4.21 to the
Registration Statement on form S-3 (Registration No. 33-60035) of
Pollution Research and Control Corp. dated June 7, 1995.)
10.56 Amendment to Warrant to Purchase Common Stock of Pollution Research
and Control Corp. of John Kilmartin, dated effective June 6, 1994.
(Incorporated herein by reference to Exhibit 4.22 to the Registration
Statement on form S-3 (Registration No. 33-60035) of Pollution
Research and Control Corp. dated June 7, 1995.)
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<PAGE>
10.57 Warrant to Purchase 74,250 Shares of Common Stock of Pollution
Research and Control Corp., dated December 16, 1991, issued to Bruce
Lynch.. (Incorporated herein by reference to Exhibit 4.23 to the
Registration Statement on form S-3 (Registration No. 33-60035) of
Pollution Research and Control Corp. dated June 7, 1995.)
10.58 Amendment to Warrant to Purchase Common Stock of Pollution Research
and Control Corp. of Bruce Lynch, dated effective June 6, 1994.
(Incorporated herein by reference to Exhibit 4.24 to the Registration
Statement on form S-3 (Registration No. 33- 60035) of Pollution
Research and Control Corp. dated June 7, 1995.)
10.59 Warrant to Purchase 25,000 Shares of Common Stock of Pollution
Research and Control Corp. of Michael Young, dated May 24, 1991.
(Incorporated herein by reference to Exhibit 4.25 to the Registration
Statement on form S-3 (Regsistration No. 33-60035) of Pollution
Research and Control Corp. dated June 7, 1995.)
10.60 Amendment to Warrant to Purchase Common Stock of Pollution Research
and Control Corp. of Michael Young, dated effective June 6, 1994.
(Incorporated herein by reference to Exhibit 4.26 to the Registration
Statement on form S-3 (Regsistration No. 33-60035) of Pollution
Research and Control Corp. dated June 7, 1995.)
10.61 Warrant to Purchase 12,000 Shares of Common Stock of Pollution
Research and Control Corp., dated December 16, 1991, of Kennedy
Capital Management, dated November 26, 1991. (Incorporated herein by
reference to Exhibit 4.27 to the Registration Statement on form S-3
(Regsistration No. 33-60035) of Pollution Research and Control Corp.
dated June 7, 1995.)
10.62 Amendment to Warrant to purchase Common Stock of Pollution Research
and Control Corp. of Kennedy Capital Management dated effective June
6, 1994. (Incorporated herein by reference to Exhibit 4.28 to the
Registration Statement on form S-3 (Regsistration No. 33-60035) of
Pollution Research and Control Corp. dated June 7, 1995.)
10.63 Pollution Research and Control Corp. Common Stock Purchase Warrant for
the purchase of 60,000 shares of the Equity Group Inc. dated August
31, 1993. (Incorporated herein by reference to Exhibit 4.29 to the
Registration Statement on Form S-3 (Registration No. 33-60035) of
Pollution Research and Control Corp. dated June 7, 1995.)
10.64 Warrant to Purchase 7,500 Shares of Common Stock of Pollution Research
and Control Corp. of Stanely Becker dated November 8, 1993.
(Incorporated herein by reference to Exhibit 4.30 to the Registration
Statement on Form S-3 (Registration No. 33-60035) of Pollution
Research and Control Corp. dated June 7, 1995.)
10.65 Amendment to Warrant to Purchase Common Stock of Pollution Research
and Control Corp. of Stanley Becker, dated effective June 6, 1994.
(Incorporated herein by reference to Exhibit 4.31 to the Registration
Statement on Form S-3 (Registration No. 33-60035) of Pollution
Research and Control Corp. dated June 7, 1995.)
10.66 Warrant to Purchase 5,500 Shares of Common Stock of Pollution Research
and Control Corp. of Bruce Lynch dated November 8, 1993. (Incorporated
herein by reference to Exhibit 4.32 to the Registration Statement on
Form S-3 (Registration No. 33-60035) of Pollution Research and Control
Corp. dated June 7, 1995.)
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<PAGE>
10.67 Amendment to Warrant to Purchase Common Stock of Pollution Research
and Control Corp. of Bruce Lynch, dated effective June 6, 1994.
(Incorporated herein by reference to Exhibit 4.33 to the Registration
Statement on Form S-3 (Registration No. 33- 60035) of Pollution
Research and Control Corp. dated June 7, 1995.)
10.68 Warrant to Purchase 7,500 Shares of Common Stock of Pollution Research
and Control Corp. of Robert Tantleff dated November 8, 1993.
(Incorporated herein by reference to Exhibit 4.34 to the Registration
Statement on Form S-3 (Registration No. 33-60035) of Pollution
Research and Control Corp. dated June 7, 1995.)
10.69 Amendment to Warrant to Purchase Common Stock of Pollution Research
and Control Corp. of Robert Tantleff, dated effective June 6, 1994.
(Incorporated herein by reference to Exhibit 4.35 to the Registration
Statement on Form S-3 (Registration No. 33-60035) of Pollution
Research and Control Corp. dated June 7, 1995.)
10.70 Warrant to Purchase 5,000 Shares of Common Stock of Pollution Research
and Control Corp. of Edward G. Lowell dated November 8, 1995.
(Incorporated herein by reference to Exhibit 4.36 to the Registration
Statement on Form S-3 (Registration No. 33-60035) of Pollution
Research and Control Corp. dated June 7, 1995.)
10.71 Option to Purchase 25,000 Shares of Common Stock of Pollution Research
and Control Corp. of Randy Foy dated as of July 4, 1994. (Incorporated
herein by reference to Exhibit 4.37 to the Registration Statement on
Form S-3 (Registration No. 33-60035) of Pollution Research and Control
Corp. dated June 7, 1995.)
10.72 Amendment to Warrant to Purchase Common Stock of Pollution Research
and Control Corp. of Frost and Company P.S. dated effective February
9, 1992. (Incorporated herein by reference to Exhibit 4.38 to the
Registration Statement on Form S-3 (Registration No. 33-60035) of
Pollution Research and Control Corp. dated June 7, 1995.)
10.73 Amendment to Warrant to Purchase Common Stock of Pollution Research
and Control Corp. of Kial, Ltd., dated effective January 9, 1992.
(Incorporated herein by reference to Exhibit 4.39 to the Registration
Statement on Form S-3 (Registration No. 33- 60035) of Pollution
Research and Control Corp. dated June 7, 1995.)
10.74 Option to Purchase 40,000 Shares of Common Stock of Pollution Research
and Control Corp. of Albert E. Gosselin, Jr., dated as of June 29,
1995 (Incorporated herein by reference to Exhibit 4.40 to the
Post-Effective Amendment No. 1 to the Registration Statement on Form
S-3 (Registration No. 33-60035) of Pollution Research and Control
Corp., dated January 17, 1996.)
10.75 Option to Purchase 20,000 Shares of Common Stock of Pollution Research
and Control Corp. of Cindy Gosselin dated as of June 29, 1995.
(Incorporated herein by reference to Exhibit 4.41 to the
Post-Effective Amendment No. 1 to the Registration Statement on Form
S-3 (Registration No. 33-60035) of Pollution Research and Control
Corp., dated January 17, 1996.)
10.76 Option to Purchase 20,000 Shares of Common Stock of Pollution Research
and Control Corp. of Barbara L. Gosselin dated as of June 29, 1995.
(Incorporated herein by reference to Exhibit 4.42 to the
Post-Effective Amendment No. 1 to the Registration Statement on Form
S-3 (Registration No. 33-60035) of Pollution Research and Control
Corp., dated January 17, 1996.)
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<PAGE>
10.77 Option to Purchase 20,000 Shares of Common Stock of Pollution Research
and Control Corp. of Gary L. Dudley dated as of June 29, 1995.
(Incorporated herein by reference to Exhibit 4.43 to the
Post-Effective Amendment No. 1 to the Registration Statement on Form
S-3 (Registration No. 33-60035) of Pollution Research and Control
Corp., dated January 17, 1996.)
10.78 Option to Purchase 20,000 Shares of Common Stock of Pollution Research
and Control Corp. of Marcia Smith dated as of June 29, 1995.
(Incorporated herein by reference to Exhibit 4.44 to the
Post-Effective Amendment No. 1 to the Registration Statement on Form
S-3 (Registration No. 33-60035) of Pollution Research and Control
Corp., dated January 17, 1996.)
10.79 Option to Purchase 20,000 Shares of Common Stock of Pollution Research
and Control Corp. of Craig E. Gosselin dated as of June 29, 1995.
(Incorporated herein by reference to Exhibit 4.45 to the
Post-Effective Amendment No. 1 to the Registration Statement on Form
S-3 (Registration No. 33-60035) of Pollution Research and Control
Corp., dated January 17, 1996.)
10.80 Option to Purchase 20,000 Shares of Common Stock of Pollution Research
and Control Corp. of Keith Gosselin dated as of June 29, 1995.
(Incorporated herein by reference to Exhibit 4.46 to the
Post-Effective Amendment No. 1 to the Registration Statement on Form
S-3 (Registration No. 33-60035) of Pollution Research and Control
Corp., dated January 17, 1996.)
10.81 Option to Purchase 10,000 Shares of Common Stock of Pollution Research
and Control Corp. of Mike Chu dated as of June 29, 1995. (Incorporated
herein by reference to Exhibit 4.47 to the Post-Effective Amendment
No. 1 to the Registration Statement on Form S-3 (Registration No.
33-60035) of Pollution Research and Control Corp., dated January 17,
1996.)
10.82 Option to Purchase 10,000 Shares of Common Stock of Pollution Research
and Control Corp. of Kimberly Chu dated as of June 29, 1995.
(Incorporated herein by reference to Exhibit 4.48 to the
Post-Effective Amendment No. 1 to the Registration Statement on Form
S-3 (Registration No. 33-60035) of Pollution Research and Control
Corp., dated January 17, 1996.)
10.83 Option to Purchase 5,000 Shares of Common Stock of Pollution Research
and Control Corp. of Tolly Smith dated as of June 29, 1995.
(Incorporated herein by reference to Exhibit 4.49 to the
Post-Effective Amendment No. 1 to the Registration Statement on Form
S-3 (Registration No. 33-60035) of Pollution Research and Control
Corp., dated January 17, 1996.)
10.84 Option to Purchase 25,000 Shares of Common Stock of Pollution Research
and Control Corp. of Randy Foy dated as of June 29, 1995.
(Incorporated herein by reference to Exhibit 4.50 to the
Post-Effective Amendment No. 1 to the Registration Statement on Form
S-3 (Registration No. 33-60035) of Pollution Research and Control
Corp., dated January 17, 1996.)
10.85 Option to Purchase 200,000 Shares of Common Stock of Pollution
Research and Control Corp. of J. Paul Consulting Group dated effective
July 18, 1995. (Incorporated herein by reference to Exhibit 4.51 to
the Post-Effective Amendment No. 1 to the Registration Statement on
Form S-3 (Registration No. 33-60035) of Pollution Research and Control
Corp., dated January 17, 1996.)
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10.86 Agreement dated June 11, 1996, among Logan Medical Devices, Inc.,
party of the first part, Ronald Bruce Logan-Sinclair and Howard George
Vincent Cooke, parties of the second part, and Pollution Research and
Control Corp., party of the third part. (Incorporated herein by
reference to Exhibit 10.86 to the Annual Report on Form 10- K for the
fiscal year ended December 31, 1996.)
10.87 Employment Agreement dated June 11, 1996, between Logan Medical
Devices, Inc. and Logan Research Ltd., on the one hand, and Ronald
Bruce Logan-Sinclair, on the other hand. (Incorporated herein by
reference to Exhibit 10.87 to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.)
10.88 Guarantee dated effective June 11, 1996, by Logan Medical Devices,
Inc. in favor of Namulas Pension Trustees Limited. (Incorporated
herein by reference to Exhibit 10.88 to the Annual Report on Form 10-K
for the fiscal year ended December 31, 1996.)
10.89 Loan and Security Agreement dated June 28, 1996, between Logan Medical
Devices, Inc., on the one hand, and Ronald Bruce Logan-Sinclair and
Howard George Vincent Cooke, on the other hand. (Incorporated herein
by reference to Exhibit 10.89 to the Annual Report on Form 10-K for
the fiscal year ended December 31, 1996.)
10.90 Nine Per Cent Debenture due June 28, 2,006, in the face amount of
$285,714.29, bearing interest quarterly commencing June 30, 1998.
(Incorporated herein by reference to Exhibit 10.90 to the Annual
Report on Form 10-K for the fiscal year ended December 31, 1996.)
10.91 Option to Purchase 10,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Phil Huss. Option Agreement, datedas of
April 1, 1996 between Pollution Research and Control Corp. and Phil
Hull. (Incorporated herein by reference to Exhibit 4.11 to the
Registration Statement on Form S-3 (Registration No. 33-14133) of
Pollution Research and Control Corp. dated October 15, 1996.)
10.92 Consulting Agreement dated as of May 30, 1996, between Pollution
Research and Control Corp. and Liviakis Financial Communications, Inc.
(Incorporated herein by reference to Exhibit 4.12 to the Registration
Statement on Form S-3 (Registration No. 33-14133) of Pollution
Research and Control Corp. dated October 15, 1996.)
10.93 Non-Qualified Stock Option Agreement dated as of May 30, 1996, between
Pollution Research and Control Corp. and Liviakis Financial
Communications, Inc. (Incorporated herein by reference to Exhibit 4.13
to the Registration Statement on Form S-3 (Registration No. 33-14133)
of Pollution Research and Control Corp. dated October 15, 1996.)
10.94 Non-Qualified Stock Option Agreement dated as of May 30, 1996, between
Pollution Research and Control Corp. and Robert B. Prag. (Incorporated
herein by reference to Exhibit 4.14 to the Registration Statement on
Form S-3 (Registration No. 33- 14133) of Pollution Research and
Control Corp. dated October 15, 1996.)
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10.95 Amendment to Non-Qualified Stock Option Agreement dated July 31, 1996,
between Pollution Research and Control Corp. and Liviakis Financial
Communications, Inc. (Incorporated herein by reference to Exhibit 4.15
to the Registration Statement on Form S-3 (Registration No. 33-14133)
of Pollution Research and Control Corp. dated October 15, 1996.)
10.96 Amendment to Non-Qualified Stock Option Agreement dated July 31, 1996,
between Pollution Research and Control Corp. and Robert B. Prag.
(Incorporated herein by reference to Exhibit 4.16 to the Registration
Statement on Form S-3 (Registration No. 33-14133) of Pollution
Research and Control Corp. dated October 15, 1996.)
10.97 Amendment to Consulting Agreement dated 5/30/96 between Pollution
Research and Control Corp. and Liviakis Financial Communications,
Inc., dated July 31, 1996. (Incorporated herein by reference to
Exhibit 4.17 to the Registration Statement on Form S-3 (Registration
No.33-14133) of Pollution Research and Control Corp. dated October 15,
1996.)
10.98 Second Amendment to Consulting Agreement dated 5/30/96 between
Pollution Research and Control Corp. and Liviakis Financial
Communications, Inc. dated as of August 28, 1996. (Incorporated herein
by reference to Exhibit 4.18 to the Registration Statement on Form S-3
(Registration No. 33-14133) of Pollution Research and Control Corp.
dated October 15, 1996.)
10.99 Option to Purchase 55,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Aubrey Hornsby; Option Agreement dated as
of May 31, 1996, between Pollution Research and Control Corp. and
Aubrey Hornsby. (Incorporated herein by reference to Exhibit 10.99 to
the Annual Report on Form 10- K for the fiscal year ended December 31,
1996.)
10.100 Option to Purchase 40,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Ernestine Taylor; Option Agreement, dated
as of May 31, 1996, between Pollution Research and Control Corp.
Ernestine Taylor. (Incorporated herein by reference to Exhibit 10.100
to the Annual Report on Form 10-K for the fiscal year ended December
31, 1996.)
10.101 Option to Purchase 30,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Debbie Kendrick; Option Agreement, dated
as of May 31, 1996, between Pollution Research and Control Corp. and
Debbie Kendrick. (Incorporated herein by reference to Exhibit 10.101
to the Annual Report on Form 10- K for the fiscal year ended December
31, 1996.)
10.102 Option to Purchase 25,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Roland Fink; Option Agreement, dated as of
May 31, 1996, between Pollution Research and Control Corp. and Roland
Fink. (Incorporated herein by reference to Exhibit 10.102 to the
Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
10.103 Option to Purchase 20,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Charles Conner; Option Agreement, dated as
of May 31, 1996 between Pollution Research and Control Corp. and
Charles Conner. (Incorporated herein by reference to Exhibit 10.103 to
the Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
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10.104 Option to Purchase 20,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Patricia Cudd; Option Agreement, dated as
of May 31, 1996, between Pollution Research and Control Corp. and
Patricia Cudd. (Incorporated herein by reference to Exhibit 10.104 to
the Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
10.105 Option to Purchase 20,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Jeffrey Harkey; Option Agreement, dated as
of May 31, 1996, between Pollution Research and Control Corp. and
Jeffrey Harkey. (Incorporated herein by reference to Exhibit 10.105 to
the Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
10.106 Option to Purchase 10,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to James Bowers; Option Agreement, dated as
of May 31, 1996, between Pollution Research and Control Corp. and
James Bowers. (Incorporated herein by reference to Exhibit 10.106 to
the Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
10.107 Option to Purchase 10,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Michael Jones; Option greement, dated as
of May 31, 1996, between Pollution Research Corp. and Michael Jones.
(Incorporated herein by reference to Exhibit 10.107 to the Annual
Report on Form 10-K for the fiscal year ended December 31, 1996.)
10.108 Option to Purchase 10,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Charles McQuaig; Option Agreement, dated
as of May 31, 1996, between Pollution Research and Control Corp. and
Charles McQuaig.(Incorported herein by reference to Exhibit 10.108 to
the Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
10.109 Option to Purchase 10,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Daniel Patanjo; Option Agreement, dated as
of May 31, 1996, between Pollution Research and Control Corp. and
Daniel Patanjo. (Incorporated herein by reference to Exhibit 10.109 to
the Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
10.110 Option to Purchase 10,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Karen Perry; Option Agreement, dated as of
May 31, 1996, between Pollution Research and Control Corp. and Karen
Perry. (Incorporated herein by reference to Exhibit 10.110 to the
Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
10.111 Option to Purchase 10,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Ricky Sonnier; Option Agreement, dated as
of May 31, 1996, between Pollution Research and Control Corp. and
Ricky Sonnier. (Incorporated herein by reference to Exhibit 10.111 to
the Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
10.112 Option to Purchase 10,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Victor Valerio; Option Agreement, dated as
of May 31, 1996, between Pollution Research and Control Corp. and
Victor Valerio. (Incorporated herein by reference to Exhibit 10.112 to
the Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
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<PAGE>
10.113 Option to Purchase 5,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Spencer Abrams; Option Agreement, dated as
of May 31, 1996, between Pollution Research and Control Corp. and
Spencer Abrams. (Incorporated herein by reference to Exhibit 10.113 to
the Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
10.114 Option to Purchase 5,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Dan Busby; Option Agreement, dated as of
May 31, 1996, between Pollution Research and Control Corp. and Dan
Busby. (Incorporated herein by reference to Exhibit 10.114 to the
Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
10.115 Option to Purchase 5,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Frank Getautas; Option Agreement, dated as
of May 31, 1996, between Pollution Research and Control Corp. and
Frank Getautas. (Incorporated herein by reference to Exhibit 10.115 to
the Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
10.116 Option to Purchase 5,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Mitzi Narramore; Option Agreement, dated
as of May 31, 1996, between Pollution Research and Control Corp. and
Mitzi Narramore. (Incorporated herein by reference to Exhibit 10.116
to the Annual Report on Form 10-K for the fiscal year ended December
31, 1996.)
10.117 Option to Purchase 300,000 Shares of Common Stock of Pollution
Research and Control Corp. issued to Ron Logan-Sinclair; Option
Agreement, dated as of June 1, 1996, between Pollution Research and
Control Corp. and Ron Logan-Sinclair. (Incorporated herein by
reference to Exhibit 10.117 to the Annual Report on Form 10- K for the
fiscal year ended December 31, 1996.)
10.118 Option to Purchase 123,000 Shares of Common Stock of Pollution
Research and Control Corp. issued to Albert E. Gosselin; Option
Agreement, dated as of June 1, 1996, between Pollution Research and
Control Corp. and Albert E. Gosselin. (Incorporated herein by
reference to Exhibit 10.118 to the Annual Report on Form 10- K for the
fiscal year ended December 31, 1996.)
10.119 Option to Purchase 120,000 Shares of Common Stock of Pollution
Research and Control Corp. issued to Albert E. Gosselin; Option
Agreement, dated as of June 1, 1996, between Pollution Research and
Control Corp. and Albert E. Gosslein. (Incorporated herein by
reference to Exhibit 4.19 to the Registration Statement on Form S-3
(Registration No. 33-14133) of Pollution Research and Control Corp.
dated October 15, 1996.)
10.120 Option to Purchase 40,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Gary L. Dudley; Option Agreement, dated as
of June 1, 1996, between Pollution Research and Control Corp. and Gary
L. Dudley. (Incorporated herein by reference to Exhibit 4.20 to the
Registration Statement on Form S-3 (Registration No. 33-14133) of
Pollution Research and Control Corp.dated October 15, 1996.)
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<PAGE>
10.121 Option to Purchase 20,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Gary L. Dudley; Option Agreement, dated as
of June 1, 1996, between Pollution Research and Control Corp. and Gary
L. Dudley. (Incorporated herein by reference to Exhibit 10.121 to the
Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
10.122 Option to Purchase 40,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Craig E. Gosselin; Option Agreement, dated
as of June 1, 1996, between Pollution Research and Control Corp. and
Craig E. Gosselin. (Incorporated herein by reference to Exhibit 4.21
to the Registration Statement on Form S-3 (Registration No. 33-14133)
of Pollution Research and Control Corp. dated October 15, 1996.)
10.123 Option to Purchase 20,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Craig E. Gosselin; Option Agreement, dated
as of June 1, 1996, between Pollution Research and Control Corp. and
Craig E. Gosselin. (Incorporated herein by reference to Exhibit 10.123
to the Annual Report on Form 10- K for the fiscal year ended December
31, 1996.)
10.124 Option to Purchase 40,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Cynthia L. Gosselin; Option Agreement,
dated as of June 1, 1996, between Pollution Research and Control Corp.
and Cynthia L. Gosselin. (Incorporated herein by reference to Exhibit
4.22 to the Registration Statement on Form S-3 (Registration No.
33-14133) of Pollution Research and Control Corp. dated October 15,
1996.
10.125 Option to Purchase 20,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Cynthia L. Gosslin; Option Agreement,
dated as of June 1, 1996, between Pollution Research and Control Corp.
and Cynthia L. Gosselin. (Incorporated herein by reference to Exhibit
10.125 to the Annual Report on Form 10- K for the fiscal year ended
December 31, 1996.)
10.126 Option to Purchase 40,000 shares of Common Stock of Pollution Research
and Control Corp. issued to Marcia Smith; Option Agreement, dated as
of June 1, 1996, between Pollution Research and Control Corp. and
Marcia Smith. (Incorporated herein by reference to Exhibit 4.23 to the
Registration Statement on Form S-3 (Registration No. 33-14133) of
Pollution Research and Control Corp. dated October 15, 1996.)
10.127 Option to Purchase 20,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Marcia Smith; Option Agreement, dated as
of June 1, 1996, between Pollution Research and Control Corp. and
Marcia Smith. (Incorporated herehin by reference to Exhibit 10.127 to
the Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
10.128 Option to Purchase 40,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Margaret Jones; Option Agreement, dated as
of June 1, 1996, between Pollution Research and Control Corp. and
Margaret Jones. (Incorporated herein by reference to Exhibit 4.24 to
the Registration Statement on Form S-3 (Registration No. 33-14133) of
Pollution Research and Control Corp. dated October 15, 1996.)
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<PAGE>
10.129 Option to Purchase 20,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Margaret Jones; Option Agreement, dated as
of June 1, 1996, between Pollution Research and Control Corp. and
Margaret Jones. (Incorporated herein by reference to Exhibit 10.129 to
the Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
10.130 Option to Purchase 37,500 Shares of Common Stock of Pollution Research
Corp. issued to Lee Sion; Option Agreement, dated as of June 1, 1996,
between Pollution Research and Control Corp. and Lee Sion.
(Incorporated herein by reference to Exhibit 10.130 to the Annual
Report on Form 10-K for the fiscal year ended December 31, 1996.)
10.131 Option to Purchase 20,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Patricia Cudd; Option Agreement, dated as
of June 1, 1996, between Pollution Research and Control Corp. and
Patricia Cudd. (Incorporated herein by reference to Exhibit 10.131 to
the Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
10.132 Option to Purchase 20,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Roland Fink; Option Agreement, dated as of
June 1, 1996, between Pollution Research and Control Corp. and Roland
Fink. (Incorporated herein by reference to Exhibit 10.132 to the
Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
10.133 Purchase Agreement, dated as of June 14, 1996, between Pollution
Research and Control Corp. and John Ann Hotchkiss; Warrant to Purchase
291,667 Shares of Common Stock of Pollution Research and Control Corp.
dated June 15, 1996, issued to John Ann Hotchkiss. (Incorporated
herein by reference to Exhibits 4.25 and 4.26 to the Registration
Statement on Form S-3 (Registration No. 33-14133) of Pollution
Research and Control Corp. dated October 15, 1996.)
10.134 Purchase Agreement, dated as of June 14, 1996, between Pollution
Research and Control Corp. and David Firestone; Warrant to Purchase
166,667 Shares of Common Stock of Pollution Research and Control Corp.
dated June 15, 1996, issued to David Firestone. (Incorporated herein
by reference to Exhibits 4.27 and 4.28 to the Registration Statement
on Form S-3 (Registration No. 33-14133) of Pollution Research and
Control Corp. dated October 15, 1996.)
10.135 Purchase Agreement, dated as of June 14, 1996, between Pollution
Research and Control Corp. and Irawan Onggara; Warrant to Purchase
166,667 Shares of Common Stock of Pollution Research and Control
Corp., dated June 15, 1996, issued to Irawan Onggara.(Incorporated
herein by reference to Exhibits 4.29 and 4.30 to the Registration
Statement on Form S-3 (Registration No. 33-14133) of Pollution
Research and Control Corp. dated October 15, 1996.)
10.136 Purchase Agreement, dated as of June 14, 1996, between Pollution
Research and Control Corp. and John M. Liviakis; Warranto to Purchase
66,667 Shares of Common Stock of Pollution Research and Control Corp.
dated June 15, 1996, issued to John M. Liviakis. (Incorporated herein
by reference to Exhibits 4.31 and 4.32 to the Registration Statement
on Form S-3 (Registration No. 33-14133) of Pollution Research and
Control Corp. dated October 15, 1996.)
10.137 Purchase Agreement, dated as of June 14, 1996, between Pollution
Research and Control Corp. and Robert S. London; Warrant to Purchase
66,667 Shares of Common Stock of Pollution Research and Control Corp.,
dated June 15, 1996, issued to Robert S. London. (Incorporated herein
by reference to Exhibits 4.33 and 4.34 to the Registration Statement
on Form S-3 (Registration No. 33-14133) of Pollution Research and
Control Corp. dated October 15, 1996.)
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<PAGE>
10.138 Purchase Agreement, dated as of June 14, 1996, between Pollution
Research and Control Corp. and Robert B. Prag; Warranto to Purchase
66,667 Shares of Common Stock of Pollution Research and Control Corp.,
dated June 15, 1996, issued to Robert B. Prag. (Incorporated herein by
reference to Exhibits 4.35 and 4.36 to the Registration Statement on
Form S-3 (Registration No. 33-14133) of Pollution Research and Control
Corp. dated October 15, 1996.)
10.139 Purchase Agreement, dated as of June 14, 1996, between Pollution
Research and Control Corp. and Shawn Cady; Warrant to Purchase 41,667
Shares of Common Stock of Pollution Research and Control Corp., dated
June 15, 1996, issued to Shawn Cady. (Incorporated herein by reference
to Exhibits 4.37 and 4.38 to the Registration Statement on Form S-3
(Registration No. 33-14133) of Pollution Research and Control Corp.
dated October 15, 1996.)
10.140 Purchase Agreement, dated as of June 14, 1996, between Pollution
Research and Control Corp. and Donald Carstens; Warrant to Purchase
41,667 Shares of Common Stock of Pollution Research and Control Corp.,
dated June 15, 1996 issued to Donald Carstens. (Incorporated herein by
reference to Exhibits 4.39 and 4.40 to the Registration Statement on
Form S-3 (Registration No. 33-14133) of Pollution Research and Control
Corp. dated October 15, 1996.)
10.141 Purchase Agreement, dated as of June 14, 1996, between Pollution
Research and Control Corp. and Ling Nen Chuan; Warrant to Purchase
41,667 Shares of Common Stock of Pollution Research and Control Corp.,
dated June 15, 1996, issued to Ling Nen Chuan. (Incorporated herein by
reference to Exhibits 4.41 and 4.42 to the Registration Statement on
Form S-3 (Registration No. 33-14133) of Pollution Research and Control
Corp. dated October 15, 1996.)
10.142 Purchase Agreement, dated as of June 14, 1996, between Pollution
Research and Control Corp. and Sanibel Capital Corporation; Warrant to
Purchase 41,667 Shares of Common Stock of Pollution Research and
Control Corp. dated June 15, 1996, issued to Sanibel Capital
Corporation. (Incorporated herein by reference to Exhibits 4.43 and
4.44 to the Registration Statement on Form S-3 (Registration No.
33-14133) of Pollution Research and Control Corp. dated October 15,
1996.)
10.143 Purchase Agreement, dated as of June 14, 1996, between Pollution
Research and Control Corp. and Donna Sizemore; Warrant to Purchase
8,333 Shares of Common Stock of Pollution Research and Control Corp.,
dated June 15, 1996, issued to Donna Sizemore. (Incorporated herein by
reference to Exhibits 4.45 and 4.46 to the Registration Statement on
Form S-3 (Registration No. 33-14133) of Pollution Research and Control
Corp. dated October 15, 1996.)
10.144 Option to Purchase 25,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Randy Foy; Option Agreement, dated as of
July 1, 1996, between Pollution Research and Control Corp. and Randy
Foy. (Incorporated herein by reference to Exhibits 4.47 to the
Registration Statement on Form S-3 (Registration No. 33-14133) of
Pollution Research and Control Corp. dated October 15, 1996.)
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<PAGE>
10.145 Option to Purchase 40,000 Shares of Common Stock of Pollution Research
and Control Corp. issued to Paul Richardson; Option Agreement, dated
as of August 6, 1996, between Pollution Research and Control Corp. and
Paul Richardson. (Incorporated herein by reference to Exhibit 10.145
to the Annual Report on Form 10- K for the fiscal year ended December
31, 1996.)
10.146 Letter Agreement, dated as of September 20, 1996, between Pollution
Research and Control Corp. and Neil C. Sullivan; Warrant to Purchase
300,000 Shares of Common Stock of Pollution Research and Control Corp.
dated September 20, 1996, issued to Neil C. Sullivan. (Incorporated
herein by reference to Exhibits 4.48 and 4.49 to the Registration
Statement on Form S-3 (Registration No. 33-14133) of Pollution
Research and Control Corp. dated October 15, 1996.)
10.147 Consulting Agreement dated November 19, 1996, between Pollution
Research and Control Corp. and Fenway Advisory Group. (Incorporated
herein by reference to Exhibit 10.147 to the Annual Report on Form
10-K for the fiscal year ended December 31, 1996.)
10.148 Option to Purchase 400,000 Shares of Pollution Research and Control
Corp. issued to Fenway Advisory Group; Option Agreement dated as of
November 19, 1996, between Pollution Research and Control Corp. and
Fenway Advisory Group. (Incorporated herein by reference to Exhibit
10.148 to the Annual Report on Form 10- K for the fiscal year ended
December 31, 1996.)
10.149* Option to purchase 40,000 Shares of Common Stock of Pollution Research
and Control Corp. dated as of March 3, 1997 issued to Barry Soltani.
10.150* Option to purchase 50,000 Shares of Common Stock of Pollution Research
and Control Corp. dated as of April 30, 1997 issued to Jorel
Management.
10.151* Employment Agreement, dated June 9, 1997, between Pollution Research
and Control Corp. and Marcia Smith.
10.152* Amended Employment Agreement dated February 9, 1998 between Pollution
Research and Control Corp. and Cindy Gosselin.
21* List of Subsidiaries.
*Filed herewith.
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<PAGE>
EXHIBIT 21 - LIST OF SUBSIDIARIES
Dasibi Environmental Corp.
506 Paula Avenue
Glendale, Ca 91201
Nutek Inc.
225 Brent Lane
Pensacola, Fl 32503
Logan Medical Devices, Inc.
506 Paula Avenue
Glendale, Ca 91201
E-18
EXHIBIT 10.149
THE OPTION REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
ISSUABLE UPON THE EXERCISE OF THE OPTION HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR REGISTERED OR QUALIFIED UNDER
THE SECURITIES LAWS OF ANY STATE AND THUS MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS REGISTERED UNDER THAT ACT AND REGISTERED OR QUALIFIED UNDER
APPLICABLE SECURITIES LAW OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION OR
QUALIFICATION IS AVAILABLE.
OPTION TO PURCHASE 40,000 SHARES OF COMMON STOCK OF
POLLUTION RESEARCH AND CONTROL CORP.
FROM JANUARY 7, 1998
VOID AFTER 5:00 P.M., LOS ANGELES TIME, ON JANUARY 6, 2002
This certifies Barry Soltani or registered assigns, is entitled,
subject to the terms set forth below, to purchase from Pollution Research and
Control Corp., a California corporation (the "Company"), the above number of
fully paid and nonassessable shares of Common Stock of the Company ("Common
Stock") at a purchase price of $.95 per share ("Purchase Price").
This Option is exercisable from January 7, 1998 to and including 5:00 p.m.,
Los Angeles time, on January 6, 2002.
Registered Owner: Barry Soltani
Purchase Price: $ .95 per share
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<PAGE>
OPTION AGREEMENT
This Option Agreement (the "Agreement") is made and entered into effective
as of March 3, 1997 by and between Pollution Research and Control Corp., a
California corporation ("PRCC") and Barry Soltani ("Optionee").
WHEREAS, Optionee has been providing valuable services as recognized by the
Company's Board of Directors to PRCC and PRCC is desirous of having Optionee
continue to provide such services to it; and
WHEREAS, PRCC is willing to grant Optionee an option to purchase up to an
aggregate of 40,000 shares of the no par value common stock of PRCC (the "Common
Stock") under the terms and conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
1. Grant of Option. PRCC hereby grants to Optionee, as a matter of separate
agreement and not in lieu of other compensation for services, the right and
option (the "Option") to purchase on the terms and conditions set forth in this
Agreement all or any part of up to an aggregate of 40,000 shares of Common Stock
(the "Option Shares"), for continuous, uninterrupted, employment service to PRCC
or by specific acknowledgement of exception by the Company's Board of Directors.
2. Option Price. At any time when shares of Common Stock are to be
purchased pursuant to the Option, the purchase price for each Option share shall
be $.95 cents (the "Option Price"), and for purposes of record, the bid price of
the Company's stock on this date was $.90 cents.
3. Option Period. The option period shall commence on January 7, 1998, (the
"Date of Grant") and shall terminate January 6, 2002 .
4. Exercise of Option. The Option may be exercised in whole or in part at
any time after the date hereof by delivering to the Chief Financial Officer of
PRCC (a) a Notice and Agreement of Exercise of Option, substantially in the form
attached hereto as Exhibit "A," specifying the number of Option Shares with
respect to which the Option is exercised, and (b) full payment of the Option
Price for such Shares.
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<PAGE>
5. Securities Laws Requirements. The Option Shares have not been registered
under the Securities Act of 1933, as amended (the "Act"), and no Shares may be
sold, offered for sale, transferred, pledged, hypothecated or otherwise disposed
of except in compliance with the Act and any other applicable federal and state
securities laws. Additionally, the Option and the Option Shares have not been
qualified under the California Securities Law of 1968, as amended (the
"California Law"). PRCC has no obligation to register the Option shares under
the Act or qualify the Option Shares under the California Law. Optionee
acknowledges that he is aware that Rule 144 of the General Rules and Regulations
under the Act ("Rule 144") affords a limited exemption from registration for the
public resale of registered securities and under the terms of Rule 144 as
currently in effect, the Shares received by Optionee may be sold to the public
without registration only after a period of two (2) years has elapsed from the
exercise date of the Option and then only in compliance with all other
requirements of Rule 144 and the Act. Optionee hereby acknowledges, represents,
warrants and agrees as follows:
(a) That the Option and the Option Shares are not registered under the
Act or qualified under the California Law, and the Option Shares shall be,
acquired solely for the account of Optionee for investment purposes only and
with no view to their resale or other distribution of any kind;
(b) Neither the Option nor any Option Share shall be sold or otherwise
distributed in violation of the Act, the California Law or any other applicable
federal or state securities law;
(c) His overall commitment to investments that are not readily
marketable is not disproportionate to his net worth, and his investment in PRCC
will not cause such overall commitment to become excessive;
(d) He has the financial ability to bear the economic risk of his
investment, has adequate means of providing for his current needs and personal
contingencies, and has no need for liquidity in his investment in PRCC;
(e) He either: (i) has a preexisting personal or business relationship
with PRCC or its officers, directors or controlling persons, or (ii) has
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<PAGE>
evaluated the business of PRCC and the high risks of investing in PRCC, the
competitive nature of the business in which PRCC is engaged, and has the
business or financial experience or has business or financial advisors who are
unaffiliated with, and not compensated by, PRCC and protect his interests in
connection with the transaction;
(f) He has been given the opportunity to review all books, records and
documents of PRCC and to ask questions and receive answers from PRCC concerning
PRCC's business, to obtain additional information necessary to verify the
accuracy of the information he has desired in order to evaluate his investment,
and to consult with such attorneys, accountants and other advisors as he has
desired;
(g) His residence set forth below is his true and correct residence,
and he has no present intention of becoming a resident or domiciliary of any
other state of jurisdiction;
(h) In making the decision to accept the Option and/or purchase the
Option Shares, he has relied solely upon independent investigations made by or
on behalf of him;
(i) No federal or state agency has made any finding or determination
as to the fairness of an investment in PRCC; and
(j) He understands that all the representations and warranties made by
him herein, and all information furnished by him to PRCC, is true, correct and
complete in all respects.
6. Optionee hereby acknowledges that he understands the meaning and legal
consequences of the representations, warranties and covenants contained herein
and that PRCC has relied on the representations made by Optionee in paragraph 5
hereof in granting this Option, and Optionee agrees to indemnify and hold
harmless PRCC and its officers, directors, controlling persons, attorneys,
agents and employees from and against any and all loss, damage or liability,
together with all costs and expenses (including attorneys' fees and
disbursements) which any of them may incur by reason of any breach and any
representation, warranty, covenant or agreement contained herein. All
representations, warranties, covenants and agreements, and the indemnification
contained herein shall survive the grant of the Option and the issuance of the
Option Shares by PRCC.
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<PAGE>
7. Legend of Certificates. All Option Shares issued pursuant to this
Agreement shall be subject to the provisions of this Agreement and the
certificates representing such Option Shares shall bear the following legend or
language substantially equivalent thereto:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER FEDERAL OR STATE SECURITIES
LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED UNLESS SO REGISTERED OR QUALIFIED
OR UNLESS AN EXEMPTION EXISTS, THE AVAILABILITY OF WHICH IS
TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY."
8. Transferability of Option. The Option shall not be transferable except
by the laws of descent and distribution and any attempt to do so shall void the
Option.
9. Adjustment. The Option Price and the number and kind of Option Shares
shall be subject to corresponding adjustment in the event of any change in the
Common stock by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares, readjustment or stock dividend, in like manner
as if such Option Shares had been issued and outstanding, fully paid and
non-assessable at the time of such occurrence.
10. Privilege of Ownership. Optionee shall not have any of the rights of a
shareholder with respect to the shares covered by the Option except to the
extent that one or more certificates for such Shares shall be delivered to his
upon one (1) or more exercises of the Option.
11. Notices. Any notices required or permitted to be given under this
Agreement shall be in writing and they shall be deemed to have been given upon
personal delivery or two (2) business days after mailing the notice by postage,
registered or certified mail. Such notice shall be addressed to the party to be
notified as shown below:
PRCC: POLLUTION RESEARCH AND CONTROL CORP.
506 Paula Avenue
Glendale, CA 91201
Attn: President
OPTIONEE: Barry Soltani
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<PAGE>
Any party may change its address for purposes of this Section by giving the
other party written notice of the new address in the manner set forth above.
12. General Provisions. This Agreement:
(a) Contains the entire agreement between PRCC and Optionee regarding
options of PRCC to Optionee and supersedes all prior communications, oral or
written;
(b) Shall not be construed to give Optionee any rights as to PRCC or
the Common Stock, except as specifically provided herein;
(c) May not be amended nor may any rights hereunder be waived except
by an instrument in writing signed by the party sought to be charged with such
amendment or waiver;
(d) Shall be construed in accordance with, and governed by, the laws
of the State of California; and
(e) Shall be binding upon and shall inure to the benefit of PRCC and
Optionee, and their respective successors and assigns, except that Optionee
shall not have the right to assign or otherwise transfer his rights hereunder to
any person.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PRCC:
POLLUTION RESEARCH AND CONTROL
CORP., a California corporation
By:/s/ Albert E. Gosselin, Jr.
-------------------------------------
Albert E. Gosselin, Jr.,
President and Chief Executive Officer
OPTIONEE:
/s/ Barry Soltani
-----------------------------------
Barry Soltani
E-24
<PAGE>
E-25
<PAGE>
EXHIBIT A
To Pollution Research and Control Corp.
NOTICE AND AGREEMENT OF EXERCISE OF OPTION
I hereby exercise the Option granted to me by POLLUTION RESEARCH AND
CONTROL CORP., a California corporation ("PRCC"), dated as of ............... as
to ....................shares of PRCC's no par value Common Stock.
Enclosed are the documents and payment specified in Paragraph 4 of my
Agreement regarding the Option.
- ----------------------------- --------------------------------
(Print Your Name) Signature
E-26
EXHIBIT 10.150
THE OPTION REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
ISSUABLE UPON THE EXERCISE OF THE OPTION HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR REGISTERED OR QUALIFIED UNDER
THE SECURITIES LAWS OF ANY STATE AND THUS MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS REGISTERED UNDER THAT ACT AND REGISTERED OR QUALIFIED UNDER
APPLICABLE SECURITIES LAW OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION OR
QUALIFICATION IS AVAILABLE.
OPTION TO PURCHASE 50,000 SHARES OF COMMON STOCK OF
POLLUTION RESEARCH AND CONTROL CORP.
FROM MARCH 4, 1998
VOID AFTER 5:00 P.M., LOS ANGELES TIME, ON NOVEMBER 4, 2000
This certifies that Jorel Management Corp. or registered assigns, is
entitled, subject to the terms set forth below, to purchase from Pollution
Research and Control Corp., a California corporation (the "Company"), the above
number of fully paid and nonassessable shares of Common Stock of the Company
("Common Stock") at a purchase price of $.75 per share ("Purchase Price").
This Option is exercisable from March 4, 1998 to and including 5:00 p.m.,
Los Angeles time, on November 4, 2000.
Registered Owner: Jorel Management Corp.
Purchase Price: $.75 per share
E-27
<PAGE>
OPTION AGREEMENT
This Option Agreement (the "Agreement") is made and entered into effective
as of May 18, 1997 by and between Pollution Research and Control Corp., a
California corporation ("PRCC") and Jorel Management Corp. ("Optionee").
WHEREAS, Optionee has been providing valuable services as recognized by the
Company's Board of Directors to PRCC and PRCC is desirous of having Optionee
continue to provide such services to it; and
WHEREAS, PRCC is willing to grant Optionee an option to purchase up to an
aggregate of 50,000 shares of the no par value common stock of PRCC (the "Common
Stock") under the terms and conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
1. Grant of Option. PRCC hereby grants to Optionee, as a matter of separate
agreement and not in lieu of other compensation for services, the right and
option (the "Option") to purchase on the terms and conditions set forth in this
Agreement all or any part of up to an aggregate of 50,000 shares of Common Stock
(the "Option Shares"), for continuous, uninterrupted, employment service to PRCC
or by specific acknowledgement of exception by the Company's Board of Directors.
2. Option Price. At any time when shares of Common Stock are to be
purchased pursuant to the Option, the purchase price for each Option share shall
be $.75 (the ""Option Price"), and for purposes of record, the bid price of the
Company's stock on the date of agreement (April 15, 1997) was $.62 cents.
3. Option Period. The option period shall commence on March 4, 1998 (the
"Date of Grant") and shall terminate November 4, 2000.
4. Exercise of Option. The Option may be exercised in whole or in part at
any time after the date hereof by delivering to the Chief Financial Officer of
PRCC (a) a Notice and Agreement of Exercise of Option, substantially in the form
attached hereto as Exhibit "A," specifying the number of Option Shares with
respect to which the Option is exercised, and (b) full payment of the Option
Price for such Shares.
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<PAGE>
5. Securities Laws Requirements. The Option Shares have not been registered
under the Securities Act of 1933, as amended (the "Act"), and no Shares may be
sold, offered for sale, transferred, pledged, hypothecated or otherwise disposed
of except in compliance with the Act and any other applicable federal and state
securities laws. Additionally, the Option and the Option Shares have not been
qualified under the California Securities Law of 1968, as amended (the
"California Law"). PRCC has no obligation to register the Option shares under
the Act or qualify the Option Shares under the California Law. Optionee
acknowledges that he is aware that Rule 144 of the General Rules and Regulations
under the Act ("Rule 144") affords a limited exemption from registration for the
public resale of registered securities and under the terms of Rule 144 as
currently in effect, the Shares received by Optionee may be sold to the public
without registration only after a period of two (2) years has elapsed from the
exercise date of the Option and then only in compliance with all other
requirements of Rule 144 and the Act. Optionee hereby acknowledges, represents,
warrants and agrees as follows:
(a) That the Option and the Option Shares are not registered under the
Act or qualified under the California Law, and the Option Shares shall be,
acquired solely for the account of Optionee for investment purposes only and
with no view to their resale or other distribution of any kind;
(b) Neither the Option nor any Option Share shall be sold or otherwise
distributed in violation of the Act, the California Law or any other applicable
federal or state securities law;
(c) His overall commitment to investments that are not readily
marketable is not disproportionate to his net worth, and his investment in PRCC
will not cause such overall commitment to become excessive;
(d) He has the financial ability to bear the economic risk of his
investment, has adequate means of providing for his current needs and personal
contingencies, and has no need for liquidity in his investment in PRCC;
(e) He either: (i) has a preexisting personal or business relationship
with PRCC or its officers, directors or controlling persons, or (ii) has
evaluated the business of PRCC and the high risks of investing in PRCC, the
E-29
<PAGE>
competitive nature of the business in which PRCC is engaged, and has the
business or financial experience or has business or financial advisors who are
unaffiliated with, and not compensated by, PRCC and protect his interests in
connection with the transaction;
(f) He has been given the opportunity to review all books, records and
documents of PRCC and to ask questions and receive answers from PRCC concerning
PRCC's business, to obtain additional information necessary to verify the
accuracy of the information he has desired in order to evaluate his investment,
and to consult with such attorneys, accountants and other advisors as he has
desired;
(g) His residence set forth below is his true and correct residence,
and he has no present intention of becoming a resident or domiciliary of any
other state of jurisdiction;
(h) In making the decision to accept the Option and/or purchase the
Option Shares, he has relied solely upon independent investigations made by or
on behalf of him;
(i) No federal or state agency has made any finding or determination
as to the fairness of an investment in PRCC; and
(j) He understands that all the representations and warranties made by
him herein, and all information furnished by him to PRCC, is true, correct and
complete in all respects.
6. Optionee hereby acknowledges that he understands the meaning and legal
consequences of the representations, warranties and covenants contained herein
and that PRCC has relied on the representations made by Optionee in paragraph 5
hereof in granting this Option, and Optionee agrees to indemnify and hold
harmless PRCC and its officers, directors, controlling persons, attorneys,
agents and employees from and against any and all loss, damage or liability,
together with all costs and expenses (including attorneys' fees and
disbursements) which any of them may incur by reason of any breach and any
representation, warranty, covenant or agreement contained herein. All
representations, warranties, covenants and agreements, and the indemnification
contained herein shall survive the grant of the Option and the issuance of the
Option Shares by PRCC.
7. Legend of Certificates. All Option Shares issued pursuant to this
Agreement shall be subject to the provisions of this Agreement and the
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<PAGE>
certificates representing such Option Shares shall bear the following legend or
language substantially equivalent thereto:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED OR QUALIFIED UNDER FEDERAL OR STATE SECURITIES
LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED UNLESS SO REGISTERED OR QUALIFIED
OR UNLESS AN EXEMPTION EXISTS, THE AVAILABILITY OF WHICH IS
TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY."
8. Transferability of Option. The Option shall not be transferable except
by the laws of descent and distribution and any attempt to do so shall void the
Option.
9. Adjustment. The Option Price and the number and kind of Option Shares
shall be subject to corresponding adjustment in the event of any change in the
Common stock by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares, readjustment or stock dividend, in like manner
as if such Option Shares had been issued and outstanding, fully paid and
non-assessable at the time of such occurrence.
10. Privilege of Ownership. Optionee shall not have any of the rights of a
shareholder with respect to the shares covered by the Option except to the
extent that one or more certificates for such Shares shall be delivered to his
upon one (1) or more exercises of the Option.
11. Notices. Any notices required or permitted to be given under this
Agreement shall be in writing and they shall be deemed to have been given upon
personal delivery or two (2) business days after mailing the notice by postage,
registered or certified mail. Such notice shall be addressed to the party to be
notified as shown below:
PRCC: POLLUTION RESEARCH AND CONTROL CORP.
506 Paula Avenue
Glendale, CA 91201
Attn: President
OPTIONEE: Jorel Management Corp.
110 East 59th Street, 18th Floor
New York, New York 10022
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<PAGE>
Any party may change its address for purposes of this Section by giving the
other party written notice of the new address in the manner set forth above.
12. General Provisions. This Agreement:
(a) Contains the entire agreement between PRCC and Optionee regarding
options of PRCC to Optionee and supersedes all prior communications, oral or
written;
(b) Shall not be construed to give Optionee any rights as to PRCC or
the Common Stock, except as specifically provided herein;
(c) May not be amended nor may any rights hereunder be waived except
by an instrument in writing signed by the party sought to be charged with such
amendment or waiver;
(d) Shall be construed in accordance with, and governed by, the laws
of the State of California; and
(e) Shall be binding upon and shall inure to the benefit of PRCC and
Optionee, and their respective successors and assigns, except that Optionee
shall not have the right to assign or otherwise transfer his rights hereunder to
any person.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PRCC:
POLLUTION RESEARCH AND CONTROL
CORP., a California corporation
By: /s/ Albert E. Gosselin, Jr.
------------------------------------
Albert E. Gosselin, Jr.,
President and Chief Executive Officer
OPTIONEE:
JOREL MANAGEMENT CORP.
By: /s/ Willian A. Purdy, III
------------------------------------
William A. Purdy, III
Vice President
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<PAGE>
EXHIBIT A
To Pollution Research and Control Corp.
NOTICE AND AGREEMENT OF EXERCISE OF OPTION
I hereby exercise the Option granted to me by POLLUTION RESEARCH AND
CONTROL CORP., a California corporation ("PRCC"), dated as of.............. as
to ........... shares of PRCC's no par value Common Stock.
Enclosed are the documents and payment specified in Paragraph 4 of my
Agreement regarding the Option.
- --------------------------- ------------------------------
(Print Your Name) Signature
E-33
EXHIBIT 10.151
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is dated as of the 9th day of June,
1997 by and between POLLUTION RESEARCH AND CONTROL CORP., a California
Corporation (the "Corporation"), and MARCIA SMITH ("Employee").
1. Employment. The Corporation hereby employs the Employee to render
services during the term of the Agreement as the Director of Administration of
the Corporation. Employee shall report to the Board of Directors. The term of
this Agreement and employment hereunder shall commence as of June 9, 1997 and
continue through and including August 31, 1999. Employee hereby accepts such
employment and agrees to perform in good faith and to the best of her ability
all services which may be required of her hereunder, and to be available to
render services at all reasonable directions, requests, rules and regulations
made by the Corporation in connection with her employment. Employee shall be
based in California subject to such reasonable travel as may be required to
perform Employee's duties. Employee shall also assume direct supervision of the
day-to-day operations of any and all aspects of the administrative activities
and affairs of the Corporation and any of its future subsidiaries subject to the
control of the Chairman of the Board and Chief Executive Officer of the
Corporation.
2. Confidentiality. Employee will not either during the continuance of her
employment hereunder (otherwise than in the performance of her duties) or
subsequent to the term of her employment hereunder, without the Corporation's
consent in writing first obtained, divulge to any person, firm or corporation,
any information concerning the business accounts, customer lists or finances of
the Corporation, or any of its future or past affiliated, subsidiary, or parent
corporation, or any of their secrets, dealings, transactions, or affairs which
have or may come to Employee's knowledge during the course of her employment
hereunder. All documents, papers, notes, memoranda, and other written records of
any kind made by her during and in connection with her employment hereunder
shall remain the property of the Corporation at all times and shall be handed to
the Corporation upon the expiration of the term of this Agreement.
3. Base Compensation. As base compensation ("Base Compensation") for the
service; to be rendered by Employee and all rights granted by Employee to the
Corporation herein, and upon the condition that Employee fully and faithfully
renders her service in accordance with the terms and conditions of this
Agreement, the Corporation agrees to pay Employee a Base Compensation at the
rate of $72,300 per year commencing as of the date hereof and through August 31,
1999. Base Compensation shall be payable in accordance with the normal payroll
practices of the Corporation and may be increased annually at the discretion of
the Board of Directors.
3.1 Withholdings. The Corporation shall deduct and withhold from Base
Compensation payable to Employee hereunder any and all amounts required to be
deducted or withheld by the Corporation under the provisions or any statute,
regulation, ordinance, or order and any and all amendments hereinafter enacted
requiring the withholding or deducting from compensation payable to employees.
4. Expense Reimbursement and Automobile. In addition to the compensation
provided in Paragraph 3 hereof, Employee shall be reimbursed for all reasonable
first class expenses including but not limited to traveling, hotel,
entertainment expenses incurred by her in the discharge of her duties hereunder,
and she will supply the Corporation with vouchers and details of such expenses
upon its request therefor.
5. Death of Employee. In the event of the Employee's death during the term
of this Agreement, this Agreement shall terminate; provided, however, that in
such event in addition to any other payments due Employee pursuant to Paragraph
7 hereof, the Corporation shall thereafter to the last day of the month in which
her death occurs and the six months following the date of her death continue to
make payments to Employee pursuant to Paragraph 3.
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<PAGE>
6. Disability of Employee.
6.1. In the event that Employee becomes disabled during the
term hereof to such extent as to preclude her from substantially performing the
services required of her hereunder, she shall be entitled to continue to receive
Base Compensation during the period of such disability, but not to exceed six
(6) months. In the event Employee continues to be disabled beyond said six (6)
months period, Employee shall cease to be entitled to receive Base Compensation
until such period of disability terminates.
6.2. During the period Employee is receiving payments pursuant
to Paragraph 6.1 hereof, Employee shall render such executive and/or consulting
services to the Corporation as Employee shall be capable of rendering.
7. Fringe Benefits. The Corporation shall make available to Employee
throughout the term of this Agreement the benefits of any health plan, life
insurance plan, group medical insurance plan and disability income insurance
policies (the benefits from which shall be credited against the obligations of
the Corporation pursuant to paragraph 6 above) which the Corporation may adopt.
8. Termination.
8.1. Termination for Cause. The Corporation may without notice
terminate this Agreement and all of the Corporation's obligations hereunder for
"cause". "Cause" shall be defined herein to include, but not be limited to,
conviction of a felony (which, through the lapse of time or otherwise is not
subject to appeal) or material refusal, failure or neglect without proper cause
to perform her obligations under this Agreement or the material breach by
Employee of any of her fiduciary obligations as a director of the Corporation.
Such fiduciary obligations shall include, without limitation, the fiduciary
obligations of an director of a California corporation. In the event of
Employee's termination for cause, the Corporation shall be required to make
payments to Employee for all amounts due her pursuant to Paragraphs 3 and 4
hereunder to the extent that such amounts have accrued but have not been paid.
8.2. Termination by the Corporation Without Cause. The Corporation may
not terminate Employee's services hereunder without cause (as that term is
defined in Paragraph 8.1 hereof).
8.3. Material Breach of the Agreement by the Corporation. In the event
the Corporation is in material breach of this Agreement, including but not
limited to (i) the Board of Directors' failure to elect of designate Employee as
Chief Financial Officer of the Corporation or removal of Employee from such
office; or (ii) the termination for any reason or demotion for any reason of
Employee within eighteen (18) months after a "change of control" of the
Corporation, as such term is hereinafter defined; and provided that the
Corporation has not cured the foregoing breaches of this Agreement within thirty
(30) days after the occurrence of such event, then Employee shall have the
right, upon written notice delivered to the Secretary of the Corporation, to
terminate this Agreement and seek to enforce any rights she may have under law,
and Employee shall be entitled to "Liquidated Damages," as such term is
hereinafter defined, which amount shall be paid to Employee in a lump sum within
thirty (30) days of termination. The term "change in control" means (a) the
Company shall cease to be a publicly owned corporation having at least 300
shareholders, (b) any person or group of persons becomes the beneficial owner,
directly or indirectly, of securities of the Corporation (including securities
convertible into or exercisable for securities of the Corporation) ordinarily
having the right to vote in the election of directors which together represent,
after giving effect to conversion or exercise, in excess of 20% of the combined
voting power of the Corporation's outstanding securities ordinarily having the
right to vote in the election of directors, (c) for any reason a majority of the
persons who are directors of the Corporation of the date of a change of control
cease to be directors of the Corporation, (d) the Corporation shall merge or
consolidate with any other person or entity other than a subsidiary and, upon
the consummation of such transaction, holders of the Corporation's common stock
immediately prior to such transaction own less than fifty percent (50%) of the
equity securities of the surviving or consolidated entity, (e) any sale or
liquidation, divestiture of all or a substantial portion of the stock or assets
E-35
<PAGE>
of the Corporation or the downsizing of the Corporation by reducing the number
of employees of the Corporation by more than 20% during any consecutive six
month period, or (f) the dissolution and winding up of the Corporation. The term
"Liquidated Damages" means 2.99 times Employee's then current annual base
compensation.
9. Services Unique. It is agreed that the services to be rendered by
Employee hereunder ar of a special, unique, unusual, extraordinary and
intellectual character which gives them a peculiar value, the loss which cannot
be reasonably or adequately compensated in damages in an action at law, and that
a breach by Employee of any of the provisions contained herein will cause the
Corporation irreparable injury and damage. Employee expressly agrees that the
Corporation shall be entitled to injunctive or other equitable relief to prevent
a breach of this Agreement. Resort to any such equitable relief shall not be
construed as a waiver of any of the rights or remedies which the Corporation may
have against Employee for damages or otherwise.
10. Key Person Life Insurance. During the term of this Agreement, the
Corporation shall maintain insurance on Employee's life in such amounts and in
such form as the Corporation may at its discretion determine. Employee shall not
have any interest in such insurance but shall, if the Corporation requests,
submit to such medical examinations, supply such information and execute such
documents as may be required in connection with or so as to enable the
Corporation to effect such insurance.
11. Vacation. Employee shall have the right during each year of the term of
this Agreement to take an aggregate of three (3) weeks of vacation with pay.
12. Notices. Any and all notices, demands or other communications required
or desired to be given hereunder by any party shall be in writing and shall be
validly given or made to the other party if served either personally or if
deposited in the United States mail, certified or registered, postage prepaid,
return receipt requested. If such notice, demand or other communication be
served personally, service shall be conclusively deemed made at the time of such
personal service. If such notice, demand or other communication be given by
mail, such shall be conclusively deemed given forty-eight (48) hours after the
deposit thereof in the United States mail addressed to the party to whom such
notice, demand or other communication is to be given as hereinafter set forth:
To the Corporation: 506 Paula Ave.
Glendale, CA 91201
To Employee: 27660 Nugget Drive
Unit #2
Canyon Country, Ca 91351
Any party hereto may change its address for the purpose of receiving notices,
demands and other communications as herein provided by a written notice given in
the manner aforesaid to the other party or parties hereto.
13. Applicable Law and Severability. This document shall, in all respects,
be governed by the laws of the State of California applicable to agreements
executed and to be wholly performed within the State of California. Nothing
contained herein shall be construed so as to require the commission of any act
contrary to law, and wherever there is a conflict between any provision
contained herein and any present or future statute, law, ordinance or regulation
contrary to which the parties have no legal right to contract, the latter shall
prevail but the provision of this document which is affected shall be curtailed
and limited only to the extent necessary to bring it within the requirements of
the law.
14. Modification or Amendments. No amendment, change or modification of
this document shall be valid unless in writing and signed by all of the parties
hereto.
15. Successors and Assigns. All of the terms and provisions contained
herein shall inure to the benefit of and shall be binding upon the parties
hereto, and to the successors and assigns of the Corporation.
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<PAGE>
16. Arbitration. Any controversy between the Corporation and Employee
involving the construction or application of any of the terms, provisions or
conditions of this Agreement, shall on the written request of either party
served on the other be submitted to arbitration, and such arbitration shall
comply with and be governed by the provisions of the California Arbitration Act,
Sections 1280 through 1294.2 of the California Code of Civil Procedure. The
Corporation and Employee shall each appoint one person to hear and determine the
dispute and, if they are unable to agree, then the two persons so chosen shall
select a third impartial arbitrator whose decision shall be final and conclusive
upon both parties. The cost of the arbitration, including reasonable attorney's
fees, shall be borne in relation to the merits of the parties' respective
positions.
17. Entire Agreement. This document constitutes the entire understanding
and agreement of the parties with respect to the subject matter of this
Agreement, and any and all prior agreements, understandings or representations
are hereby terminated and canceled in their entirety and are of no further force
or effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
POLLUTION RESEARCH AND CONTROL CORP.,
a California corporation
/s/ Marcia Smith /s/ Albert E. Gosselin
- --------------------- --------------------------------------
MARCIA SMITH ALBERT E. GOSSELIN, JR.
"Employee" President
"Corporation"
E-37
EXHIBIT 10.152
--------------
EMPLOYMENT AGREEMENT-AMENDMENT NO 1 (2/9/98)
--------------------------------------------
This EMPLOYMENT AGREEMENT ("Agreement") is dated as of the 9th day of
February 1998 by and between POLLUTION RESEARCH AND CONTROL CORP., a California
Corporation (the "Corporation"), and Cindy Gosselin ("Employee").
1. Employment. The Corporation hereby employs the Employee to render
services during the term of the Agreement as the Bookkeeper/Purchasing
Agent/Production Coordinator of the Corporation. Employee shall report to the
Board of Directors. The term of this Agreement and employment hereunder shall
commence as of February 9,1998 and continue through and including August 31,
1999. Employee hereby accepts such employment and agrees to perform in good
faith and to the best of her ability all services which may be required of her
hereunder, and to be available to render services at all reasonable directions,
requests, rules and regulations made by the Corporation in connection with her
employment. Employee shall be based in California subject to such reasonable
travel as may be required to perform Employee's duties. Employee shall also
assume direct supervision of the day-to-day operations of any and all aspects of
purchasing, production planning and financial accounting of the Corporation and
any of its future subsidiaries subject to the control of the Chairman of the
Board and Chief Executive Officer of the Corporation.
2. Confidentiality. Employee will not either during the continuance of her
employment hereunder (otherwise than in the performance of her duties) or
subsequent to the term of her employment hereunder, without the Corporation's
consent in writing first obtained, divulge to any person, firm or corporation,
any information concerning the business accounts, customer lists or finances of
the Corporation, or any of its future or past affiliated, subsidiary, or parent
corporation, or any of their secrets, dealings, transactions, or affairs which
have or may come to Employee's knowledge during the course of her employment
hereunder. All documents, papers, notes, memoranda, and other written records of
any kind made by her during and in connection with her employment hereunder
shall remain the property of the Corporation at all times and shall be handed to
the Corporation upon the expiration of the term of this Agreement.
3. Base Compensation. As base compensation ("Base Compensation") for the
service; to be rendered by Employee and all rights granted by Employee to the
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<PAGE>
Corporation herein, and upon the condition that Employee fully and faithfully
renders her service in accordance with the terms and conditions of this
Agreement, the Corporation agrees to pay Employee a Base Compensation at the
rate of $72,300 per year commencing as of the date hereof and through August 31,
1999. Base Compensation shall be payable in accordance with the normal payroll
practices of the Corporation and may be increased annually at the discretion of
the Board of Directors.
3.1 Withholdings. The Corporation shall deduct and withhold from Base
Compensation payable to Employee hereunder any and all amounts required to be
deducted or withheld by the Corporation under the provisions or any statute,
regulation, ordinance, or order and any and all amendments hereinafter enacted
requiring the withholding or deducting from compensation payable to employees.
4. Expense Reimbursement and Automobile. In addition to the compensation
provided in Paragraph 3 hereof, Employee shall be reimbursed for all reasonable
first class expenses including but not limited to traveling, hotel,
entertainment expenses incurred by her in the discharge of her duties hereunder,
and she will supply the Corporation with vouchers and details of such expenses
upon its request therefor.
5. Death of Employee. In the event of the Employee's death during the term
of this Agreement, this Agreement shall terminate; provided, however, that in
such event in addition to any other payments due Employee pursuant to Paragraph
7 hereof, the Corporation shall thereafter to the last day of the month in which
her death occurs and the six months following the date of her death continue to
make payments to Employee pursuant to Paragraph 3.
6. Disability of Employee.
6.1. In the event that Employee becomes disabled during the term
hereof to such extent as to preclude her from substantially performing the
services required of her hereunder, she shall be entitled to continue to receive
Base Compensation during the period of such disability, but not to exceed six
(6) months. In the event Employee continues to be disabled beyond said six (6)
months period, Employee shall cease to be entitled to receive Base Compensation
until such period of disability terminates.
6.2. During the period Employee is receiving payments pursuant to
Paragraph 6.1 hereof, Employee shall render such executive and/or consulting
services to the Corporation as Employee shall be capable of rendering.
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<PAGE>
7. Fringe Benefits. The Corporation shall make available to Employee
throughout the term of this Agreement the benefits of any health plan, life
insurance plan, group medical insurance plan and disability income insurance
policies (the benefits from which shall be credited against the obligations of
the Corporation pursuant to paragraph 6 above) which the Corporation may adopt.
8. Termination.
8.1. Termination for Cause. The Corporation may without notice
terminate this Agreement and all of the Corporation's obligations hereunder for
"cause". "Cause" shall be defined herein to include, but not be limited to,
conviction of a felony (which, through the lapse of time or otherwise is not
subject to appeal) or material refusal, failure or neglect without proper cause
to perform her obligations under this Agreement or the material breach by
Employee of any of her fiduciary obligations as a director of the Corporation.
Such fiduciary obligations shall include, without limitation, the fiduciary
obligations of an director of a California corporation. In the event of
Employee's termination for cause, the Corporation shall be required to make
payments to Employee for all amounts due her pursuant to Paragraphs 3 and 4
hereunder to the extent that such amounts have accrued but have not been paid.
8.2. Termination by the Corporation Without Cause. The Corporation may
not terminate Employee's services hereunder without cause (as that term is
defined in Paragraph 8.1 hereof).
8.3. Material Breach of the Agreement by the Corporation. In the event
the Corporation is in material breach of this Agreement, including but not
limited to (i) the Board of Directors' failure to elect of designate Employee as
Chief Financial Officer of the Corporation or removal of Employee from such
office; or (ii) the termination for any reason or demotion for any reason of
Employee within eighteen (18) months after a "change of control" of the
Corporation, as such term is hereinafter defined; and provided that the
Corporation has not cured the foregoing breaches of this Agreement within thirty
(30) days after the occurrence of such event, then Employee shall have the
right, upon written notice delivered to the Secretary of the Corporation, to
terminate this Agreement and seek to enforce any rights she may have under law,
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<PAGE>
and Employee shall be entitled to "Liquidated Damages," as such term is
hereinafter defined, which amount shall be paid to Employee in a lump sum within
thirty (30) days of termination. The term "change in control" means (a) the
Company shall cease to be a publicly owned corporation having at least 300
shareholders, (b) any person or group of persons becomes the beneficial owner,
directly or indirectly, of securities of the Corporation (including securities
convertible into or exercisable for securities of the Corporation) ordinarily
having the right to vote in the election of directors which together represent,
after giving effect to conversion or exercise, in excess of 20% of the combined
voting power of the Corporation's outstanding securities ordinarily having the
right to vote in the election of directors, (c) for any reason a majority of the
persons who are directors of the Corporation of the date of a change of control
cease to be directors of the Corporation, (d) the Corporation shall merge or
consolidate with any other person or entity other than a subsidiary and, upon
the consummation of such transaction, holders of the Corporation's common stock
immediately prior to such transaction own less than fifty percent (50%) of the
equity securities of the surviving or consolidated entity, (e) any sale or
liquidation, divestiture of all or a substantial portion of the stock or assets
of the Corporation or the downsizing of the Corporation by reducing the number
of employees of the Corporation by more than 20% during any consecutive six
month period, or (f) the dissolution and winding up of the Corporation. The term
"Liquidated Damages" means 2.99 times Employee's then current annual base
compensation.
9. Services Unique. It is agreed that the services to be rendered by
Employee hereunder ar of a special, unique, unusual, extraordinary and
intellectual character which gives them a peculiar value, the loss which cannot
be reasonably or adequately compensated in damages in an action at law, and that
a breach by Employee of any of the provisions contained herein will cause the
Corporation irreparable injury and damage. Employee expressly agrees that the
Corporation shall be entitled to injunctive or other equitable relief to prevent
a breach of this Agreement. Resort to any such equitable relief shall not be
construed as a waiver of any of the rights or remedies which the Corporation may
have against Employee for damages or otherwise.
10. Key Person Life Insurance. During the term of this Agreement, the
Corporation shall maintain insurance on Employee's life in such amounts and in
such form as the Corporation may at its discretion determine. Employee shall not
have any interest in such insurance but shall, if the Corporation requests,
submit to such medical examinations, supply such information and execute such
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<PAGE>
documents as may be required in connection with or so as to enable the
Corporation to effect such insurance.
11. Vacation. Employee shall have the right during each year of the term of
this Agreement to take an aggregate of three (3) weeks of vacation with pay.
12. Notices. Any and all notices, demands or other communications required
or desired to be given hereunder by any party shall be in writing and shall be
validly given or made to the other party if served either personally or if
deposited in the United States mail, certified or registered, postage prepaid,
return receipt requested. If such notice, demand or other communication be
served personally, service shall be conclusively deemed made at the time of such
personal service. If such notice, demand or other communication be given by
mail, such shall be conclusively deemed given forty-eight (48) hours after the
deposit thereof in the United States mail addressed to the party to whom such
notice, demand or other communication is to be given as hereinafter set forth:
To the Corporation: 506 Paula Ave.
Glendale, CA 91201
To Employee: 5604 Ocean View
La Canada, Ca 91011
Any party hereto may change its address for the purpose of receiving notices,
demands and other communications as herein provided by a written notice given in
the manner aforesaid to the other party or parties hereto.
13. Applicable Law and Severability. This document shall, in all respects,
be governed by the laws of the State of California applicable to agreements
executed and to be wholly performed within the State of California. Nothing
contained herein shall be construed so as to require the commission of any act
contrary to law, and wherever there is a conflict between any provision
contained herein and any present or future statute, law, ordinance or regulation
contrary to which the parties have no legal right to contract, the latter shall
prevail but the provision of this document which is affected shall be curtailed
and limited only to the extent necessary to bring it within the requirements of
the law.
14. Modification or Amendments. No amendment, change or modification of
this document shall be valid unless in writing and signed by all of the parties
hereto.
E-42
<PAGE>
15. Successors and Assigns. All of the terms and provisions contained
herein shall inure to the benefit of and shall be binding upon the parties
hereto, and to the successors and assigns of the Corporation.
16. Arbitration. Any controversy between the Corporation and Employee
involving the construction or application of any of the terms, provisions or
conditions of this Agreement, shall on the written request of either party
served on the other be submitted to arbitration, and such arbitration shall
comply with and be governed by the provisions of the California Arbitration Act,
Sections 1280 through 1294.2 of the California Code of Civil Procedure. The
Corporation and Employee shall each appoint one person to hear and determine the
dispute and, if they are unable to agree, then the two persons so chosen shall
select a third impartial arbitrator whose decision shall be final and conclusive
upon both parties. The cost of the arbitration, including reasonable attorney's
fees, shall be borne in relation to the merits of the parties' respective
positions.
17. Entire Agreement. This document constitutes the entire understanding
and agreement of the parties with respect to the subject matter of this
Agreement, and any and all prior agreements, understandings or representations
are hereby terminated and canceled in their entirety and are of no further force
or effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
POLLUTION RESEARCH AND CONTROL CORP.,
a California corporation
/s/ Cindy Gosselin /s/ Albert E. Gosselin, Jr.
- -------------------------- --------------------------------------
CINDY GOSSELIN ALBERT E. GOSSELIN, JR.
"Employee" President
"Corporation"
E-43
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0
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