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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 000-25132
ICHOR Corporation
(Exact name of Registrant as specified in its charter)
Delaware 25-1741849
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 1250, 400 Burrard Street, Vancouver,
British Columbia, Canada V6C 3A6
(Address of principal executive offices) (Postal Code)
Registrant's telephone number, including area code: (604) 683-5767
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of Class)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $1,405,725 as of March 24, 1998, computed on the
basis of the average of the bid and ask prices on such date.
As of March 24, 1998, there were 4,907,520 shares of the Registrant's Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1997 Proxy Statement to be filed within 120 days
of the period ended December 31, 1997 are incorporated by reference into Part
III.
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FORWARD-LOOKING STATEMENTS
Statements in this report, to the extent they are not based on historical
events, constitute forward-looking statements. Forward-looking statements
include, without limitation, statements regarding the outlook for future
operations, forecasts of future costs and expenditures, evaluation of market
conditions, the outcome of legal proceedings, the adequacy of reserves, or
other business plans. Investors are cautioned that forward-looking statements
are subject to an inherent risk that actual results may vary materially from
those described herein. Factors that may result in such variance, in addition
to those accompanying the forward-looking statements, include changes in
interest rates, prices, and other economic conditions; actions by competitors;
natural phenomena; actions by government authorities; uncertainties associated
with legal proceedings; technological development; future decisions by
management in response to changing conditions; and misjudgments in the course
of preparing forward-looking statements.
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TABLE OF CONTENTS
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PAGE
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PART I
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ITEM 1. BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
ITEM 2. PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . .6
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . .6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . .7
PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . .7
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . .8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . .9
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . .11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . .11
PART III
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . .11
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . .12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . .12
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . .12
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . .12
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
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PART I
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ITEM 1. BUSINESS
The Corporation
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ICHOR Corporation was incorporated in July 1994 pursuant to the laws of the
Commonwealth of Pennsylvania under the name "PDG Remediation, Inc.". In
November 1996, the Corporation reincorporated under the laws of the State of
Delaware and changed its name to "ICHOR Corporation". In this document, unless
the context otherwise requires, the "Corporation" refers to ICHOR Corporation
and its subsidiaries.
General
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The Corporation has been in the environmental services business since 1994,
when it was a wholly-owned subsidiary of PDG Environmental, Inc. ("PDGE").
The Corporation's initial operations included remediation services offices
located in Melbourne and Tallahassee, Florida, and Pittsburgh, Pennsylvania
and a thermal treatment facility in Florida. The Corporation responded to
changes in the Florida market by closing its Tallahassee remediation office in
1995 and selling its soil remediation facility in April 1996 and its
Melbourne, Florida remediation services operations in November 1996. In
December 1996, the Corporation acquired a waste oil processing facility in
McCook, Illinois (the "McCook Facility"), which was brought on-line in the
second quarter of 1997.
During 1997, the Corporation's environmental services business included
remediation and recycling. Its operations consisted of providing remediation
services to assist commercial, industrial and government clients in complying
with environmental laws and regulations and re-refining petroleum waste
products and disposing of oily waste waters. The Corporation's remediation
services ranged from the initial assessment of site contamination to the
design and implementation of remediation and treatment systems to remove
contamination. The McCook Facility converted waste oil into distillate and
other recycled petroleum products and processed and disposed of oily waste
waters.
In the first quarter of 1998, the Corporation commenced providing certain
environmental consulting services to an industrial customer in Germany. The
Corporation is currently negotiating a contract to provide environmental
rehabilitation services to this customer.
The Corporation completed its initial public offering in February 1995. In
July 1996, PDGE transferred its 59.5% interest in the Corporation to Drummond
Financial Corporation ("Drummond"). In December 1996, the Corporation issued
2,500,000 shares, or approximately 50.3%, of the Corporation's common stock to
Logan International Corp. ("Logan") as partial consideration for a loan
receivable through which the Corporation acquired the McCook Facility. Logan
and Drummond are controlled by MFC Bancorp Ltd. ("MFC"). As at December 31,
1997, the Corporation had settled an aggregate of $2.2 million in indebtedness
to Logan and MFC in consideration of the issuance of 217,500 shares of 5%
Cumulative Redeemable Convertible Preferred Stock, Series 1 (the "Preferred
Stock") of the Corporation. In February 1998, the Corporation completed the
private placement of 250,000 shares of Preferred Stock for $2,500,000 in cash.
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As of April 1997, the Corporation sold substantially all of the assets of its
environmental remediation services operations for $147,000 in cash and the
purchaser assumed certain liabilities related to those assets. The
Corporation retained cash, accounts receivable, accounts payable and other
accrued liabilities relating to such operations. Contract revenue for the
Corporation's environmental remediation services operations was $0.7 million
in the year ended December 31, 1997, $4.0 million in the 11 months ended
December 31, 1996 and $0.3 million in the year ended January 31, 1996.
In December 1997, the Corporation sold the McCook Facility for approximately
$1.0 million, consisting of a down payment of $0.3 million and a final payment
of $0.7 million plus interest at 2.5% per annum on or before December 23,
1998. The McCook Facility had revenues of $2.6 million for the year ended
December 31, 1997.
The Corporation's environmental remediation services operations and the McCook
Facility have been classified separately within the Corporation's financial
statements for the year ended December 31, 1997 as discontinued operations and
have been excluded from the amounts of revenues and expenses for the
Corporation's continuing operations.
Acquisitions
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The Corporation is currently negotiating to acquire a European machine tool
manufacturer. In December 1997, the Corporation entered into an agreement to
acquire an Italian machine tool manufacturer which did not complete.
In March 1998, the Corporation entered into an agreement to acquire a company
that leases and operates a carton and box making plant located in Germany,
subject to certain conditions. This plant had sales of $7.5 million in 1997.
The purchase price is approximately $0.8 million, subject to certain
adjustments.
Environmental Services Business
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The Corporation's environmental remediation and decontamination operations
were located in Monroeville, Pennsylvania, with services offered throughout
the Northeast, Midwest, Mid-Atlantic and Southeastern United States. The
Corporation provided a broad range of environmental remediation services to
both the public and private sectors, including assessments to determine the
nature and extent of environmental contamination, feasibility studies to
evaluate the application of appropriate remedial technologies, remedial design
and procedures, and the maintenance of existing remedial systems.
The Corporation focused primarily on the remediation of facilities
contaminated by hazardous substances and the remediation of contamination
caused by leakage from underground storage tanks. Several key contracts had
been obtained by the Corporation, including serving as a remedial action
contractor for the U.S. Navy at multiple facilities under a contract with J.A.
Jones Management Services and providing similar remediation services for major
industrial clients based in Pittsburgh. Most of the Corporation's
environmental remediation contracts were obtained on a cost plus basis whereby
the Corporation was reimbursed at standard rates for its time expended and
expenses incurred with respect to a project, although certain projects were
obtained on a fixed price basis.
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The McCook Facility processed waste oil into distillate, which can be further
processed into base oil and then into blended lube oil. The facility had a
distillate production capacity of approximately one million gallons per month.
Distillate can be sold to other manufacturers of lube oil or to crude oil
refineries which use distillate as feed stock for gasoline. Any distillate
which is further processed into base lube oil can also be sold to other lube
oil manufacturers or further processed into end user lube oil. The McCook
Facility also processed and disposed of oily waste waters for customers in the
greater Chicago area and had the capacity to process approximately 13,000 to
15,000 gallons of oily waste waters per day.
The Corporation focused its marketing efforts with respect to the McCook
Facility on the sale of distillate to refineries which use distillate to
produce gasoline and on niche markets such as the specialty lube oil market
(metal working and railroad lubricants).
Government regulations impacted on all aspects of the Corporation's
environmental remediation and recycling operations, including the disposal of
residual chemical wastes, operating procedures, waste water discharges, fire
protection, safety standards, worker and community right-to-know initiatives,
and emergency response plans. Government authorities have the power, in
various circumstances, to enforce compliance with such regulations, and any
violator thereof may be subject to civil or criminal penalties. Private
individuals may also have the right to sue to enforce compliance with certain
of the governmental requirements.
At December 31, 1997, the Corporation had one full-time employee. The
executive officers of the Corporation are not full-time employees, but devote
such time to the business of the Corporation as is required.
ITEM 2. PROPERTIES
The Corporation's administrative facilities are located in Monroeville,
Pennsylvania and are leased.
ITEM 3. LEGAL PROCEEDINGS
In June 1995, Klein v. PDG Remediation, Inc., et al., No. CIV-4954 (DAB) was
filed in the United States District Court for the Southern District of New
York and alleges that the Corporation, its directors and certain of its
officers, PDGE and the underwriters of the Corporation's initial public
offering issued or participated in issuing a registration statement and
prospectus which contained material misstatements or omissions, which were
relied upon by the plaintiff. Specifically, the plaintiff alleges that the
defendants knew or should have known that the Florida reimbursement program in
which the Corporation participated was operating at a deficit and was being
revised to eliminate funding of environmental remediation activities for lower
priority sites. This action has been certified as a class action on behalf of
all purchasers of the Corporation's common stock from February 9, 1995 through
May 23, 1995. The plaintiff is seeking: (i) either the rescission of any
agreement with respect to the purchase of shares of common stock of the
Corporation by the members of the class or statutory damages, and (ii)
interest, attorneys' fees and other costs and expenses. On September 1, 1995,
an answer to the allegations was filed on behalf of the Corporation, its
officers and directors and PDGE, which generally denies the plaintiff's
claims.
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The Corporation believes that the allegations are without merit or that there
are meritorious defenses to the allegations, and the Corporation intends to
defend the action vigorously. However, if the plaintiff is successful in its
claims, a judgment rendered against the Corporation and other defendants may
have a material adverse effect on the business of the Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) Market Information. The Corporation's common stock is quoted on the
NASDAQ SmallCap Market under the trading symbol "ICHR". The following table
sets forth the quarterly high and low sale price per share of the
Corporation's common stock for the periods indicated:
Fiscal Quarter Ended High Low
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1996
April 30. . . . . . . . . . . . . . 1.41 0.98
July 31 . . . . . . . . . . . . . . 1.38 0.75
September 30. . . . . . . . . . . . 1.19 0.56
December 31 . . . . . . . . . . . . 1.75 0.63
1997
March 31. . . . . . . . . . . . . . 1.63 1.19
June 30 . . . . . . . . . . . . . . 1.50 1.25
September 30. . . . . . . . . . . . 1.75 1.63
December 31 . . . . . . . . . . . . 1.75 1.50
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Note: In September 1996, the Corporation changed its fiscal year end from
January 31 to December 31.
(b) Shareholders. At March 24, 1998, the Corporation had approximately 17
stockholders of record, some of which are securities clearing agencies and
intermediaries.
(c) Dividends. The Corporation has not paid any dividends with respect to
its common stock and has no intention of paying any dividends in the
foreseeable future.
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ITEM 6. SELECTED FINANCIAL DATA
The following table reflects selected consolidated financial data for the
Corporation for the fiscal year ended December 31, 1997, the 11 months ended
December 31, 1996 and the fiscal year ended January 31, 1996. The Corporation
does not have access to the information necessary to reclassify its financial
information for the years ended January 31, 1995 and 1994, respectively. The
results of operations and financial condition of the Corporation have been
restated to reflect the sale by the Corporation of its environmental
remediation services operations and the McCook Facility in 1997 and its soil
remediation facility in 1996.
For the Year For the 11 For the Year
Ended Months Ended Ended
December 31, December 31, January 31,
1997 1996 1996
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(Dollars in thousands, except per share amounts)
OPERATING DATA
Selling, general and
administrative expenses. . . . $ (418) $ (1,042) $ (791)
Interest expense . . . . . . . . (613) (423) (406)
Other income . . . . . . . . . . 6 145 14
Loss from continuing operations. (1,025) (1,320) (1,183)
Net loss . . . . . . . . . . . . (4,054) (1,399) (2,858)
COMMON SHARE DATA(1)
Loss from continuing operations
per common share. . . . . . . . (0.21) (0.51) (0.48)
Net loss per common share. . . . (0.83) (0.54) (1.16)
Weighted average common shares
outstanding (in thousands). . . 4,193 2,586 2,456
BALANCE SHEET DATA
Working capital. . . . . . . . . 87 3,861 2,417
Total assets . . . . . . . . . . 2,028 5,582 5,578
Long-term obligations. . . . . . - 1,916 -
Total stockholders' equity . . . 89 1,987 2,438
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(1) Basic and diluted common share data is the same.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of the results of operations and
financial condition of the Corporation for the year ended December 31, 1997,
the 11 months ended December 31, 1996 and the year ended January 31, 1996
should be read in conjunction with the Corporation's audited consolidated
financial statements and related notes included elsewhere herein. In
September 1996, the Corporation changed its fiscal year end from January 31 to
December 31. As a result, the comparison of the year ended December 31, 1997
to the 11 months ended December 31, 1996 and the comparison of the 11 months
ended December 31, 1996 to the year ended January 31, 1996 are comparisons
between 11 and 12 month periods.
The Corporation sold its environmental remediation services operations in
April 1997 and the McCook Facility in December 1997. These operations have
been accounted for as discontinued operations for the year ended December 31,
1997. As a result, the financial information provided in the Corporation's
financial statements relating to the periods ended December 31, 1996 and
January 31, 1996, respectively, has been restated to conform to this method of
presentation. The Corporation's soil remediation facility was sold effective
January 31, 1996 and has been accounted for as discontinued operations for the
year ended January 31, 1996.
Year Ended December 31, 1997 Compared to 11 Months Ended December 31, 1996
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Selling, general and administrative expenses for the year ended December 31,
1997 decreased to $0.4 million from $1.0 million for the 11 months ended
December 31, 1996, primarily as a result of the legal and accounting costs
associated with certain litigation involving the Corporation and the costs
associated with a proposed acquisition in the 11 months ended December 31,
1996 and reduced staffing as a result of the sale of the Corporation's
environmental remediation services operations and the McCook Facility in 1997.
Interest expense was $0.6 million in the period ended December 31, 1997,
compared to $0.4 million in the period ended December 31, 1996, primarily as a
result of an increase in amounts funded under the Sirrom Agreements (as
hereinafter defined) during the year ended December 31, 1997. Other income
was $6,000 in the period ended December 31, 1997, compared to $0.1 million in
the period ended December 31, 1996.
The Corporation reported a loss from continuing operations of $1.0 million in
the year ended December 31, 1997, compared to $1.3 million in the 11 months
ended December 31, 1996.
The Corporation recognized a loss from the operation of its environmental
remediation services operations of $0.5 million in the year ended December 31,
1997, compared to $0.2 million in the period ended December 31, 1996. The
Corporation recorded a gain of $59,000 from the sale of these operations in
the period ended December 31, 1997. The Corporation reported a loss of $1.2
million from the operation the McCook Facility and a loss of $1.4 million from
the sale of the facility in the year ended December 31, 1997. The Corporation
had income from the operation of its soil remediation facility of $90,000 in
the 11 months ended December 31, 1996, as a result of a reduction in the
reserve for operating losses.
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The Corporation's net loss for the year ended December 31, 1997 was $4.1
million or $0.83 per share, compared to $1.4 million or $0.54 per share for
the 11 months ended December 31, 1996.
11 Months Ended December 31, 1996 Compared to Year Ended January 31, 1996
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Selling, general and administrative expenses for the 11 months ended December
31, 1996 increased to $1.0 million from $0.8 million for the year ended
January 31, 1996, primarily due to the legal and accounting costs associated
with certain litigation involving the Corporation and the costs associated
with a proposed acquisition in the period ended December 31, 1996. Interest
expense was $0.4 million in both the 11 months ended December 31, 1996 and the
year ended January 31, 1996. Other income was $0.1 million in the period
ended December 31, 1996, compared to $14,000 in the period ended January 31,
1996.
The Corporation reported a loss from continuing operations of $1.3 million in
the 11 months ended December 31, 1996, compared to $1.2 million in the year
ended January 31, 1996.
The Corporation recognized a loss from the operation of its environmental
remediation services operations of $0.2 million in the period ended December
31, 1996, compared to $67,000 in the period ended January 31, 1996. The
Corporation had income from the operation of its soil remediation facility of
$90,000 in the 11 months ended December 31, 1996, compared to a loss of $0.8
million in the year ended January 31, 1996, as a result of a reduction in the
reserve for operating losses in the period ended December 31, 1996. The
Corporation reported a loss on the disposal of its soil remediation facility
of $0.8 million in the year ended January 31, 1996.
The Corporation's net loss for the 11 months ended December 31, 1996 was $1.4
million or $0.54 per share, compared to $2.9 million or $1.16 per share for
the year ended January 31, 1996.
Liquidity and Capital Resources
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At December 31, 1997, the Corporation had cash of $0.1 million, a net decrease
of $0.5 million from $0.6 million at December 31, 1996.
At December 31, 1997, under two agreements with Sirrom Environmental Funding,
LLC (the "Sirrom Agreements"), the Corporation had funded the amounts billed
and outstanding under certain Florida State environmental rehabilitation
programs in the amount of $3.0 million, at the rate of prime plus 2% and 3%,
respectively. The Corporation had $0.6 million held in escrow at December 31,
1997 to cover potential disallowances and future interest costs relating to the
Sirrom Agreements. Due to an accelerated payment program, the amounts billed
and outstanding are expected to be paid in 1998 at a discounted rate of 3.5%
effective January 1, 1997, with the present value to be determined from the
actual settlement date of a reimbursement application rather than the original
settlement date. The Corporation will not be able to determine the impact of
the discounting and any related disallowances on its operating results and
financial condition until the payment dates and amount of payment have been
established. The Corporation may be required to record an adjustment to
reflect any negative impact.
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In January 1997, the Corporation established a line of credit with Drummond in
the amount of $0.3 million which was increased to $0.8 million in June 1997.
As at December 31, 1997, the Corporation had settled an aggregate of
approximately $2.2 million of its debt to Logan and MFC in consideration of
the issuance of a total of 217,500 shares of Preferred Stock.
Net cash used in operating activities was $1.0 million for the year ended
December 31, 1997, compared to cash provided of $0.3 million for the 11 months
ended December 31, 1996. Operating activities used cash primarily as a result
of the loss from the operation and disposition of the McCook Facility. In the
year ended December 31, 1997, an increase in accounts and notes receivables
used cash of $0.2 million, compared to a decrease in accounts and notes
receivable providing cash of $3.1 million in the period ended December 31,
1996. A decrease in cash held in escrow provided cash of $0.6 million in the
year ended December 31, 1997, compared to an increase in cash held in escrow
using cash of $0.3 million in the 11 months ended December 31, 1996.
Investing activities provided cash of $32,000 in the period ended December 31,
1996, as a result of the sale of property and equipment.
Financing activities provided cash of $0.5 million in the year ended December
31, 1997, compared to using cash of $25,000 in the 11 months ended December
31, 1996, primarily as a result of a net increase in indebtedness during the
year ended December 31, 1997. In February 1998, the Corporation issued and
sold 250,000 shares of Preferred Stock for proceeds of $2.5 million.
The Corporation believes that its cash on hand and lines of credit should
enable the Corporation to meet its ongoing liquidity requirements. The
Corporation anticipates that it may require substantial capital to pursue
current and future acquisitions of businesses and/or operating assets and
anticipates that such capital will be provided through debt and/or equity
financing.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary data required with
respect to this Item 8, and as listed in Item 14 of this annual report, are
included in this annual report commencing on page 15.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference from the Corporation's definitive proxy statement to
be filed within 120 days of the end of the Corporation's fiscal year.
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ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the Corporation's definitive proxy statement to
be filed within 120 days of the end of the Corporation's fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Incorporated by reference from the Corporation's definitive proxy statement to
be filed within 120 days of the end of the Corporation's fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the Corporation's definitive proxy statement to
be filed within 120 days of the end of the Corporation's fiscal year.
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
INDEX
(a) (1) FINANCIAL STATEMENTS
Independent Auditors' Report
Report of Independent Auditors
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Changes in Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2) FINANCIAL STATEMENT SCHEDULES
Independent Auditors' Report
Schedule II - Valuation and Qualifying Accounts
All other schedules have been omitted because they are not applicable
or the required information is shown in the financial statements or
notes thereto.
(3) LIST OF EXHIBITS
2.1 Agreement and Plan of Merger dated October 1, 1996 between ICHOR
Corporation and PDG Remediation, Inc. Incorporated by reference to
the Corporation's Schedule 14C dated September 17, 1996.
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3.1 Articles of Incorporation.(1)
3.2 Certificate of Designations. Incorporated by reference to the
Corporation's Form 8-K dated March 12, 1998.
3.3 Bylaws.(1)
10.1 Amended 1994 Stock Option Plan.(2)
10.2 1995 Qualified Incentive Stock Option Plan.(2)
10.3 Amended and Restated Employment Agreement for John M. Musacchio
dated February 1, 1997.
10.4 Purchase Agreement dated as of January 31, 1996 between Specialty
Environmental, Inc. and the Corporation.(1)
10.5 Purchase Agreement dated December 13, 1996 between the Corporation
and Logan International Corp.(3)
10.6 Order of Court of the Honorable Jack B. Schmeitterer of the United
States Bankruptcy Court of the Northern District of Illinois,
Eastern Division approving the sale of assets of Enviropur Waste
Refining and Technology, Inc. to Ortek Inc. (formerly BC Ventures
Limited).(3)
10.7 Loan Agreement dated January 15, 1997 between Ortek Inc. and
Volendam Investments Limited.(4)
10.8 Loan Agreement dated January 15, 1997 among Drummond Financial
Corporation, the Corporation and ICHOR Services, Inc.(4)
10.9 Amendment to Loan Agreement dated June 30, 1997 among Drummond
Financial Corporation, the Corporation and ICHOR Services, Inc.
10.10 Stock Purchase Agreement between the Corporation and Evergreen
Holding Inc. dated December 23, 1997. Incorporated by reference
to the Corporation's Form 8-K dated January 7, 1998.
10.11 Debt Settlement Agreement between Logan International Corp. and
the Corporation dated September 30, 1997.(5)
10.12 Debt Settlement Agreement between Logan International Corp. and
the Corporation dated February 20, 1998.(5)
10.13 Debt Settlement Agreement between Sutton Park International Ltd.
and the Corporation dated February 20, 1998.(5)
10.14 Subscription Agreement between Constable Investments Ltd. and the
Corporation dated February 26, 1998.(5)
10.15 Subscription Agreement between Conqueror Holdings Ltd. and the
Corporation dated February 26, 1998.
10.16 Subscription Agreement between Sutton Park International Ltd. and
the Corporation dated February 26, 1998.(5)
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10.17 Subscription Agreement between Zellstoff-und Papierfabrik
Rosenthal GmbH and the Corporation dated February 26, 1998.
21 List of subsidiaries of the Registrant.
23 Consent of Independent Auditors.
27 Article 5 - Financial Data Schedule for the year ended December
31, 1997.
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(1) Incorporated by reference to the Corporation's Form 10-K dated
January 31, 1996.
(2) Incorporated by reference to the Corporation's Definitive Schedule
14A dated July 8, 1996.
(3) Incorporated by reference to the Corporation's Form 8-K dated
December 17, 1996.
(4) Incorporated by reference to the Corporation's Form 10-K dated
December 31, 1996.
(5) Incorporated by reference to a Schedule 13D\A dated March 13, 1998.
(b) REPORTS ON FORM 8-K
None.
14
<PAGE> 15
- ------------------------------------------------------------------------------
PETERSON SULLIVAN P.L.L.C.
601 UNION STREET SUITE 2300 SEATTLE WA 98101 (206) 382-7777 FAX 382-7700
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Ichor Corporation and Subsidiaries
We have audited the consolidated balance sheets of Ichor Corporation and
Subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations, changes in shareholders' equity, and cash flows for
the year ended December 31, 1997 and the eleven months ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The consolidated statements of operations,
changes in shareholders' equity, and cash flows of Ichor Corporation and
Subsidiaries for the year ended January 31, 1996, were audited by other
auditors whose report dated March 8, 1996, (except for Note 3, the date of
which was April 25, 1996), expressed an unqualified opinion on those
statements.
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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Ichor
Corporation and Subsidiaries as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for the year ended December 31, 1997
and the eleven months ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Peterson Sullivan P.L.L.C.
February 28, 1998
Seattle, Washington
15
<PAGE> 16
ERNST & YOUNG LLP One Oxford Centre Phone 412 644 7800
Pittsburgh, Pennsylvania 15219
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Ichor Corporation
We have audited the accompanying consolidated statements of operations,
stockholder's equity, and cash flows of Ichor Corporation (formerly PDG
Remediation, Inc.) (the "Corporation") for the year ended January 31, 1996.
Our audit also included the financial statement schedule in the index at Item
14(a). These financial statements and schedule are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of their
operations and their cash flows for the year ended January 31, 1996, in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
March 8, 1996, except for Note 3, as
to which the date is April 25, 1996
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
16
<PAGE> 17
ICHOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
(In Thousands of Dollars)
1997 1996
---------- ----------
ASSETS
Current Assets
Cash $ 127 $ 628
Cash held in escrow 617 1,254
Accounts and notes receivable, less allowance for
doubtful accounts of $562 and $560, respectively 332 829
Note receivable 680 -
Advances to an affiliate 270 -
Prepaid expenses and other assets - 106
Net assets of discontinued environmental
remediation services segment - 71
Net assets of discontinued waste oil
recycling facility - 2,652
---------- ----------
Total current assets 2,026 5,540
Other Assets 2 42
---------- ----------
$ 2,028 $ 5,582
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 39 $ 531
Accrued interest and other liabilities 363 274
Advances from an affiliate 780 420
Current portion of long-term debt 757 454
---------- ----------
Total current liabilities 1,939 1,679
Long-Term Debt, less current portion - 1,916
---------- ----------
Total liabilities 1,939 3,595
Shareholders' Equity
Preferred stock, $.01 par value, 5,000,000 shares
authorized; series 1, nonvoting; shares issued and
outstanding 217,500 at December 31, 1997 and none
at December 31, 1996 2 -
Common stock, $.01 par value; 30,000,000 shares
authorized; shares issued 4,970,320 at December 31,
1997 and 1996 50 50
Additional paid-in capital on preferred stock 2,173 -
Additional paid-in capital on common stock 5,743 5,743
Retained deficit (7,808) (3,754)
---------- ----------
160 2,039
Less cost of 62,800 and 47,600 shares of common
stock held in treasury at December 31, 1997
and 1996, respectively (71) (52)
---------- ----------
89 1,987
---------- ----------
$ 2,028 $ 5,582
========== ==========
See Notes to Consolidated Financial Statements
17
<PAGE> 18
ICHOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, 1997, Eleven Months Ended December 31, 1996
and Year Ended January 31, 1996
(In Thousands of Dollars, Except for Per Share Amounts)
December 31, December 31, January 31,
1997 1996 1996
------------ ------------ -----------
Selling, general and administrative
expenses $ (418) $ (1,042) $ (791)
Other income (expense)
Interest expense (613) (423) (406)
Other 6 145 14
------------ ------------ -----------
(607) (278) (392)
------------ ------------ -----------
Loss from continuing operations (1,025) (1,320) (1,183)
Discontinued operations (any tax
benefits from losses are fully
reserved; any taxes associated
with gains are offset by tax
losses)
Loss from operation of
environmental remediation
services segment (489) (169) (67)
Gain on sale of environmental
remediation services segment 59 - -
Loss from operation of waste oil
recycling facility (1,224) - -
Loss on sale of waste oil
recycling facility (1,375) - -
Gain (loss) from operation
of soil remediation facility - 90 (768)
Loss on disposal of soil
remediation facility - - (840)
------------ ------------ -----------
Loss from discontinued operations (3,029) (79) (1,675)
------------ ------------ -----------
Net loss $ (4,054) $ (1,399) $ (2,858)
============ ============ ===========
Basic earnings (loss) per
common share
Loss from continuing operations $ (.21) $ (.51) $ (.48)
Discontinued operations (.62) (.03) (.68)
------------ ------------ -----------
Net loss $ (.83) $ (.54) $ (1.16)
============ ============ ===========
See Notes to Consolidated Financial Statements
18
<PAGE> 19
ICHOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Year Ended December 31, 1997, Eleven Months Ended December 31, 1996
and Year Ended January 31, 1996
(In Thousands of Dollars)
<TABLE>
<CAPTION>
--------------Common Stock---------------- -----------Preferred Stock--------------
Additional Additional Retained
Number of Paid-in Treasury Number of Paid-in Earnings
Shares Par Value Capital Stock Shares Par Value Capital (Deficit) Total
--------- --------- ---------- -------- --------- --------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January
31, 1995 1,870,320 $ 19 $ 2,473 $ - - $ - $ - $ 503 $ 2,995
Net loss for year ended
January 31, 1996 - - - - - - - (2,858) (2,858)
Common shares sold in
initial public offering 600,000 6 2,145 - - - - - 2,151
Warrants sold in initial
public offering - - 100 - - - - - 100
Issuance of 100,000
warrants - - 50 - - - - - 50
--------- --------- ---------- -------- --------- --------- ---------- --------- -------
Balance at January
31, 1996 2,470,320 25 4,768 - - - - (2,355) 2,438
Net loss for eleven
months ended December
31, 1996 - - - - - - - (1,399) (1,399)
Common shares issued in
the acquisition of
wholly-owned
subsidiary 2,500,000 25 975 - - - - - 1,000
Repurchase of 47,600
shares of common stock
held in treasury (47,600) - - (52) - - - - (52)
--------- --------- ---------- -------- --------- --------- ---------- --------- -------
Balance at December
31, 1996 4,922,720 50 5,743 (52) - - - (3,754) 1,987
Net loss for year ended
December 31, 1997 - - - - - - - (4,054) (4,054)
Conversion of debt from
related parties to
preferred stock - - - - 217,500 2 2,173 - 2,175
Repurchase of 15,200
shares of common stock
held in treasury (15,200) - - (19) - - - - (19)
--------- --------- ---------- -------- --------- --------- ---------- --------- -------
Balance at December
31, 1997 4,907,520 $ 50 $ 5,743 $ (71) 217,500 $ 2 $ 2,173 $ (7,808) $ 89
========= ========= ========= ======== ========= ========= ========== ========= =======
</TABLE>
See Notes to Consolidated Financial Statements
19
<PAGE> 20
ICHOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, 1997, Eleven Months Ended December 31, 1996
and Year Ended January 31, 1996
(In Thousands of Dollars)
December 31, December 31, January 31,
1997 1996 1996
------------ ------------ -----------
Cash Flows from Operating Activities
Net loss $ (4,054) $ (1,399) $ (2,858)
Adjustments to reconcile net
income (loss) to cash flows
from operating activities
Provision for disposal of
discontinued soil remediation
operation - - 840
Provision for losses on accounts
receivable 2 40 387
Gain on settlement of insurance
company accrual - (149) -
Other - 14 (8)
Changes in current assets and
liabilities
Cash held in escrow 637 (286) (817)
Accounts and notes receivable (185) 3,077 5,216
Advances to an affiliate (270) - -
Repayments to former parent - (117) (541)
Prepaid expenses and other assets 106 (40) (142)
Accounts payable (492) (530) 23
Advances from an affiliate 360 193 -
Net assets of discontinued
operations 2,723 74 (82)
Other accrued liabilities 89 (597) 202
Other 40 (21) (3)
------------ ------------ -----------
Net cash provided by (used
in) operating activities (1,044) 259 2,217
Cash Flows from Investing Activities
Proceeds from sale of property and
equipment - 32 -
Cash Flows from Financing Activities
Proceeds from issuance of common
shares - - 2,151
Proceeds from warrants sold - - 100
Purchase of stock held in treasury (19) (52) -
Proceeds from debt 750 51 3,676
Principal payments on debt (188) (24) (7,789)
------------ ------------ -----------
Net cash provided by (used
in) financing activities 543 (25) (1,862)
------------ ------------ -----------
Increase (decrease) in cash (501) 266 355
Cash, beginning of year 628 362 7
------------ ------------ -----------
Cash, end of year $ 127 $ 628 $ 362
============ ============ ===========
See Notes to Consolidated Financial Statements
20
<PAGE> 21
ICHOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands of Dollars, Except for Per Share Amounts)
Note 1. The Corporation and Summary of Significant Accounting Policies
History
- -------
Prior to February 1995, Ichor Corporation and Subsidiaries ("the
Corporation"), was a wholly-owned subsidiary of PDG Environmental, Inc.
("PDGE") when 1,000,000 shares of the Corporation's common stock and 1,000,000
warrants were sold in an initial public offering. The Corporation sold
600,000 newly issued common shares and 1,000,000 warrants and received net
proceeds of approximately $2,251. PDGE sold 400,000 shares of the
Corporation's common stock it held which reduced its interest to approximately
59.5%. The warrants entitle the holder to purchase one share of common stock
for $6 and will expire on February 8, 2000.
Effective July 31, 1996, Drummond Financial Corporation ("Drummond") acquired
PDGE's interest in the Corporation. The acquisition was part of a plan by
Drummond's parent to financially restructure Drummond's loans outstanding to
other entities. As part of this acquisition, the Corporation changed its year
end to December 31 from January 31.
In December 1996, another subsidiary of Drummond's parent, Logan International
Corporation ("Logan"), acquired a 50.3% interest in the Corporation as part of
a purchase of a subsidiary which owned a waste oil recycling facility in
Illinois. At this point, Drummond's interest was reduced to 29.6%.
In 1997, Logan converted $1,425 of its debt from the Corporation into 142,500
shares of the Corporation's preferred stock, series 1. In addition, another
subsidiary of Logan's and Drummond's parent converted a $750 advance into
75,000 shares of preferred stock, series 1. At December 31, 1997, the
Corporation had a receivable from Logan of $270 and owed $780 and $420 at
December 31, 1997 and 1996, respectively, to Drummond.
Business Activities
- -------------------
At the beginning of 1997, the Corporation was involved in the environmental
industry, providing environmental remediation services to the public and
private sectors, and operating the recycling waste oil facility. As discussed
in Note 2, the Corporation sold both of these operations in 1997. The
Corporation is currently negotiating a transaction to acquire a business or
operating assets from a European company that manufactures machine tools.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the Corporation
and its subsidiaries. Significant intercompany accounts and transactions have
been eliminated. Unless otherwise stated, all notes relate to continuing
operations.
21
<PAGE> 22
Note 1. (Continued)
Cash
- ----
Cash balances are occasionally in excess of federally insured amounts. Cash
held in escrow represents amounts which are subject to withdrawal restrictions
and relate to the credit arrangements described in Note 4. The Corporation
expects the cash to be released in 1998.
Environmental Conservation
- --------------------------
Liabilities for environmental conservation are recorded when it is probable
that obligations have been incurred and the amounts can be reasonably
estimated. Any potential recoveries of such liabilities are to be recorded
when there is an agreement with a reimbursing entity.
Taxes on Income
- ---------------
The Corporation accounts for income taxes under an asset and liability
approach that requires the recognition of deferred tax assets and liabilities
for expected future tax consequences of events that have been recognized in
the Corporation's financial statements or tax returns. In estimating future
tax consequences, the Corporation generally considers all expected future
events other than enactments of changes in the tax laws or rates.
Earnings Per Share
- ------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS 128") which
is effective for interim and annual financial statements for periods ending
after December 15, 1997. Under FAS 128, basic and diluted earnings per share
are to be presented. Basic earnings per share is computed by dividing income
available to common shareholders by the weighted average number of common
shares outstanding in the period. Diluted earnings per share takes into
consideration common shares outstanding (computed under basic earnings per
share) and potentially dilutive common shares. The conversion of the
convertible preferred stock, and the stock options and warrants have not been
reflected as exercised for the purposes of computing earnings or loss per
share since the conversion of such stock or exercise of such options and
warrants would be antidilutive. The weighted average number of shares was
4,912,643, 2,585,590, and 2,456,000 for the year ended December 31, 1997, the
eleven months ended December 31, 1996, and the year ended January 31, 1996.
The adoption of FAS 128 did not result in a restatement of earnings per share
in prior periods.
Preferred Stock
- ---------------
The entire redemption value of preferred shares, series 1, can be exchanged
for common stock at 90% of the common stock average market price (as defined).
Redemption value is $10 per share and shares are redeemable only by the
Corporation with a 30 day notice. The preferred shares, series 1, have a
liquidation preference over other stock to the extent of the redemption value
plus unpaid dividends. This stock has an annual cumulative dividend rate of
5%, payable quarterly and no dividends may be paid on common stock if
preferred share dividends are in arrears. Because the
22
<PAGE> 23
Note 1. (Continued)
shares were issued effective December 31, 1997, no preferred dividends were
paid and there are no preferred dividends in arrears.
Depreciation
- ------------
Property and equipment are depreciated over the estimated useful lives of the
assets using the straight-line method. Permits were amortized over a 40-year
period representing their estimated economic lives.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Stock-Based Compensation
- ------------------------
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation," encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value.
The Corporation has chosen to account for stock-based compensation using
Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock
Issued to Employees." Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the
Corporation's stock at the date of the grant over the amount an employee is
required to pay for the stock. There was no compensation expense under APB
25.
Reclassifications
- -----------------
Certain reclassifications have been made to the prior year financial
statements to combine the assets of discontinued operations and net these
assets with the related liabilities.
New Accounting Standards
- ------------------------
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," is effective for years beginning after December 15, 1997. The
primary objective of this statement is to report and disclose a measure
("Comprehensive Income") of all changes in equity of a company that result
from transactions and other economic events in a period other than
transactions with owners. The Corporation does not anticipate that the
statement will have a significant impact on its financial statements.
Statement of Financial Accounting Standards No. 131, "Disclosure About
Segments of an Enterprise and Related Information," is effective for years
beginning after December 15, 1997. This statement requires use of the
"management approach" model for segment reporting. The management approach
model is based on the way a company's management organizes segments within the
company for making operating decisions and assessing performance. Reportable
segments are based on products and services, geography, legal structure,
management structure, or any other manner in
23
<PAGE> 24
Note 1. (Continued)
which management disaggregates a company. The Corporation does not anticipate
that the adoption of the statement will have a significant impact on its
financial statements other than potentially providing more financial statement
disclosures.
Statement of Financial Standards No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," standardizes the disclosure
requirements for pensions and other postretirement benefits. This statement
requires additional information on changes in benefit obligations and fair
values of plan assets. It revises prior standards and is effective for years
beginning after December 15, 1997. Because the Corporation does not currently
have such employee benefit plans nor intends to initiate any in the near-term,
there should not be an impact on its financial statements.
Note 2. Discontinued Operations
Environmental Remediation Services Segment
- ------------------------------------------
The Corporation sold its environmental remediation services segment effective
April 30, 1997. The transaction was accounted for as a discontinued operation
for the year ended December 31, 1997. Certain assets were sold and the
purchaser assumed liabilities related to those assets. As part of the sale
transaction, the Corporation retained cash, receivables, accounts payable and
other accrued liabilities that had been part of the segment.
The segment was sold for $147, which was paid in cash. Contract revenue for
this segment was $748 in the year ended December 31, 1997, $4,043 in the
eleven months ended December 31 ,1996, and $328 in the year ended January 31,
1996.
Net assets associated with this segment at December 31, 1996, were property
and equipment of $132 and long-term debt of $61, resulting in net assets of
$71.
Waste Oil Recycling Facility
- ----------------------------
The waste oil recycling facility began operations in 1997 and had sales of
$2,582 (68% to two major customers) for the year. However, later in the year,
the Corporation decided to dispose of the facility and on December 23, 1997,
the Corporation sold the subsidiary, including all of its assets and
liabilities (except for certain debts payable to affiliated entities). The
facility was sold for $1,000 with a down payment of $320 and a note for $680
due December 23, 1998, at 2.5% and secured by a letter of credit issued by a
bank. Since the note is due in 1998, no interest was imputed and its fair
value is estimated at $680.
24
<PAGE> 25
Note 2. (Continued)
Net assets associated with this segment at December 31, 1996, are summarized
as follows:
Property and equipment $ 3,542
Other assets 76
Environmental liabilities (800)
Other liabilities (166)
---------------
$ 2,652
===============
The Corporation originally acquired this subsidiary in December 1996 for 2.5
million shares of common stock (valued at $1.0 million) and a promissory note
in the amount of $1,425. The cost of the assets acquired was $3,619, and
$1,194 in liabilities were assumed. The acquisition was accounted for as a
purchase.
Soil Remediation Facility
- -------------------------
In prior years, the Corporation provided services associated with the
decontamination of petroleum contaminated soils in Florida. The Corporation
developed a plan during 1996 to exit this segment of the remediation industry
which was accounted for as a discontinued operation as of January 31, 1996.
Note 3. Accounts Receivable and Indemnifications
It is the Corporation's policy not to require collateral with respect to
outstanding receivables. The Corporation continuously reviews the
creditworthiness of customers and, when necessary, requests collateral. The
Corporation had contracts to provide services involving the remediation of
underground storage tank sites for private customers in Florida. Receivables
from this Florida activity totaled $740 and $771 at December 31, 1997 and
1996, respectively.
The Corporation also was a subcontractor to other remediation companies in
Florida which were providing services to the state. In certain circumstances,
the Corporation provided an indemnification for any amounts not paid to the
prime contractor. At December 31, 1997 and 1996, the Corporation provided
such indemnifications for $1,711 and $4,596, respectively. The Corporation
has provided for estimated potential future losses associated with these
indemnifications as a part of the allowance for doubtful accounts.
Note 4. Credit Arrangements
The Corporation had two credit arrangements with the same company which
provided funding for certain of its remediation activities in Florida during
prior years. Receivables relating to a state-sponsored remediation program
were financed at 100%. Any outstanding balances under these credit
arrangements are to be repaid as the financed receivables are collected.
Under one of the arrangements, the Corporation has outstanding balances of
$358 and $750 at December 31, 1997 and 1996 respectively, with interest
accruing at 2% above the prime rate.
25
<PAGE> 26
Note 4. (Continued)
The amounts outstanding under the second arrangement were $2,605 and $4,000 at
December 31, 1997 and 1996, respectively. In connection with obtaining this
financing, the Corporation issued to the creditor a warrant to purchase
100,000 shares of its common stock at an exercise price of $1.37 per share.
The warrant will expire on January 1, 1999 and the Corporation recorded $50 as
the market value of the warrant during the year ended January 31, 1996. The
interest rate on the outstanding balance under this arrangement is the prime
rate plus 3%. Both arrangements required that the Corporation deposit a
portion of the borrowings into an escrow account to cover potential nonpayment
of receivable balances. The total amounts deposited were $617 and $1,254 at
December 31, 1997 and 1996, respectively.
Since 1996, no additional advances have been allowed under either arrangement.
Note 5. Long-Term Debt
1997 1996
----------- -----------
Note payable to Logan, due December 1999, interest
at 8% payable monthly, collateralized by certain
assets of the Corporation's subsidiaries. Interest
due on this loan for 1997 was $114, which was all
waived by Logan. This note was converted to
preferred stock in 1997 which is a noncash
transaction. $ - $ 1,425
Amounts due to an insurance company in monthly
payments of $38. No interest is charged on this
debt. No interest has been imputed since the
amount is not material. Payments are in arrears
so the entire balance is considered due in 1998. 757 945
----------- -----------
757 2,370
Less current portion (757) (454)
----------- -----------
$ - $ 1,916
=========== ===========
The Corporation paid approximately $541, $442, and $643 for interest expense
during the year ended December 31, 1997, the eleven months ended December 31,
1996, and the year ended January 31, 1996.
The fair value of the note payable to Logan was estimated to approximate the
recorded value. The fair value of the amount due to an insurance company is
estimated to be $743 and $895 at December 31, 1997 and 1996, respectively.
Fair values are based on the terms of the related debt and assume all
remaining payments will be made in accordance with the o6riginal settlement
terms.
26
<PAGE> 27
Note 6. Income Taxes
The reconciliation of income tax on income from continuing operations computed
at the federal statutory rates to income tax expense is as follows:
Eleven
Year Ended Months Ended Year Ended
December 31, December 31, January 31,
1997 1996 1996
------------ ------------ -----------
Tax at statutory rate $ (349) $ (449) $ (402)
Increase in net operating loss
carryover 377 832 400
Other (28) (383) 2
------------ ------------ -----------
$ - $ - $ -
============ ============ ===========
The significant components of the Corporation's deferred tax assets as of
December 31, 1997 and 1996, are as follows:
1997 1996
------------ ------------
Accounts receivable allowance $ 191 $ 213
Net operating loss carryforwards 2,999 1,732
------------ ------------
Net deferred tax assets before valuation allowance 3,190 1,945
Valuation allowance for deferred tax assets (3,190) (1,945)
------------ -----------
Net deferred tax assets $ - $ -
============ ===========
The Corporation had net operating loss carryforwards of approximately $8,800
and $4,600 at December 31, 1997 and 1996, respectively. Of the $8,800
carryover as of December 31, 1997, $500 expires in 2004, $1,800 expires in
2010, $2,300 expires in 2011, and $4,200 expires in 2012. The Corporation's
utilization of the losses is subject to limitation due to ownership and
operational changes, except those that expire in 2012.
Note 7. Stock Option Plans
1994 Amended Stock Option Plan
- ------------------------------
The Corporation maintains a stock option plan which provides for the issuance
of up to 350,000 shares of the Corporation's common stock to employees and
non-employee directors.
27
<PAGE> 28
Note 7. (Continued)
The following table summarizes information with respect to the 1994 Amended
Stock Option Plan:
Weighted
Average
Number Exercise
of Shares Price
---------------- ----------------
Outstanding at January 31, 1995 137,500 $ .75
Granted 22,500 .75
Canceled - Reusable (12,500) .75
----------------
Outstanding at January 31, 1996 147,500 .75
Granted 42,500 1.18
Canceled - Reusable (10,500) .75
----------------
Outstanding at December 31, 1996 179,500 .81
Granted 145,000 2.00
Canceled - Reusable (89,500) 1.10
----------------
Outstanding at December 31, 1997 235,000 $ 1.39
================ ================
Exercisable at December 31, 1997 115,000 $ .76
================ ================
Reserved for future grants at
December 31, 1997 115,000
================
The weighted average fair values (per option) at date of grant for options
granted during the year ended December 31, 1997, and the eleven months ended
December 31, 1996, was $.65 and $1.18, respectively. Almost all options have
an expiration date ten years after issuance. No options have been exercised.
1995 Qualified Incentive Stock Option Plan
- ------------------------------------------
The Corporation's board of directors approved a second stock option plan on
August 15, 1996. This plan provides for the issuance of up to 150,000 shares
of the Corporation's common stock to key employees.
28
<PAGE> 29
Note 7. (Continued)
The following table summarizes information with respect to the 1995 Qualified
Incentive Stock Option Plan:
Weighted
Average
Number Exercise
of Shares Price
---------------- ----------------
Outstanding at January 31, 1996 - $ -
Granted 150,000 .75
Canceled - Reusable (25,000) .75
----------------
Outstanding at December 31, 1996 125,000 .75
Canceled - Reusable (25,000) .75
----------------
Outstanding at December 31, 1997 100,000 $ .75
================ ================
Exercisable at December 31, 1997 100,000 $ .75
================ ================
Reserved for future grants at December
31, 1997 50,000
================
The weighted average fair value (per option) at grant date for options granted
during the eleven months ended December 31, 1996, was $.72. All options have
an expiration date ten years after issuance. No options have been exercised.
Compensation
- ------------
For both the 1994 Amended Stock Option Plan and the 1995 Qualified Incentive
Stock Option Plan, when options are granted, or the exercise price is
adjusted, the exercise price cannot be less than the fair market value of the
Corporation's common stock (as defined). In accordance with Accounting
Principles Board Opinion No. 25, no compensation expense was recognized. Had
compensation expense been recognized on the basis of fair value pursuant to
Statement of Financial Accounting Standards No. 123, net loss and per share
data would have been adjusted as follows:
Eleven Months
Year Ended Ended
December 31, December 31,
1997 1996
------------ -------------
Net loss
- ---------------------------------
As reported $ (4,054) $ (1,399)
============ =============
Pro forma $ (4,085) $ (1,551)
============ =============
Basic earnings per share data
- ---------------------------------
As reported $ (.83) $ (.54)
============ =============
Pro forma $ (.83) $ (.60)
============ =============
The fair value of each option granted is estimated on the grant date using the
Black Scholes model.
29
<PAGE> 30
Note 7. (Continued)
The assumptions used in calculating fair value are as follows:
Eleven Months
Year Ended Ended
December 31, December 31,
1997 1996
------------ -------------
Risk-free interest rate 6.0% 5.0%
Expected life of the options 3 years 10 years
Expected volatility 101.2% 111.5%
Expected dividend yield 0.0% 0.0%
Note 8. Contingencies
The Corporation has been named as a defendant in a purported class action
lawsuit filed in U.S. Federal Court involving all persons and entities who
purchased the Corporation's common stock from February 9, 1995, the effective
date of the initial public offering, through May 23, 1995. The plaintiff is
seeking recision for the purchase of shares of common stock by members of the
class or statutory damages, as well as interest, attorneys' fees and other
costs and expenses. The Corporation believes that the plaintiff's allegations
are without merit or that there are meritorious defenses, and intends to
defend the action vigorously. However, if the plaintiff is successful, it may
have an adverse effect on the Corporation. No liability has been recorded in
connection with this lawsuit.
No claims have been made against the Corporation with respect to environmental
liabilities. However, if claims were to be made in the future, and were not
paid by the current or future owners of the waste oil recycling facility (or
other responsible parties), the Corporation could be deemed a responsible
party and could potentially be liable. No liability has been recorded for
potential environmental claims at December 31, 1997.
Note 9. Subsequent Event
In February 1998, the Corporation sold 250,000 convertible preferred shares,
series 1, for $2,500 in cash to affiliates and others.
30
<PAGE> 31
- ------------------------------------------------------------------------------
PETERSON SULLIVAN P.L.L.C.
601 UNION STREET SUITE 2300 SEATTLE WA 98101 (206) 382-7777 FAX 382-7700
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Ichor Corporation and Subsidiaries
Our report on the consolidated financial statements of Ichor Corporation and
Subsidiaries is included on page 15 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related
financial statement schedule listed in Item 14 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
/s/ Peterson Sullivan P.L.L.C.
February 21, 1998
Seattle, Washington
31
<PAGE> 32
ICHOR CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Year Ended December 31, 1997, Eleven Months Ended December 31, 1996
and Year Ended January 31, 1996
(In Thousands of Dollars)
Additions
--------------------
Balance at Charged Balance at
beginning Charged to other close
of period to income accounts Deductions of period
---------- --------- -------- ---------- ----------
Year Ended December
31, 1997 (3)
Allowance for
doubtful accounts $ 690 $ 2 $ - $ 130 $ 562
========= ========= ========= ========== =========
Eleven Months Ended
December 31, 1996 (1) (2)
Allowance for
doubtful accounts $ 724 $ 40 $ 130 $ 204 $ 690*
========= ========= ========= ========== =========
Year Ended January
31, 1996 (2)
Allowance for
doubtful accounts $ 307 387 $ - $ (30) $ 724
========= ========= ========= ========== =========
(1) Allowance for uncollectibility to reflect the fair value of receivables
purchased; recorded at the date of acquisition of the waste oil
recycling facility.
(2) Uncollectible accounts written off, net of recoveries.
(3) Allowance for uncollectibility sold in conjunction with sale of waste oil
recycling facility.
* The consolidated balance sheet shows the allowance for doubtful accounts to
be $560 (instead of $690). This is because of $130 was reclassified to "net
assets of discontinued waste oil recycling facility" at December 31, 1996.
32
<PAGE> 33
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: March 25, 1998 ICHOR CORPORATION
By: /s/ Michael J. Smith
------------------------------
Michael J. Smith, President,
Chief Financial Officer and
Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Michael J. Smith March 25, 1998
- ------------------------------
Michael J. Smith
President, Chief Financial Officer,
Treasurer and Director
/s/ Roy Zanatta March 25, 1998
- ------------------------------
Roy Zanatta
Secretary and Director
/s/ John Musacchio March 25, 1998
- ------------------------------
John Musacchio
Director
/s/ Leonard Petersen March 25, 1998
- ------------------------------
Leonard Petersen
Director
/s/ Young-Soo Ko March 25, 1998
- ------------------------------
Young-Soo Ko
Director
/s/ Jae-Sun Lee March 25, 1998
- ------------------------------
Jae-Sun Lee
Director
33
<PAGE> 34
EXHIBIT INDEX
-------------
Exhibit Number Description
-------------- -----------
2.1 Agreement and Plan of Merger dated October 1, 1996
between ICHOR Corporation and PDG Remediation,
Inc. Incorporated by reference to the Corporation's
Schedule 14C dated September 17, 1996.
3.1 Articles of Incorporation.(1)
3.2 Certificate of Designations. Incorporated by
reference to the Corporation's Form 8-K dated
March 12, 1998.
3.3 Bylaws.(1)
10.1 Amended 1994 Stock Option Plan.(2)
10.2 1995 Qualified Incentive Stock Option Plan.(2)
10.3 Amended and Restated Employment Agreement for John
M. Musacchio dated February 1, 1997.
10.4 Purchase Agreement dated as of January 31, 1996
between Specialty Environmental, Inc. and the
Corporation.(1)
10.5 Purchase Agreement dated December 13, 1996 between
the Corporation and Logan International Corp.(3)
10.6 Order of Court of the Honorable Jack B.
Schmeitterer of the United States Bankruptcy Court
of the Northern District of Illinois, Eastern
Division approving the sale of assets of Enviropur
Waste Refining and Technology, Inc. to Ortek Inc.
(formerly BC Ventures Limited).(3)
10.7 Loan Agreement dated January 15, 1997 between
Ortek Inc. and Volendam Investments Limited.(4)
10.8 Loan Agreement dated January 15, 1997 among
Drummond Financial Corporation, the Corporation
and ICHOR Services, Inc.(4)
10.9 Amendment to Loan Agreement dated June 30, 1997
among Drummond Financial Corporation, the
Corporation and ICHOR Services, Inc.
10.10 Stock Purchase Agreement between the Corporation
and Evergreen Holding Inc. dated December 23,
1997. Incorporated by reference to the
Corporation's Form 8-K dated January 7, 1998.
10.11 Debt Settlement Agreement between Logan
International Corp. and the Corporation dated
September 30, 1997.(5)
<PAGE> 35
10.12 Debt Settlement Agreement between Logan
International Corp. and the Corporation dated
February 20, 1998.(5)
10.13 Debt Settlement Agreement between Sutton Park
International Ltd. and the Corporation dated
February 20, 1998.(5)
10.14 Subscription Agreement between Constable
Investments Ltd. and the Corporation dated
February 26, 1998.(5)
10.15 Subscription Agreement between Conqueror Holdings
Ltd. and the Corporation dated February 26, 1998.
10.16 Subscription Agreement between Sutton Park
International Ltd. and the Corporation dated
February 26, 1998.(5)
10.17 Subscription Agreement between Zellstoff-und
Papierfabrik Rosenthal GmbH and the Corporation
dated February 26, 1998.
21 List of subsidiaries of the Registrant.
23 Consent of Independent Auditors.
27 Article 5 - Financial Data Schedule for the year
ended December 31, 1997.
- -------------------------
(1) Incorporated by reference to the Corporation's Form 10-K dated January
31, 1996.
(2) Incorporated by reference to the Corporation's Definitive Schedule 14A
dated July 8, 1996.
(3) Incorporated by reference to the Corporation's Form 8-K dated December
17, 1996.
(4) Incorporated by reference to the Corporation's Form 10-K dated December
31, 1996.
(5) Incorporated by reference to a Schedule 13D\A dated March 13, 1998.
<PAGE> 1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
-----------------------------------------
THIS AGREEMENT effective the 1st day of February, 1997
BETWEEN:
JOHN M. MUSACCHIO, a resident of Monroeville, Pennsylvania
(the "Executive")
AND:
ICHOR CORPORATION, a Delaware corporation, with offices at
300 Oxford Drive, Monroeville, Pennsylvania, U.S.A., 15146
(the "Corporation")
WHEREAS:
A. The Corporation desires to continue to employ the Executive, and the
Executive desires to continue his employment with the Corporation, as Chief
Operating Officer ("COO"); and
B. The Corporation and the Executive wish to amend the employment agreement
between the Corporation and the Executive dated November 30, 1995 as set out
in this amended and restated employee agreement (the "Agreement").
NOW THEREFORE, in consideration of the mutual obligations herein contained,
the parties hereto, intending to be legally bound hereby, covenant and agree
as follows:
ARTICLE 1
EMPLOYMENT
1.1 The Corporation hereby employs the Executive to render services to the
Corporation as COO. The Executive shall devote his full time and
attention to rendering his services in the general management of the
business of the Corporation and shall report to the President and board
of directors of the Corporation or a committee or subcommittee thereof,
as may be established from time to time (the "Board").
1.2 The Executive hereby accepts such employment and agrees that he will,
during the continuance hereof, devote his full time and attention and
best talents and abilities to the duties of employment hereby accepted
by him.
1.3 The Executive agrees to serve without additional compensation as a
director or member of any committee of the Board.
<PAGE> 2
- 2 -
ARTICLE 2
TERM AND TERMINATION
2.1 The Corporation acknowledges that the term of the Executive's employment
commenced on November 30, 1995 and continues at the will of the
Corporation.
2.2 The Executive shall have the right to terminate this Agreement provided
he gives the Corporation written notice of his intent to terminate at
least six (6) months before his anticipated termination date, in which
case the Executive shall be entitled to the benefits, if any,
hereinafter set forth.
2.3 The Corporation may terminate the employment of the Executive at any
time, without cause, at which event this Agreement shall automatically
terminate in its entirety, and the Executive shall be entitled to a
severance benefit of one (1) year of Annual Salary (as defined herein)
(the "Severance Benefit"). The Severance Benefit shall be paid in
twelve (12) consecutive equal monthly instalments beginning the first of
the month following termination. Notwithstanding the above, the
Corporation may terminate the Executive's employment for cause without
notice or payment.
ARTICLE 3
COMPENSATION
3.1 As compensation to the Executive for his performance of the services to
be rendered hereunder and for his performance of all the additional
obligations of employment imposed by common law or statutory law with
respect to his positions and offices with the Corporation, the
Corporation agrees to pay to the Executive and the Executive agrees to
accept the following salary, other compensation and benefits, in
addition to the other compensation and benefits provided under this
Agreement:
(a) During the term of this Agreement, the Corporation shall pay the
Executive, in equal monthly installments, a salary at an annual
rate of $165,000 or such greater rate as the President or the Board
may from time to time determined (the most recent rate, annualized,
being herein referred to as the "Annual Salary").
(b) As long as the Executive is an employee of the Corporation, if the
Corporation awards its executive class of officers bonuses and/or
additional incentive compensation, the Executive shall be entitled
to equitably participate in such bonuses and/or additional
incentive compensation as determined and awarded in the discretion
of the Compensation Committee of the Board.
(c) The Executive shall be entitled to participate, so long as he is an
employee of the Corporation, in any and all of the Corporation's
present or future employee benefit plans, insurance plans, and
other benefits, which are generally applicable to the Corporation's
executives; provided, however, that the accrual and/or receipt by
the
<PAGE> 3
- 3 -
Executive of benefits under and pursuant to any such present or
future employee benefit plan shall be determined and controlled by
the provisions of such plan.
(d) The Executive shall be entitled to retain and continue to enjoy
such perquisites that he is presently receiving and those which are
granted by the President or the Board to the Executive during the
term of this Agreement.
ARTICLE 4
COVENANT AGAINST COMPETITION
4.1 The Executive agrees that:
(a) at all times during the term of this Agreement;
(b) for two years after the Executive retires; and
(c) during any time in which the Executive is receiving an Annual
Salary from the Corporation, or the equivalent of his Annual Salary
from the Corporation or any of its subsidiaries, after this
Agreement has been terminated,
the Executive will not directly or indirectly engage in any business
which is substantially competitive with any business then actively
conducted by the Corporation or any of its subsidiaries, either as
owner, partner or officer, or employee of such a business, and the
Executive will not consult with any such a business; provided, however,
that ownership by the Executive of not more than five percent (5%) of
the outstanding shares of stock of any such business listed on any
national stock exchange or of not more than twenty-five percent (25%) of
the stock of any such business not so listed shall not be deemed to
amount to a violation of this covenant.
ARTICLE 5
WITHHOLDING OF APPROPRIATE TAXES
5.1 It is understood and agreed by the parties hereto that the Corporation
shall withhold appropriate taxes from compensation and with respect to
any other economic benefits herein provided when such withholding is, in
the reasonable judgment of the Corporation, required by law or
regulation.
ARTICLE 6
GENERAL
6.1 This Agreement supersedes any prior agreements or understandings, oral
or written, with respect to employment of the Executive with the
Corporation and constitutes the entire agreement with respect thereto.
It cannot be changed or terminated orally and may be modified only by a
subsequent written agreement executed by both the parties hereto. There
are no representations, warranties, forms, conditions, undertakings,
rights, entitlements or
<PAGE> 4
- 4 -
collateral agreements, express, implied or statutory, between the
parties hereto with respect to the employment of the Executive with the
Corporation, except as expressly set forth in this Agreement.
6.2 This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
6.3 This is a personal service agreement which may not be assigned by the
Executive. Any assignment in violation of this covenant shall be null
and void.
6.4 Except as otherwise provided in Section 6.3, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
successors and assigns.
6.5 If any provision of this Agreement is determined to be invalid or
unenforceable in whole or in part, such invalidity or unenforceability
shall attach only to such provision or part thereof and the remaining
part of such provision and all other provisions hereof shall continue in
full force and effect.
6.6 This Agreement may be executed in several parts and in the same form and
by facsimile and such parts as so executed shall together constitute one
original document, and such parts, if more than one, shall be read
together and construed as if all the signing parties had executed one
copy of the said agreement.
IN WITNESS WHEREOF, the Executive has signed and sealed this Agreement and the
Corporation has caused this Agreement to be executed by a duly authorized
person and its corporate seal to be hereunto affixed the day and year first
above written.
Signed in the presence of )
)
/s/ Dionne M. Wiederstein ) /s/ John M. Musacchio
- ----------------------------------- ) ----------------------
Name of Witness ) JOHN M. MUSACCHIO
339 Haymaker Rd. )
- ----------------------------------- )
Address of Witness )
)
Monroevile, PA 15146 )
- ----------------------------------- )
ICHOR CORPORATION
By: /s/ Michael J. Smith
--------------------------
Name: c/s
--------------------------
Title:
--------------------------
<PAGE> 1
AMENDMENT TO LOAN AGREEMENT
WHEREAS ICHOR Corporation ("Ichor"), ICHOR Services, Inc. ("ISI") and
Drummond Financial Corporation (the "Lender") entered into a loan agreement
effective the 15th day of January, 1997 (the "Loan Agreement"), wherein Ichor
and ISI (collectively the "Borrowers") requested that a credit facility be
made available to them by the Lender and the Lender agreed to make the credit
facility available to the Borrowers upon the terms and conditions set out in
the Loan Agreement; and
WHEREAS the Borrowers and the Lender desire to amend the Loan Agreement,
in accordance with section 1.3 thereof, to reflect a change in the Principal
Sum to be made available by the Lender to the Borrowers pursuant to such
credit facility and have agreed to enter into this amendment agreement (the
"Amendment Agreement").
NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of one dollar
($1.00) paid by the parties to each other, receipt of this sum being
acknowledged by each of the parties, and other good and valuable
consideration, the Borrowers jointly and severally covenant and agree with the
Lender and the Lender covenants and agrees with the Borrowers as follows:
1. All capitalized terms used and not otherwise defined herein shall have
the meanings assigned to them in the Loan Agreement.
2. The definition of "Principal Sum" contained in section 1.1 of the Loan
Agreement is hereby amended to delete the reference to "$250,000" and
insert in its place "$750,000".
3. The Lender and the Borrowers hereby confirm and ratify the Loan Agreement
as amended and modified by this Amendment Agreement.
4. Each of the Borrowers represents and warrants to the Lender as follows:
(a) each of the Borrowers has taken all necessary action to authorize the
creation, execution, delivery and performance of this Amendment
Agreement and this Amendment Agreement has been duly executed by the
Borrowers, as required, and when delivered, will, together with the
Loan Agreement and Ancillary Documents, constitute legal, valid and
binding obligations of the Borrowers, enforceable in accordance with
their terms;
(b) each of the Borrowers has to date fulfilled and will hereafter
continue to fulfill each covenant, agreement and condition on its
part to be performed under the Loan Agreement, as amended, and
Ancillary Documents;
<PAGE> 2
- 2 -
(c) neither of the Borrowers has knowledge of the existence of any event
of default or any event which, upon notice or lapse of time or both,
would become an event of default under the Loan Agreement, as
amended; and
(d) neither of the Borrowers has entered into any amendment or supplement
to the Loan Agreement other than this Amendment Agreement.
5. This Amendment Agreement is declared to be supplemental to the Loan
Agreement and is to form part of and shall have the same effect as though
incorporated in the Loan Agreement.
6. This Amendment Agreement may be executed in several parts in the same
form and by facsimile, and such parts as so executed shall together
constitute one original document, and such parts, if more than one, shall
be read together and construed as if all the signing parties had executed
one copy of this Amendment Agreement.
7. This Amendment Agreement will enure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to Loan
Agreement to be duly executed effective as of the date set out herein.
Dated: June 30, 1997
ICHOR CORPORATION DRUMMOND FINANCIAL CORPORATION
By: /s/ John M. Musacchio By: /s/ Rene Randall
------------------------------ --------------------------
Name: John Musacchio Name: R. Randall
---------------------------- --------------------------
Title: Chief Operating Officer Title: Director
--------------------------- -------------------------
ICHOR SERVICES, INC.
By: /s/ John M. Musacchio
------------------------------
Name: John Musacchio
----------------------------
Title: President
---------------------------
<PAGE> 1
SUBSCRIPTION AGREEMENT
February 26 , 1998
----
TO: PURCHASERS OF 5% CUMULATIVE REDEEMABLE CONVERTIBLE
PREFERRED SHARES, SERIES 1
OF ICHOR CORPORATION
MFC Merchant Bank S.A. (the "Dealer") and Ichor Corporation. (the
"Corporation") entered into a purchase agreement dated for reference February
20, 1998 (the "Purchase Agreement") providing for the purchase from the
Corporation of 250,000 5% Cumulative Redeemable Convertible Preferred Shares,
Series 1 for an aggregate purchase price of $2,500,000 (the "Purchased
Shares"). A copy of the term sheet (the "Term Sheet") outlining the features
of the private placement is attached as Schedule "A" hereto.
The Purchase Agreement provides that the Dealer may arrange for substituted
purchasers of the Purchased Shares on a "private placement" basis, and that
each substituted purchaser will enter into a subscription agreement (the
"Subscription Agreement") in substantially the form of this agreement. Your
acceptance of this letter, as evidenced by your signature below, will
constitute your offer to the Corporation to subscribe for the Purchased Shares
set forth below under the heading "Details of Subscription" on the terms and
conditions contained herein. The Corporation's acceptance of your offer, as
evidenced by the signature of its officer below, will constitute an agreement
between you and the Corporation for you to purchase from the Corporation and
for the Corporation to issue and sell to you such Purchased Shares on such
terms and conditions.
References below to "this Agreement" are to be read as references to the
agreement resulting from the Corporation's acceptance of your offer. You are
referred to below as the "Purchaser".
A. SUBSCRIPTION
The Purchaser subscribes for and agrees to purchase from the Corporation the
Purchased Shares set forth below under the heading "Details of Subscription".
The Purchaser understands that the Purchased Shares subscribed for form part
of the offering made pursuant to the Purchase Agreement.
B. REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE CORPORATION
By accepting this offer, the Corporation represents, warrants, covenants and
agrees as follows:
1. The Corporation is a corporation duly organized and is validly subsisting
under the laws of Delaware.
2. The Corporation has all necessary corporate power to own or lease its
property and to carry on its business as presently carried on by it and
to execute and deliver this Agreement and the Purchased Shares.
<PAGE> 2
2
3. This Agreement has been duly authorized by all necessary corporate action
by the Corporation and constitutes legal, valid and binding obligations
of the Corporation.
4. The Corporation's common shares are quoted through the National
Association of Securities Dealers Authorized Distribution System SmallCap
market and the Corporation will maintain such status, without default,
until the Closing Date.
5. The Corporation's annual audited financial statements for the period
ended December 31, 1996 and its unaudited interim financial statements
for the period ended September 30, 1997 were, at the respective dates of
issue or publication, true and correct in all material respects and were
prepared in accordance with and complied in all material respects with
the laws, regulations, policy statements and rules applicable to such
documents.
6. There has been no material or adverse change in the affairs of the
Corporation since December 31, 1996, and no material or adverse fact
exists in relation to the proposed issue of the Purchased Shares, which
in either case is not generally disclosed.
C. CONDITIONS
The Purchaser's obligation to complete the purchase of the Purchased Shares
contemplated hereby shall be conditional upon the fulfilment either on or
before the Closing Date of the following conditions:
(a) the Purchased Shares will be validly and duly authorized, created
and issued by the Corporation;
(b) the representations and the warranties contained herein are true and
correct and all covenants relating to the Corporation herein
contained and required to be performed and complied with have been
performed and complied with by the Corporation; and
(c) no action or proceeding in the United States shall be pending or
threatened by any person, company, firm, governmental authority,
regulatory body or agency to cease trade, enjoin or prohibit:
(i) the sale of the Purchased Shares to the Purchaser as
contemplated hereby; or
(ii) the right of the Corporation to issue shares on the exercise by
the Purchaser of its right of conversion contained in the
Purchased Shares.
<PAGE> 3
3
D. DELIVERY AND PAYMENT
Subject to acceptance by the Corporation of this Agreement, delivery and
payment for the Purchased Shares shall be completed at the offices of the
Dealer at 1:00 p.m. (local time) on or before February 27, 1998 or such other
date, time and place as may be agreed upon in writing by the Corporation and
the Dealer (the "Closing Date"). The Purchaser hereby appoints the Dealer as
its agent to represent it at the closing for the purposes of all closing
matters including, without limitation, to execute receipts and documents as
its agent and to accept delivery of documents and the Purchased Shares and
hereby irrevocably authorizes the Dealer to extend such period and modify or
waive such terms and conditions as may be contemplated herein or in the
Purchase Agreement as the Dealer deems appropriate in its absolute discretion.
The Purchased Shares subscribed for by the Purchaser will be available for
delivery on the Closing Date to the Dealer by way of a certificate
representing the Purchased Shares registered in the name of the Purchaser,
against delivery to the Corporation of the Purchase Price for the Purchased
Shares by certified cheque or bank draft in U.S. funds or other electronic
form of payment satisfactory to the Corporation, provided that, in the event
that the certificates representing the Purchased Shares are not available for
physical delivery on the Closing Date, the Purchase Price shall be paid to the
Corporation pending delivery of the Purchased Shares. If the certificates
representing the Purchased Shares are not delivered by March 31, 1998, the
Dealer may agree to one or more extensions of time for delivery of the
certificates and may modify or waive such terms relating thereto as the Dealer
deems appropriate in its absolute discretion, or may, at its option, elect to
terminate this agreement whereupon the Purchase Price paid by the Purchaser
shall be returned and the Purchaser shall have no further obligations
hereunder.
E. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
The Purchaser represents, warrants, covenants and agrees as follows:
1. The Purchased Shares are not being purchased as a result of any material
information about the Corporation's affairs which has not been publicly
disclosed
2. The Purchaser has not received any general solicitation or
advertisement, article, notice or other communication nor has it become
aware of any advertisement in printed media of general and regular paid
circulation, radio and television with respect to the distribution of the
Purchased Shares.
3. The Purchaser acknowledges that the Corporation and its officers and
directors are relying upon the representations and warranties made by the
Purchaser.
4. The Purchased Shares being subscribed for and any rights the Purchaser
may acquire as a Purchased Shares holder of the Corporation will be
acquired for investment purposes and not with a view to a subsequent
offering, sale or distribution thereof and the Purchaser may not
participate, directly or indirectly, in any plan or scheme involving the
resale or distribution of the Purchased Shares or any interest therein.
5. The Purchaser has not received or been provided with an offering
memorandum or similar document, its decision to enter into this Agreement
and to purchase the Purchased Shares has
<PAGE> 4
4
not been made upon any verbal or written representation as to fact or
otherwise by or on behalf of the Dealer or any other person and its
decision to enter into this Agreement and purchase the Purchased Shares
set forth herein is based entirely upon information concerning the
Corporation which is publicly available and the Term Sheet.
6. The Purchaser has knowledge and experience in financial and business
affairs as to be capable of evaluating the merits and risks of the
investment and is able to bear the economic risk of loss of the
investment.
7. The Purchaser has been independently advised as to and is aware of the
applicable restrictions on the resale of the Purchased Shares and any
securities issuable upon the conversion thereof under the securities
legislation in the jurisdiction in which the Purchaser may subsequently
trade such securities, and is aware of the risks and other
characteristics of the Purchased Shares and of the fact that the
Purchaser may not be able to resell such securities except in accordance
with applicable securities legislation and regulatory policies and that
the certificates representing such securities will contain a legend to
that effect and the Purchaser agrees to comply with, and not in any
manner violate, any applicable securities laws, rules or regulations in
connection with the purchase, sale, transfer or other disposition of any
of such securities.
8. The Purchaser will execute and deliver all documentation as may be
required by applicable securities legislation to permit the purchase of
the Purchased Shares on the terms and conditions as set forth herein and
will comply with all applicable hold periods and other resale
restrictions as are prescribed by applicable securities legislation.
9. Any questionnaire, statement, certificate, instrument or other documents
delivered by the Purchaser in connection herewith will be considered to
form part of and be incorporated into this Agreement with the same effect
as if each constituted a representation and warranty or covenant of the
Purchaser to the Corporation.
10. The Corporation has not provided the Purchaser with investment, legal or
financial advice or acted as an advisor with respect to the purchase of
the Purchased Shares and the Purchaser is relying solely on its own
professional advisors, if any, for any such advice.
F. RESTRICTIONS UPON TRANSFER
1. The Purchaser understands that the Purchased Shares have not been
registered by the Corporation under the United States Securities Act of
1933 (the "1933 Act") and that the Corporation does not plan, and is
under no obligation to provide for registration of the Purchased Shares
in the future. Offer or sale of the Purchased Shares in the United States
or to a U.S. person would constitute a violation of United States law
unless made in compliance with the registration requirements of the 1933
Act or pursuant to an exemption therefrom. The term "United States"
means the United States of America and includes its territories,
possessions and all areas subject to its jurisdiction; and the term "U.S.
person" has the meaning as defined in Regulation S made under the 1933
Act.
<PAGE> 5
5
G. GENERAL PROVISIONS
1. This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. The Purchaser
may, with the consent of the Corporation, acting reasonably, assign this
Agreement to a subsidiary or an affiliate, but any such assignment shall
not relieve the Purchaser from responsibility for performance of its
obligations hereunder.
2. Each of the parties agrees to take all such actions as may be within its
powers as may be necessary or desirable to implement and give effect to
the provisions of this Agreement.
3. Time shall be of the essence.
4. This Agreement shall be governed and enforced in accordance with the laws
of Switzerland, without regard to its conflict of laws and principles, and
the parties hereto agree to submit any dispute hereunder to the
jurisdiction of the courts of the Canton of Geneva.
5. The provisions herein contained constitute the entire agreement between
the parties and supersede all previous communications, representations,
understandings and agreements between the parties with respect to the
subject matter hereof, whether verbal or written.
6. This Agreement may be executed by facsimile in any number of counterparts,
each of which when delivered shall be deemed to be an original, all of
which together shall constitute one and the same document.
If the foregoing is in accordance with your understanding, please complete the
relevant portions below under the heading "Details of Subscription" and sign
and return the enclosed copy of this letter as soon as possible. The
Purchaser, by such signature, authorizes the Dealer to deliver a copy of this
letter, as the Purchaser's offer, on its behalf to the Corporation.
CONQUEROR HOLDINGS LTD.
(Name of Purchaser)
/s/ Rene Randall
- ---------------------------
(Signature)
Rene Randall
- ---------------------------
(Name)
Director
- ---------------------------
(Title)
<PAGE> 6
6
DETAILS OF SUBSCRIPTION
-----------------------
TO: ICHOR CORPORATION
(the "Corporation")
AND TO: MFC MERCHANT BANK S.A.
The undersigned accepts the foregoing and offers to purchase the Purchased
Shares set forth below, on the terms and conditions of the foregoing, from the
Corporation. All references to dollar amounts herein are in United States
dollars.
(a) Number and Aggregate Purchase Price of Purchased Shares:
30,000 Purchased Shares at an Aggregate Purchase Price of $300,000
(b) Name and address of Purchaser: Conqueror Holdings Ltd.
1250 - 400 Burrard Street
Vancouver, B.C. V6C 3A6
Canada
Signed by: /s/ Rene Randall
---------------------
Director
---------------------
Office or Title
(c) Registration Instructions:
If there are no instructions below, the certificate for the Purchased Shares
delivered to the Purchaser will be registered in the name of the Purchaser as
set forth immediately above. If registration differs from the name and
address shown above, please so specify:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(d) Delivery and Payment Instructions (include contact name and telephone
number):
PAY TO MFC MERCHANT BANK S.A.
(e) Delivery against Payment at:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Attn: Telephone:
---------------------------- ----------------------------
The foregoing offer is confirmed and accepted by Ichor Corporation this day
of February, 1998. ----
By: /s/ Roy Zanatta
-----------------------
(Authorized Signatory)
<PAGE> 1
SUBSCRIPTION AGREEMENT
February 26 , 1998
----
TO: PURCHASERS OF 5% CUMULATIVE REDEEMABLE CONVERTIBLE
PREFERRED SHARES, SERIES 1
OF ICHOR CORPORATION
MFC Merchant Bank S.A. (the "Dealer") and Ichor Corporation. (the
"Corporation") entered into a purchase agreement dated for reference February
20, 1998 (the "Purchase Agreement") providing for the purchase from the
Corporation of 250,000 5% Cumulative Redeemable Convertible Preferred Shares,
Series 1 for an aggregate purchase price of $2,500,000 (the "Purchased
Shares"). A copy of the term sheet (the "Term Sheet") outlining the features
of the private placement is attached as Schedule "A" hereto.
The Purchase Agreement provides that the Dealer may arrange for substituted
purchasers of the Purchased Shares on a "private placement" basis, and that
each substituted purchaser will enter into a subscription agreement (the
"Subscription Agreement") in substantially the form of this agreement. Your
acceptance of this letter, as evidenced by your signature below, will
constitute your offer to the Corporation to subscribe for the Purchased Shares
set forth below under the heading "Details of Subscription" on the terms and
conditions contained herein. The Corporation's acceptance of your offer, as
evidenced by the signature of its officer below, will constitute an agreement
between you and the Corporation for you to purchase from the Corporation and
for the Corporation to issue and sell to you such Purchased Shares on such
terms and conditions.
References below to "this Agreement" are to be read as references to the
agreement resulting from the Corporation's acceptance of your offer. You are
referred to below as the "Purchaser".
A. SUBSCRIPTION
The Purchaser subscribes for and agrees to purchase from the Corporation the
Purchased Shares set forth below under the heading "Details of Subscription".
The Purchaser understands that the Purchased Shares subscribed for form part
of the offering made pursuant to the Purchase Agreement.
B. REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE CORPORATION
By accepting this offer, the Corporation represents, warrants, covenants and
agrees as follows:
1. The Corporation is a corporation duly organized and is validly subsisting
under the laws of Delaware.
2. The Corporation has all necessary corporate power to own or lease its
property and to carry on its business as presently carried on by it and
to execute and deliver this Agreement and the Purchased Shares.
<PAGE> 2
2
3. This Agreement has been duly authorized by all necessary corporate action
by the Corporation and constitutes legal, valid and binding obligations
of the Corporation.
4. The Corporation's common shares are quoted through the National
Association of Securities Dealers Authorized Distribution System SmallCap
market and the Corporation will maintain such status, without default,
until the Closing Date.
5. The Corporation's annual audited financial statements for the period
ended December 31, 1996 and its unaudited interim financial statements
for the period ended September 30, 1997 were, at the respective dates of
issue or publication, true and correct in all material respects and were
prepared in accordance with and complied in all material respects with
the laws, regulations, policy statements and rules applicable to such
documents.
6. There has been no material or adverse change in the affairs of the
Corporation since December 31, 1996, and no material or adverse fact
exists in relation to the proposed issue of the Purchased Shares, which
in either case is not generally disclosed.
C. CONDITIONS
The Purchaser's obligation to complete the purchase of the Purchased Shares
contemplated hereby shall be conditional upon the fulfilment either on or
before the Closing Date of the following conditions:
(a) the Purchased Shares will be validly and duly authorized, created
and issued by the Corporation;
(b) the representations and the warranties contained herein are true and
correct and all covenants relating to the Corporation herein
contained and required to be performed and complied with have been
performed and complied with by the Corporation; and
(c) no action or proceeding in the United States shall be pending or
threatened by any person, company, firm, governmental authority,
regulatory body or agency to cease trade, enjoin or prohibit:
(i) the sale of the Purchased Shares to the Purchaser as
contemplated hereby; or
(ii) the right of the Corporation to issue shares on the exercise by
the Purchaser of its right of conversion contained in the
Purchased Shares.
<PAGE> 3
3
D. DELIVERY AND PAYMENT
Subject to acceptance by the Corporation of this Agreement, delivery and
payment for the Purchased Shares shall be completed at the offices of the
Dealer at 1:00 p.m. (local time) on or before February 27, 1998 or such other
date, time and place as may be agreed upon in writing by the Corporation and
the Dealer (the "Closing Date"). The Purchaser hereby appoints the Dealer as
its agent to represent it at the closing for the purposes of all closing
matters including, without limitation, to execute receipts and documents as
its agent and to accept delivery of documents and the Purchased Shares and
hereby irrevocably authorizes the Dealer to extend such period and modify or
waive such terms and conditions as may be contemplated herein or in the
Purchase Agreement as the Dealer deems appropriate in its absolute discretion.
The Purchased Shares subscribed for by the Purchaser will be available for
delivery on the Closing Date to the Dealer by way of a certificate
representing the Purchased Shares registered in the name of the Purchaser,
against delivery to the Corporation of the Purchase Price for the Purchased
Shares by certified cheque or bank draft in U.S. funds or other electronic
form of payment satisfactory to the Corporation, provided that, in the event
that the certificates representing the Purchased Shares are not available for
physical delivery on the Closing Date, the Purchase Price shall be paid to the
Corporation pending delivery of the Purchased Shares. If the certificates
representing the Purchased Shares are not delivered by March 31, 1998, the
Dealer may agree to one or more extensions of time for delivery of the
certificates and may modify or waive such terms relating thereto as the Dealer
deems appropriate in its absolute discretion, or may, at its option, elect to
terminate this agreement whereupon the Purchase Price paid by the Purchaser
shall be returned and the Purchaser shall have no further obligations
hereunder.
E. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
The Purchaser represents, warrants, covenants and agrees as follows:
1. The Purchased Shares are not being purchased as a result of any material
information about the Corporation's affairs which has not been publicly
disclosed
2. The Purchaser has not received any general solicitation or
advertisement, article, notice or other communication nor has it become
aware of any advertisement in printed media of general and regular paid
circulation, radio and television with respect to the distribution of the
Purchased Shares.
3. The Purchaser acknowledges that the Corporation and its officers and
directors are relying upon the representations and warranties made by the
Purchaser.
4. The Purchased Shares being subscribed for and any rights the Purchaser
may acquire as a Purchased Shares holder of the Corporation will be
acquired for investment purposes and not with a view to a subsequent
offering, sale or distribution thereof and the Purchaser may not
participate, directly or indirectly, in any plan or scheme involving the
resale or distribution of the Purchased Shares or any interest therein.
5. The Purchaser has not received or been provided with an offering
memorandum or similar document, its decision to enter into this Agreement
and to purchase the Purchased Shares has
<PAGE> 4
4
not been made upon any verbal or written representation as to fact or
otherwise by or on behalf of the Dealer or any other person and its
decision to enter into this Agreement and purchase the Purchased Shares
set forth herein is based entirely upon information concerning the
Corporation which is publicly available and the Term Sheet.
6. The Purchaser has knowledge and experience in financial and business
affairs as to be capable of evaluating the merits and risks of the
investment and is able to bear the economic risk of loss of the
investment.
7. The Purchaser has been independently advised as to and is aware of the
applicable restrictions on the resale of the Purchased Shares and any
securities issuable upon the conversion thereof under the securities
legislation in the jurisdiction in which the Purchaser may subsequently
trade such securities, and is aware of the risks and other
characteristics of the Purchased Shares and of the fact that the
Purchaser may not be able to resell such securities except in accordance
with applicable securities legislation and regulatory policies and that
the certificates representing such securities will contain a legend to
that effect and the Purchaser agrees to comply with, and not in any
manner violate, any applicable securities laws, rules or regulations in
connection with the purchase, sale, transfer or other disposition of any
of such securities.
8. The Purchaser will execute and deliver all documentation as may be
required by applicable securities legislation to permit the purchase of
the Purchased Shares on the terms and conditions as set forth herein and
will comply with all applicable hold periods and other resale
restrictions as are prescribed by applicable securities legislation.
9. Any questionnaire, statement, certificate, instrument or other documents
delivered by the Purchaser in connection herewith will be considered to
form part of and be incorporated into this Agreement with the same effect
as if each constituted a representation and warranty or covenant of the
Purchaser to the Corporation.
10. The Corporation has not provided the Purchaser with investment, legal or
financial advice or acted as an advisor with respect to the purchase of
the Purchased Shares and the Purchaser is relying solely on its own
professional advisors, if any, for any such advice.
F. RESTRICTIONS UPON TRANSFER
1. The Purchaser understands that the Purchased Shares have not been
registered by the Corporation under the United States Securities Act of
1933 (the "1933 Act") and that the Corporation does not plan, and is
under no obligation to provide for registration of the Purchased Shares
in the future. Offer or sale of the Purchased Shares in the United States
or to a U.S. person would constitute a violation of United States law
unless made in compliance with the registration requirements of the 1933
Act or pursuant to an exemption therefrom. The term "United States"
means the United States of America and includes its territories,
possessions and all areas subject to its jurisdiction; and the term "U.S.
person" has the meaning as defined in Regulation S made under the 1933
Act.
<PAGE> 5
5
G. GENERAL PROVISIONS
1. This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. The
Purchaser may, with the consent of the Corporation, acting reasonably,
assign this Agreement to a subsidiary or an affiliate, but any such
assignment shall not relieve the Purchaser from responsibility for
performance of its obligations hereunder.
2. Each of the parties agrees to take all such actions as may be within its
powers as may be necessary or desirable to implement and give effect to
the provisions of this Agreement.
3. Time shall be of the essence.
4. This Agreement shall be governed and enforced in accordance with the laws
of Switzerland, without regard to its conflict of laws and principles,
and the parties hereto agree to submit any dispute hereunder to the
jurisdiction of the courts of the Canton of Geneva.
5. The provisions herein contained constitute the entire agreement between
the parties and supersede all previous communications, representations,
understandings and agreements between the parties with respect to the
subject matter hereof, whether verbal or written.
6. This Agreement may be executed by facsimile in any number of
counterparts, each of which when delivered shall be deemed to be an
original, all of which together shall constitute one and the same
document.
If the foregoing is in accordance with your understanding, please complete the
relevant portions below under the heading "Details of Subscription" and sign
and return the enclosed copy of this letter as soon as possible. The
Purchaser, by such signature, authorizes the Dealer to deliver a copy of this
letter, as the Purchaser's offer, on its behalf to the Corporation.
ZELLSTOFF-UND PAPIERFABRIK ROSENTHAL GmbH
(Name of Purchaser)
/s/ E.J. Haas
- ----------------------------
(Signature)
E.J. Haas
- ----------------------------
(Name)
PA
- ----------------------------
(Title)
<PAGE> 6
6
DETAILS OF SUBSCRIPTION
TO: ICHOR CORPORATION
(the "Corporation")
AND TO: MFC MERCHANT BANK S.A.
The undersigned accepts the foregoing and offers to purchase the Purchased
Shares set forth below, on the terms and conditions of the foregoing, from the
Corporation. All references to dollar amounts herein are in United States
dollars.
(a) Number and Aggregate Purchase Price of Purchased Shares:
35,000 Purchased Shares at an Aggregate Purchase Price of $350,000
(b) Name and address of Purchaser: Zellstoff-und Papierfabrik Rosenthal GmbH
Hauptstrasse 16
07365 Blankenstein (Saale)
Germany
Signed by: /s/ E.J. Haas
----------------------------
PA
----------------------------
Office or Title
(c) Registration Instructions:
If there are no instructions below, the certificate for the Purchased Shares
delivered to the Purchaser will be registered in the name of the Purchaser as
set forth immediately above. If registration differs from the name and
address shown above, please so specify:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(d) Delivery and Payment Instructions (include contact name and telephone
number):
Pay to MFC Merchant Bank S.A.
(e) Delivery against Payment at:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Attn: Telephone:
------------------------------ ----------------------------
The foregoing offer is confirmed and accepted by Ichor Corporation this day
of February, 1998. ----
By: /s/ Roy Zanatta
--------------------------
(Authorized Signatory)
<PAGE> 1
ICHOR CORPORATION
EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT
Shareholding at
December 31, 1997
Name of Subsidiary Jurisdiction of Incorporation (Direct)
- ------------------ ----------------------------- -----------------
ICHOR Services, Inc. State of Delaware 100%
501164 B.C. Ltd. Province of British Columbia, Canada 100%
<PAGE> 1
- ------------------------------------------------------------------------------
PETERSON SULLIVAN P.L.L.C.
601 UNION STREET SUITE 2300 SEATTLE WA 98101 (206) 382-7777 FAX 382-7700
CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Consent
-----------------------------
We hereby consent to the incorporation by reference in the registration
statements (No. 333-15831 and 333-15829) on Form S-8 of Ichor Corporation and
Subsidiaries of our report dated February 28, 1998, relating to the balance
sheets of Ichor Corporation and Subsidiaries as of December 31, 1997 and 1996,
and the related statements of operations, shareholders' equity and cash flows
for the year ended December 31, 1997, and the eleven months ending December
31, 1996, which report appears in the Annual Report of Form 10-K for the year
ended December 31, 1997, of Ichor Corporation and Subsidiaries.
/s/ Peterson Sullivan P.L.L.C.
March 25, 1998
Seattle, Washington
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES INCLUDED IN THIS FORM 10-K AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 127
<SECURITIES> 0
<RECEIVABLES> 894
<ALLOWANCES> 562
<INVENTORY> 0
<CURRENT-ASSETS> 2,026
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,028
<CURRENT-LIABILITIES> 1,939
<BONDS> 0
0
2
<COMMON> 50
<OTHER-SE> 37
<TOTAL-LIABILITY-AND-EQUITY> 2,028
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 613
<INCOME-PRETAX> (1,025)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,025)
<DISCONTINUED> (3,029)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,054)
<EPS-PRIMARY> (.83)
<EPS-DILUTED> (.83)
</TABLE>
